Do you have an entity such as a company or trust that provides personal services to only one customer?

Bad news - you may have to pay a little more tax. The attribution rules are what you need to be aware of and were introduced to stop people getting a tax advantage by trading through another entity, rather than in their own names.

This rule was introduced when the top tax rate was 39 per cent and the trust and company tax rates were 33 per cent and although the company tax rate is now 28 per cent there's still a potential advantage to trading as a company because individual rates are higher at 33 per cent.

That 5 cents per dollar is what you could end up paying if the rules apply to you, plus interest and naughty penalties. So what do the rules say? Income is attributed to a person if all the following criteria is met.

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* 80 per cent of the entity's income is from services personally performed by an associated person or relative.

* 80 per cent or more of the income of the entity from personal services is from the sale of services to a customer or a person associated with the customer.

*The working person's net income for the year is more than $70,000.

* Substantial business assets (assets that cost more than 75,000) are not a necessary part of the business structure to make income.

An example is a person in a company structure that provides consulting under a contract which makes up 90 per cent of the company's turnover. Let's say the net profit of the company is $120,000.

This $120,000 would be attributed to the person performing those services and no profit can be left in the company taxed at a lower rate. Just remember all criteria have to be met above and if some of the rules apply and one doesn't you may need to review your circumstances year on year.

Jeremy Tauri is an associate at Plus Chartered Accountants