What Is a Loan-Out Company?
A loan-out company is a business entity created by an entertainment professional — an actor, director, producer, writer, or other creative — through which they offer their services to production companies and clients. Instead of contracting personally, the individual “loans out” their services through their company.
The concept originates from the US entertainment industry, where loan-out corporations are standard practice. In Australia, the equivalent structure is a proprietary limited company (Pty Ltd). The individual becomes a director and shareholder of their own company, which then contracts with production companies and receives payment for their services.
How Loan-Out Companies Work in Australia
The mechanics are straightforward:
- You register a Pty Ltd company with ASIC
- You become the sole director and shareholder
- The company obtains its own ABN and TFN
- Production companies contract with your company (not you personally)
- Your company invoices the production company and receives payment
- You take income from the company as salary, director’s fees, or dividends
This structure is most commonly used by above-the-line talent — directors, producers, lead cast, and senior crew members who are engaged as contractors on higher-budget productions. If you are engaged as an employee under a MEAA performers’ agreement or crew award, the loan-out structure does not apply to that engagement. For more on the employee vs contractor distinction, see our guide on ABN for actors in Australia.
The Critical Issue: Personal Services Income Rules
This is where Australia diverges sharply from the US. Divisions 84–87 of the Income Tax Assessment Act 1997 contain the Personal Services Income (PSI) rules, which are specifically designed to prevent individuals from gaining a tax advantage by channelling personal services income through a company.
Your income is classified as PSI if it is mainly (more than 50%) a reward for your personal efforts or skills. The ATO’s ruling TR 2022/3 specifically identifies income earned by entertainers and professional sportspeople as a clear example of PSI.
What happens if the PSI rules apply to you?
If your income is PSI and you do not qualify as a Personal Services Business (PSB), then:
- The net PSI earned by your company is attributed back to you personally
- It is taxed at your individual marginal tax rate — not the 25% company rate
- Your company becomes a “look-through” entity for tax purposes
- Deductions are limited to what an employee could claim
This effectively negates the main tax benefit of operating through a company.
The Personal Services Business (PSB) Tests
To be exempt from the PSI attribution rules, you must first satisfy the 80% rule — less than 80% of your PSI comes from a single client. Then you must pass at least one of these four tests:
| Test | Requirements | Likely for entertainers? |
|---|---|---|
| Results test | Paid for a specific result (not time), provide own tools, fix mistakes at own cost | Difficult — actors are typically paid for time, not a deliverable result |
| Unrelated clients test | PSI from 2+ unrelated clients, services offered to the public | More achievable for freelancers who work for multiple production companies |
| Employment test | Employ workers who perform 20%+ of the principal work | Unlikely for most performers |
| Business premises test | Maintain separate business premises (not home, not client’s premises) | Unlikely — most work on client locations (sets, studios) |
For actors on a long-running TV series or feature film, the 80% rule is often the first barrier — if most of your income comes from one production company, you can only use the results test, which is the hardest for performers to pass.
If you cannot pass any PSB test, you can apply to the Commissioner of Taxation for a PSB Determination based on unusual circumstances.
When a Loan-Out Company Makes Sense in Australia
Despite the PSI rules, there are legitimate reasons for Australian entertainment professionals to operate through a Pty Ltd. A company structure makes sense when multiple factors align:
- Multiple income streams beyond personal services — royalties, licensing income, IP income, producer fees with backend participation. These non-PSI income streams genuinely benefit from the company structure.
- Genuine PSB status — you work for multiple unrelated clients and can pass at least one PSB test. Freelance directors, producers, and production designers who move between productions regularly are more likely to qualify.
- Asset protection — a company separates business and personal assets. This matters for producers who take on financial risk or sign contracts with delivery guarantees and indemnities.
- Contractor income consistently above $120,000–$150,000 — the gap between the 25% company rate and 37%/45% personal rates becomes meaningful, but only if PSI rules do not apply.
- You need to set up SPVs for productions — if you are producing, a holding company structure is often essential. See our guide on SPV setup for film production.
When a Sole Trader Structure Is Better
- Income is sporadic or below $90,000–$120,000
- Work is predominantly for one client (fails the 80% rule)
- You cannot pass any PSB test
- Minimal assets at risk
- You want simplicity and lower compliance costs
For a detailed comparison, see our guide on when to move from sole trader to company structure.
Cost Comparison: Sole Trader vs Pty Ltd
| Item | Sole Trader | Pty Ltd Company |
|---|---|---|
| ASIC registration | N/A | ~$611 (one-off) |
| ASIC annual review fee | N/A | ~$329/year |
| Director ID | N/A | Required (free to apply) |
| Tax return preparation | $200–$500 | $425–$1,300+ |
| BAS lodgement | If GST registered | If GST registered |
| Estimated annual overhead | $200–$500 | $1,000–$2,500+ |
US Loan-Out vs Australian Pty Ltd: Key Differences
Many Australian creatives Google “loan-out company” and find US-focused advice. The differences are significant and understanding them is critical before making structural decisions.
| Feature | US Loan-Out (S-Corp/LLC) | Australian Pty Ltd |
|---|---|---|
| Tax savings mechanism | Avoid 15.3% self-employment tax via salary/distribution split | 25% company rate vs personal rates — but PSI rules usually negate this |
| Income splitting | Possible via S-Corp distributions and family employment | Heavily restricted by PSI rules and Part IVA anti-avoidance |
| Anti-avoidance rules | Limited — IRS scrutinises “reasonable salary” only | Comprehensive — Divisions 84–87 (PSI) plus Part IVA specifically target this |
| Industry expectation | Studios expect it — standard practice | Less universal — many productions engage talent as employees or individual contractors |
| Asset protection | Yes | Yes — this is a genuine benefit in both countries |
The key takeaway: Do not assume that setting up an Australian Pty Ltd will deliver the same tax benefits as a US loan-out company. The primary benefits in Australia are asset protection, professional structure, and tax planning for non-PSI income streams — not a lower tax rate on personal services income.
Director and Compliance Obligations
If you set up a Pty Ltd, you take on legal obligations as a company director:
- Director Identification Number — you must obtain a Director ID before appointment. Failure to do so is a criminal offence with penalties up to $19,800.
- ASIC annual review — pay the annual review fee (~$329) and confirm company details each year
- Company tax return — lodge annually in addition to your personal tax return
- Director duties — act with care and diligence, act in good faith, prevent insolvent trading (Corporations Act 2001)
- Record keeping — maintain proper financial records for at least 7 years
- Workers compensation — as a working director, you may be able to cover yourself under your company’s workers compensation policy (varies by state)
GST Registration
Your company must register for GST if its annual turnover exceeds $75,000. Most entertainment professionals operating through a Pty Ltd will exceed this threshold. When registered, you add 10% GST to your invoices and lodge quarterly Business Activity Statements (BAS).
If you also operate as a sole trader for some work, note that each structure (your company and your sole trade) has its own ABN and GST registration. Employment income does not count toward the $75,000 threshold for either.
ATO Guidance: PCG 2025/5 and Part IVA
In late 2025, the ATO released Practical Compliance Guideline PCG 2025/5, which directly affects how loan-out company structures are assessed. Even if you qualify as a PSB, Part IVA (the general anti-avoidance provision) can still apply if the dominant purpose of your company structure is to obtain a tax benefit.
The ATO considers these higher-risk arrangements:
- Retaining significant profits in the company at 25% without genuine business purpose
- Distributing income to family members who do not genuinely contribute to the business
- Paying yourself a salary disproportionately low compared to the value of your services
The ATO has provided a transition period until 30 June 2027 for restructuring higher-risk arrangements. If you currently operate a loan-out company, now is the time to review your structure with a qualified accountant.
Frequently Asked Questions
Can I set up a loan-out company just for one production?
You can, but it rarely makes financial sense for a single engagement. The setup costs (ASIC registration, accounting, Director ID) and ongoing compliance obligations mean you need consistent contractor income to justify the structure. If you are engaged for a single production, operating as a sole trader with an ABN is usually simpler and more cost-effective. A company structure makes more sense when you have ongoing, recurring contractor work across multiple clients.
Will the PSI rules always apply to actors and directors?
Not always — but they usually do. If you can establish Personal Services Business (PSB) status by passing one of the four PSB tests and the 80% rule, the attribution rules do not apply. The most accessible test for entertainment professionals is the unrelated clients test: if you work for multiple unrelated production companies and make your services available to the public (through an agent, website, or industry platforms), you may qualify. However, even with PSB status, Part IVA can apply if the dominant purpose of the structure is to obtain a tax benefit. Professional advice is essential.
What about income from royalties, residuals, and IP — are those PSI?
Income is PSI if it is mainly a reward for your personal efforts or skills. Royalties and residuals that flow from work you personally performed may still be classified as PSI. However, income from intellectual property that generates returns independent of your ongoing personal effort — such as licensing fees for a format you created, or backend participation in a production’s profits — may not be PSI. The distinction depends on the specific facts, and this is an area where the right structure can make a genuine tax difference. Talk to your accountant about how your specific income streams are classified.
Can I use income averaging if I operate through a company?
Income averaging under Division 405 is available to individuals, not companies. If your company’s PSI is attributed back to you personally under the PSI rules, you may still be eligible for income averaging as a special professional. If your company genuinely operates as a PSB and retains profits at the company level, those retained profits are not part of your individual income averaging calculation. The interaction between company structures and income averaging is complex — it is one of the factors to consider when choosing your structure.
Should I get a company ABN or a personal ABN?
If you set up a Pty Ltd, the company needs its own ABN. You may also want a personal ABN as a sole trader for smaller jobs or work you do outside the company structure. Many entertainment professionals hold both — a company ABN for larger engagements and a personal ABN for smaller freelance work. The decision depends on the volume and nature of your work, and which structure each client expects to contract with.
Talk to Count Out Loud about whether a loan-out company structure is right for your entertainment career. We specialise in accounting for the film and TV industry and can assess your PSI status, structure your income tax-effectively, and handle all the compliance. Call us on (02) 9043 1525.