The Rule Against Alienation of Personal Exertion Income — Does it Apply in Australia?

Abstract

This article examines the validity of the personal exertion income rule and seeks to identify whether it applies to the more common income-splitting techniques. Those techniques usually comprise assignment by the taxpayer of either the income-producing source or the right to receive income from that source. The article will not address the potential application of the general anti-avoidance provisions contained in Part IVA (or its predecessor, s. 260) of the Income Tax Assessment Act 1936 (Cth); the question of the rule's application is quite seperate and distinct from the question of whether Part IVA might apply to defeat an income assignment. Before implementing an income-splitting plan, however, the scope both of the rule and of Part IVA should be considered.