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  • Employment test

    To pass the employment test in an income year, your business must employ or contract others to help complete the work that generates your PSI.

    To pass the test, you must meet either one of the following conditions:

    If you're a company, partnership or trust and you have more than one individual generating PSI, you will need to work out whether you pass the employment test for each individual. It is possible to be a PSB for one individual but not another.

    Principal work performed by others

    To meet this condition, other employees or contractors that you engage must perform at least 20% of the principal work.

    Principal work is the work you must perform under a contract and for which you are paid. It is work that is central to meeting contractual obligations between you and the acquirer of the services. It does not include work that supports you in meeting your contractual obligations, such as bookkeeping.

    It's important to consider the market value of the principal work performed. Market value is the amount other professionals in the industry would be paid for the same work.

    You can count principal work performed by a family member. However, you cannot count principal work done by:

    • a business (company, partnership or trust) associated with you or your business
    • yourself as an employee of your business
    • other individuals in your business who earn PSI through their own contracts with clients.


    Roger runs his engineering business through the Davis Family Trust. Roger engages three entities to help with his main contract, Mega Mine Ltd, as follows:

    • Helen Davis, Roger’s wife, performs data processing and administrative tasks
    • Mining Magnate Pty Ltd, an unrelated engineering firm, performs 10% of the principal work
    • John Smith, an unrelated employee, performs 5% of the principal work.

    Davis Family Trust does not pass the employment test because, together, Mining Magnate Pty Ltd and John Smith perform less than 20% of the principal work. As Helen is performing administration assistance only, her work cannot be considered for the employment test.

    End of example


    To meet this condition, you must employ one or more apprentices for at least six months of the income year.

    An apprentice is a person who works for a fixed period of time to learn a trade, business or skill. This includes government or industry group training programs. Research and other assistants are not considered apprentices.

    An apprentice doesn't need to be apprenticed directly to your business. For example, apprentices supplied through a government program to work for a business as part of their trade training may meet this requirement.

    An apprentice may work periodically throughout the income year, as long as their total time worked is at least six months.

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    Last modified: 30 Mar 2017QC 46027