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  • Step 1: Have you received personal services income?

    When working out if your income is personal services income (PSI), you need to look at the income received from each separate contract. The terms and conditions of the contract, as well as invoices and written agreements (which show the arrangement for the work) are important in working out if the income is PSI.

    Calculate what percentage of income from each contract was for:

    • your labour, skills, knowledge, expertise or efforts for the services you provided
    • anything else, such as the materials supplied or tools and equipment used.

    If more than 50% of the income received for a contract was for your labour, skills or expertise, then all income for that contract is PSI.

    If 50% or less of the income received for a contract was for your labour, skills or expertise, then none of the income for that contract is PSI.

    Salary and wages you receive as an employee, and some other types of income, will not be affected by the PSI rules. But, if you are operating through an entity, such as a company, partnership or trust, and are an employee of that entity then the PSI rules may still apply.

    Example: personal services income and non-personal services income – income from several sources

    Reindeer Pty Ltd has three sources of income, as indicated in its financial statements:

    • income from consultancy work performed by its sole director, Ms Rudolph
    • rent received on real property, and
    • interest.

    The income from consultancy work is PSI as the income is mainly a reward for the personal efforts and skills of Ms Rudolph. The rental and interest income are received as a result of holding assets (property and cash) so they are not PSI.

    End of example

    Next steps:

    • If the income you received from any of your contracts is classified as PSI, work out if the PSI rules apply by:    
    • If no income from any of your contracts is PSI, then you do not have to read any further as there are no changes to your tax obligations.

    See also:

    Last modified: 16 Aug 2021QC 46004