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  • Income that is not PSI

    If you're an employee earning only salary and wages, you are not affected by the PSI rules. There are a number of factors that determine whether you're working as a contractor or as an employee.

    PSI does not include income produced mainly from:

    See also:

    Supplying or selling goods

    Income that is produced mainly from supplying or selling goods (for example, retailing, wholesaling or manufacturing) is not PSI.

    However, where materials are only a minor part of the services provided, this is not regarded as supplying or selling goods. Materials would only be a minor part of services provided in the following examples:

    • the use of art supplies by a graphic designer in doing design work for a client
    • the use of wiring by an electrician when installing wiring into a building.

    Granting a right to use intellectual property

    Income produced mainly from granting a right to use intellectual property (for example, copyright to a computer program or book), is not PSI.

    Using an income-producing asset

    Income that is generated mainly by an asset rather than an individual's efforts or skills (for example, using a truck to move cargo) is not PSI. It's more likely that income is being generated by an asset if the asset is:

    • large-scale or high value
    • essential to performing the work, and
    • specified in the contract.

    In such cases, using the asset represents substantially more than 50% of the contract price, and the services of the person operating the equipment will be substantially less than 50% of the contract price.

    Businesses with substantial assets or employees

    Your business is less likely to be generating PSI if you have:

    • arm's length employees or others engaged to perform principal work
    • a business with substantial goodwill
    • substantial income-producing assets that are used to derive the income, or
    • large-scale operations.

    People who are not connected and therefore cannot influence or control each other are said to be at arm's length.

    See also:

    Last modified: 30 Mar 2017QC 46005