Avoiding common mistakes with PSI
There are common mistakes that businesses make with personal services income (PSI). To help you avoid these mistakes when accounting for PSI, we have divided them into four types:
- Working out if the PSI rules apply – where you incorrectly apply the tests and the 80% rule to work out if your business is affected by the PSI rules.
- Retaining profits – where you treat any profit your business makes from PSI as business income instead of belonging to the individual/s that generated it.
- Pay as you go (PAYG) withholding – where your business doesn’t meet the additional PAYG withholding obligations for PSI.
- Claiming deductions – where you incorrectly claim deductions when you lodge your tax return.
When we say ‘you’ or 'your business', we mean the entity you operate through, whether that is as a sole trader, or through a company, partnership or trust.
If more than one individual is generating the PSI in your company, partnership or trust, you will need to work through the steps for each individual separately.
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