• Claiming deductions when receiving PSI

    When personal services income (PSI) rules apply, there are limitations for deductions that can be claimed against this income. In general, an individual who earns PSI is treated as though they are in the same position as an employee.

    This means, your business may claim deductions against PSI received if:

    • the expenses are incurred in producing the income
    • you (as an individual who earns the income) would be entitled to the deduction.

    This applies to all PSI, whether it is earned as a sole trader or through a company, partnership or trust.

    You must keep records of your transactions, including expense claims, for five years after they are prepared, obtained or the transactions completed, whichever occurs later. You will need to show whether the expenses relate to PSI or other income.

    Where PSI is generated by more than one individual in a business, you need to allocate the deductions which relate to the income received by each individual.

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      Last modified: 30 Mar 2017QC 46085