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  • Working out if the PSI rules apply

    When working out if the personal services income (PSI) rules apply, you need to look at the income received from each separate contract or job to determine if you have received PSI. If you have received PSI (including if you've received it through a company, partnership or trust), you then need to work out if the PSI rules apply to that income.

    To do this, you need to work through a series of steps in the correct order. The easiest way to do this is by using our personal services income decision tool. You can see a summary of the steps in the Working out if the PSI rules apply (PDF 135KB)This link will download a file flow chart.

    PSI steps

    • Step 1 is to work out if you've received PSI.
    • Steps 2 to 4 are known as the PSB tests – they'll help you work out if you're running a personal services business (PSB).

    If, after following the steps, you work out that your business is a PSB, the rules won't apply to your PSI.

    A PSB may still be subject to the anti-avoidance provisions contained in Part IVA of the Income Tax Assessment Act 1936 if you are not receiving an appropriate amount of your PSI from the business.

    If more than one individual is generating PSI through an entity you operate through such as a company, partnership or trust, you'll need to work through the steps separately for each individual.

    You may pass one of the tests and qualify as a PSB for one individual but not for another. In this case, the PSI rules will not apply to the PSI earned by the first individual, but will apply to the PSI earned by the second individual.

    Example: two individuals operating through one company

    Mick and Robin are engineers who operate through a company, M&R Engineering Pty Ltd, to provide their services. M&R Engineering Pty Ltd contracts with Agency A.

    Mick and Robin are each required to perform work for the agency's clients. Agency A provides:

    • Mick's services to Client A
    • Robin's services to Client B.

    Both engineers work independently of each other.

    The tests must be applied separately to the PSI of each individual contractor (Mick and Robin) whose income is received by M&R Engineering Pty Ltd.

    End of example

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    Last modified: 07 Aug 2019QC 46003