Show download pdf controls
  • Deductions

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Limited deductions against PSI

    The PSI rules affect the deductions you can claim against your PSI. They do not affect your legal, contractual or workplace arrangements; you won’t be treated as an employee as a result of the PSI rules.

    The information on this page is a guide only. You may need further information to determine whether a deduction is available in your circumstances; Taxation Ruling TR 2003/10 Income tax: deductions that relate to personal services income explains the PSI deduction limitation rules.

    What deductions you may be able to claim

    Subject to specific exceptions, the general rule is that you may claim an amount that is incurred in gaining or producing your PSI if you could claim that amount if the income was payable to you as an employee.

    The following are examples of items you may be able to claim a deduction for:

    • premiums for workers compensation, public liability and professional indemnity insurance
    • financial institution and other account-keeping fees and charges
    • tax-related expenses, such as the cost of preparing and lodging a tax return or business activity statement (BAS)
    • registration or licensing fees
    • expenses for advertising, tendering and quoting for work
    • deduction for decline in value of depreciating assets
    • simplified depreciation (if you are a small business entity)
    • running expenses for your home office, such as heating and lighting for using a room in your house as a home office (not including rent, mortgage interest, rates or land taxes)
    • salary and wages for an arm’s length employee (not an associate)
    • contributions to a complying superannuation fund on behalf of an arm’s length employee (not an associate)
    • reasonable amounts paid to an associate for principal work
    • contributions to a complying superannuation fund or retirement savings account up to the superannuation guarantee amount for an associate doing solely principal work.

    Do not include any amount that was a superannuation contribution for yourself. Any deduction for your own superannuation contributions must be claimed at Personal super contributions on your tax return.

    What you cannot claim

    You cannot claim an amount for the following if it related to gaining your PSI:

    • rent, mortgage interest, rates or land tax for your residence (or the residence of an associate)
    • amounts paid to an associate for non-principal work, for example, support such as secretarial work
    • contributions to a superannuation fund for an associate doing solely non-principal work.

    Deductions for payments to associates for principal work

    Add up the total amount of payments made to associates for principal work.

    Total amount of other deductions against PSI

    Include only non-commercial business losses deferred from a prior year if they relate to a business activity which is the same as, or similar to, one of your current year business activities. See Loss details for an explanation of how the non-commercial business loss rules work.

    Your non-commercial business loss deduction may be reduced if:

    • you earned net exempt income in this income year, or
    • you became bankrupt or were released from any debts by the operation of an Act relating to bankruptcy.

    See also How to defer your losses or phone 13 28 66.

    If you are registered or required to be registered for GST, your deductions should not include the amount that relates to input tax credit entitlements.

      Last modified: 28 Jun 2018QC 55406