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  • Working out if the PSI rules apply

    When working out if the personal services income (PSI) rules apply, you need to look at the income received from each separate contract or job to determine if you have received PSI. If you have received PSI (including if you've received it through a company, partnership or trust), you then need to work out if the PSI rules apply to that income.

    To do this, you need to work through a series of steps, but you can also select the most appropriate test to suit your circumstances. The easiest way to do this is by using our PSI decision tool. You can see a summary of the steps in this flow chart.

    PSI steps

    • Step 1 is to work out if you've received PSI.
    • Steps 2 to 4 are known as the personal services business (PSB) tests – they'll help you work out if you're conducting a PSB.

    If, after following the steps, you work out that your business is a PSB, the rules won't apply to your PSI.

    A PSB may still be subject to the anti-avoidance provisions contained in Part IVA of the Income Tax Assessment Act 1936.

    If more than one individual is generating PSI through your company, partnership or trust, you'll need to work through the steps separately for each individual.

    You may pass one of the tests and qualify as a PSB for one individual but not for another. In this case, the PSI rules will not apply to the PSI earned by the first individual, but will apply to the PSI earned by the second individual.

    Example: Two individuals operating through one company

    Mick and Robin are engineers who operate through a company, M&R Engineering Pty Ltd, to provide their services. M&R Engineering Pty Ltd contracts with Agency A.

    Mick and Robin are each required to perform work for the agency's clients. Agency A provides:

    • Mick's services to Client A
    • Robin's services to Client B.

    Both engineers work independently of each other.

    The tests must be applied separately to the PSI of each individual contractor (Mick and Robin) whose income is received by M&R Engineering Pty Ltd.

    End of example

    Next steps:

    See also:

    • The draft ruling has more examples to help you determine whose PSI it is.
    • If, after working through the tests, you're still unsure about your circumstances, you can seek further advice.
    Last modified: 16 Aug 2021QC 46003