Personal services income (PSI)
If you are a contractor or sub-contractor, income you receive for your skills, knowledge, expertise or efforts may be classified as personal services income (PSI) and special rules apply.
You need to keep records to show how you worked out whether or not you received PSI, and whether expenses relate to PSI or other income
What income is PSI?
Generally your income as a contractor will be classed as 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 your skills, knowledge, expertise or efforts, not from materials you supply or tools and equipment you use.
What income is not PSI?
- income you receive from selling or supplying goods - for example, if you build and then sell a house
- income from operating significant assets, such as a bulldozer or crane
- income from the work of many employees or contractors.
- Income derived by a business that has substantial income-producing assets, or many employees.
If you are a consultant or contractor, the income you receive for your skills, knowledge, expertise or efforts may be personal services income and special rules apply to how your report and claim your income and deductions.