An individual performs services for a client, or an acquirer of the personal services (client), for which the individual does not directly receive any (or adequate) consideration for the services provided. 2. The client does not pay or remit funds to the individual directly; rather the client remits the consideration for, or in respect of, the services provided by the individual to a company, trust or other non-individual entity (entity). The entity may be an unrelated third party. 3. The entity then distributes the income to a SMSF, of which the individual is a member, purportedly as a return on an investment of the SMSF in the entity. 4. The trustee of the SMSF treats the income received as subject to a concessional rate of tax, or as exempt current pension income of the SMSF.
The income may be remitted by the entity to the SMSF via a written or oral agreement between the entity and SMSF, instead of as a return on an investment in the entity. 6. The SMSF may receive the income from more than one entity or through a chain of entities. Alternatively, the entity may distribute the income to more than one SMSF of which the individual and/or associates are members.