Personal services income for road transport workers
Personal services income for road transport workers
Working out if your income is PSI
This publication can be downloaded in Portable Document Format (PDF): download Personal services income for road transport workers (NAT 6996, PDF, 99KB).
As a road transport worker, the income you receive is personal services income (PSI) if:
- you're earning the income as a sole trader or through a company, partnership or trust, and
- the majority (more than 50%) of the income is for the skills, knowledge, expertise or efforts of the person who performed the services.
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If you operate through a company, partnership or trust, when we say you or your, we are referring to that business.
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What income is PSI?
In the road transport industry, there are two important factors that affect whether your income is PSI:
- whether or not the person who drives the truck or vehicle owns it
- the type of truck or vehicle used.
Example
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Ownership and type of truck/vehicle used
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Is the income received for transporting the goods PSI?
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Contract 1
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Truck driver owns and uses a semi-trailer to transport the goods.
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The income is not PSI as the majority of the income is:
- generated by the semi-trailer which is a substantial income-producing asset
- not for the skills, expertise or efforts of the driver.
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Contract 2
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Truck driver uses a truck owned by someone else.
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The income is PSI as the majority of the income is generated by the driver's skills, expertise or efforts in driving the truck.
As the driver doesn't own the truck, no income they receive is related to the truck.
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Some common examples of PSI in the road transport industry, due to the majority of the income received being for the person's skills, knowledge, expertise or efforts, include:
- a truck driver who is paid to drive a transport company's semi-trailer either on long-haul trips or shorter journeys
- a courier driver who collects and delivers goods.
What income is not PSI?
Income you receive from income-producing assets
This includes income generated by a semi trailer, as the majority of the income is for the asset.
Income generated from your business structure
This includes income generated by the substantial assets, many employees or contractors, sizable operations or goodwill of a large transport company.
Working out if the PSI rules apply
If the income you receive is PSI, you need to work out if the PSI rules apply to this income using a series of tests.
Common road transport examples
To help you work out if the PSI rules apply, here are some examples that affect road transport workers.
Example 1: Driving contractor's income
Ruth is a driver and she asks if her income is PSI. PSI would usually include income received from driving a vehicle. However, in some situations the income is not PSI because it is generated by the vehicle, not the personal services of the driver.
Whether or not Ruth's income is PSI depends on the nature, size and value of the vehicle.
Ruth's income from driving is not PSI if the vehicle is:
- a substantial business asset, purpose-built for road transport, and
- generally not suitable for private purposes.
This would include a semi-trailer specifically suited to the driver's business.
Ruth's income from driving is PSI if the vehicle is an ordinary passenger vehicle, used partly for private purposes, even if its carrying capacity meets the contract requirements. This would include an ordinary passenger vehicle used to deliver parcels and goods.
If Ruth receives her PSI through a company, partnership or trust, it is still Ruth's PSI for income tax purposes, even if it was the business that entered into the contract rather than Ruth.
Example 2: Results test
Chan is a driver and wants to know if he passes the results test. He is paid for each individual delivery after it is made. If he makes a delivery to the wrong address, he has to redeliver the goods at his own cost or pay for someone else to do so.
Chan passes the results test because, for at least 75% of his PSI, he:
- is paid for each individual delivery
- provides his own vehicle
- has to re-deliver goods at his own cost if he delivers to the wrong address. If he cannot make the delivery, he has to pay someone else to make it.
For work that cannot be physically rectified, Chan would pass the third condition if his clients have a right to claim damages from him under his contract or work arrangement; for example, where goods are damaged or destroyed.
If Chan did not work under a written contract, he would have to look at his working arrangements to work out if he passes the results test. This would include:
- the conditions he needs to comply with in order to receive payment
- the equipment he must provide
- whether he has to correct errors in his work at his own expense.
Example 3: Paying a salary to a spouse
Andrei receives PSI that is affected by the PSI rules. His spouse, Olga, sometimes drives a truck that he owns and operates. Andrei wants to know if he can claim a tax deduction for the salary he pays her.
Andrei can claim a deduction for any reasonable amounts he pays Olga for any principal work she does - that is, the main work that generates the PSI under his contract or work arrangement. It does not usually include work such as secretarial duties, unless these duties are the main personal services being provided under the contract.
As Olga drives Andrei's truck and delivers goods on his behalf, her driving counts as principal work. Andrei can claim a deduction for reasonable amounts he pays to Olga for driving.
Example 4: Deductions for other amounts paid to a spouse
Glenys receives PSI that is affected by the PSI rules. Her husband, Peter, owns a truck that Glenys uses to provide driving services. Glenys is the nominated driver in the contract. Glenys asks if she can deduct amounts she pays to Peter for truck rental.
Glenys cannot claim a deduction for payments she makes to Peter for truck rental as the PSI rules restrict amounts paid to an associate, such as a spouse.
For more information about PSI, refer to:
Last Modified: Thursday, 11 September 2008
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