This publication can be downloaded in Portable Document Format (PDF): download Personal services income for financial planners (NAT 9802, PDF, 100KB).
As a financial planner, 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?
As a financial planner, your income is likely to be PSI because:
- the majority of the income received is for the skills, knowledge, expertise or efforts of the person who performed the services
- little of the income is related to materials you supply or tools and equipment you use.
Some common examples of PSI in the financial planning industry include:
- money you receive up-front for your advice
- trailing commissions you receive on investments made as a result of advice you have given, regardless of when the commission is paid
- money you receive as a proper authority holder or authorised representative for portfolio maintenance or other activities you carry out for a customer under a proper authority or authorisation
- commissions for new business
- initial commissions
- renewal commissions
- CPI commissions
- persistency bonuses
- production volume bonuses
- overriding commissions
- deferred commissions
- recruiting commissions.
What income is not PSI?
Income you receive from income-producing assets
Certain commissions are not PSI if you receive them mainly from income-producing property. Commissions that are not PSI are those where your rights to those commissions can be transferred under the terms of your agreement with the payer and relate to your past services rather than your future services. This includes:
- orphan policy commissions
- commissions from a customer list obtained from another advisor.
Income you receive from granting a right to use property
This includes the copyright to a financial planning computer program as the majority of the income is for the copyright to the program.
Income generated from your business structure
This includes income generated by the substantial assets, many employees or contractors, sizeable operations, or goodwill of a large accounting firm.
What is an authorised representative?
An authorised representative is someone who is authorised by a financial services licensee to provide financial services on behalf of the licensee.
If you operate your business as a company that is an authorised representative, any PSI you receive belongs to you (not the company) and is subject to the PSI rules.
Last Modified: Thursday, 11 September 2008