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Personal services income – P1

Instructions to complete P1 Personal services income.

Published 28 May 2025

What is personal services income?

Personal services income (PSI) is income that is mainly a reward for an individual’s personal efforts or skills. If more than 50% of the income you receive under a contract is for your personal efforts or skills, then all income from that contract is PSI. If 50% or less of the income you receive under a contract is for your personal efforts or skills, then none of the income for that contract is PSI.

Examples of PSI are:

  • income you receive under a contract which is wholly or mainly for your labour or services
  • income of a professional practitioner in a sole practice
  • income of a professional sportsperson or entertainer for their professional skills
  • income of a consultant from their personal expertise.

Your PSI doesn't include income that is mainly:

  • for supplying or selling goods (for example, from retailing, wholesaling or manufacturing)
  • generated by a significant income-producing asset (such as contracting to provide a bulldozer)
  • for granting a right to use property (for example, the copyright to a computer program)
  • generated by a business structure (for example, a large accounting firm).

For more information, see Taxation Ruling TR 2022/3 Income tax: personal services income and personal services businesses.

P1 Personal services income (PSI) concerns PSI you earn as a sole trader only. Answer No to the question below if you gain all your PSI as an employee or through a company, partnership or trust.

Do you receive any PSI?

If you earn PSI, there are restrictions on certain deductions in relation to earning that income (for example, rent, mortgage interest, rates or land tax for your home), or payments to your spouse (or other associate) for support work, such as secretarial duties. However, these restrictions don't apply if you either:

  • have a personal services business determination from the Commissioner of Taxation (the Commissioner) stating that your PSI is from conducting a personal services business for the whole period you earn PSI
  • satisfy one of the 4 personal services business tests in Part A.

If you earn PSI as a sole trader, you need to answer one or more of the questions in Part A. The questions will determine whether the PSI rules affect your deductions relating to your PSI.

The PSI rules don't affect your legal, contractual or workplace arrangements and we won’t treat you as an employee as a result of the PSI rules applying.

Part A

Answer the following questions to complete Part A.

Do you satisfy the results test?

If you earn PSI, you satisfy the results test for 2024–25 if, in respect of at least 75% of your PSI, you can answer yes to all of the following 3 questions:

  • Under your contract or arrangement, is the PSI paid to achieve a contractually specified result or outcome?
  • Do you have to provide the tools or equipment necessary to do your work? (If no tools or equipment were required for your work, answer yes.)
  • Are you liable for the cost of rectifying defects in your work?

Your contract must require the production of a specified result or outcome. The contract must also state that payment is conditional upon the achievement of that outcome. The essence of the contract must be to achieve a result and not just do work as required.

Do you have a PSB determination?

Have you received a personal services business determination that was in force for the whole of the period you earned PSI?

This is a notice from the Commissioner stating that you're conducting a personal services business. If you have a personal services business determination from the Commissioner, the PSI rules don't apply to your PSI.

Do you receive 80% or more of your PSI from one source?

  • Yes – Print X in the Yes box at P1 Personal services income (PSI) – label Q in your schedule.
    Go to, Part B.
  • No – Print X in the No box at P1 Personal services income (PSI) – label Q in your schedule. Read on.

If you don’t satisfy the results test and 80% or more of your PSI in 2024–25 comes from one client and its associates (that is, from one source), you can't self-assess whether you satisfy the other personal services business tests. The PSI rules apply to your PSI unless you get a determination from the Commissioner.

If you don’t satisfy the results test, you can self-assess against the other tests only if less than 80% of your PSI comes from one source. If you receive less than 80% of your PSI from each source for the whole of the period you earn PSI and you satisfy any of the following personal services business tests, indicate which business tests you satisfy.

If you enter a contract to provide your services with a labour-hire firm or similar arrangement, the labour-hire firm is the source of the income for the purposes of the 80% rule even if you gain more than one job through the labour-hire firm.

Commission agents

The PSI rules are modified for commission agents who act or represent others and bear an entrepreneurial risk in the way they provide their services. See, Special rules for agents.

Do you satisfy the unrelated clients test?
  • Yes – Print X in the box at P1 Personal services income (PSI) – label D1 in your schedule. Read on.
  • No – Read on.

You satisfy the unrelated clients test for 2024–25 if you can answer yes to the following questions:

  • Do you receive PSI from 2 or more clients who aren't associated with each other or with you?
  • Are those clients obtained as a direct result of making offers to the public, for example, by advertising?
    Don't count clients you get by registering with a labour-hire firm, placement agency or similar organisation.
Did you satisfy the employment test?
  • Yes – Print X in the box at P1 Personal services income (PSI) – label E1 in your schedule. Read on
  • No – Read on.

You satisfy the employment test in 2024–25 if you can answer yes to either of the following questions:

  • Do you have one or more apprentices for at least half of 2024–25?
  • Did you have employees, or do you engage subcontractors or entities, who performed at least 20% (by market value) of your principal work?

Principal work is the main work that generates the PSI and doesn't usually include support work, such as secretarial duties. You can count a spouse or a family member who does principal work, but not companies, partnerships or trusts associated with you.

Do you satisfy the business premises test?
  • Yes – Print X in the box at P1 Personal services income (PSI) – label F1 in your schedule. Read on.
  • No – Read on.

You satisfy the business premises test if you can answer yes to all the following questions. For the whole period during which you earned PSI, do you maintain and use business premises that:

  • are mainly used by you for work in earning your PSI, that is, more than 50% of the activities conducted at the premises are directed at producing your PSI
  • you have exclusive use
  • are physically separate from your private residence or the private residence of any of your associates
  • are physically separate from the business premises of your clients or their associates?

If you print X at label D1, E1 or F1 – go to, P2 Description of main business or professional activity. Otherwise read on.

Part B

Don't show PSI amounts that are subject to foreign resident withholding in part B. Show these at P8 Business income and expenses.

You need to know

You must complete Part B of P1 Personal services income (PSI) if you receive PSI and you don't:

  • receive a personal services business determination in relation to your PSI
  • satisfy the results test, or
  • satisfy at least one of the other 3 personal services business tests (if less than 80% of your PSI came from each client).

Your PSI is divided into:

  • payments you receive under a PAYG voluntary agreement to withhold tax
  • payments you receive from which tax is withheld because you didn't quote your Australian business number (ABN) to one of your payers
  • payments you receive for working under a labour-hire arrangement or from a specified payment
  • other PSI.

Goods and services tax (GST)

If you're registered or required to be registered for GST, don't include any GST amounts in your assessable income. Your deductions should not include any amounts that relate to input tax credit entitlements.

Former STS taxpayers

If you're eligible and are continuing to use the simplified tax system (STS) accounting method, you must complete the income and deduction parts of P1 Personal services income (PSI) using the STS accounting method.

Individual PAYG payment summary schedule

If tax is withheld from business income, you should receive a payment summary.

You'll need to complete the Individual PAYG payment summary schedule before completing the rest of P1 Personal services income (PSI) if you receive one of the following:

While the PAYG payment summary – business and personal services income allows reporting of different payment types (including labour hire or other specified payments and voluntary agreement), you must specify on the schedule the nature of the income and the payment type made to you.

A payer may issue a receipt, remittance advice or similar document in place of the PAYG payment summary – withholding where ABN not quoted. This document must contain the same details as the payment summary and the payer must sign the statement.

If you receive income from which tax is withheld and you didn't receive or have lost your payment summary, contact your payer and ask for a copy.

For instructions on completing the statement, see Individual payment summary schedule and instructions.

Don't attach the payment summaries to your tax return. You must keep them for a period of 5 years.

Payers must report to us details of payments where amounts of tax are withheld. This information will be cross-checked with that in your tax return to make sure that you declare the correct amount of income and the correct amount of tax withheld.

You may need 2 payment summary schedules. If you have both PSI (at P1 Personal services income (PSI)) and business income (P8 Income), you'll need to complete an Individual PAYG payment summary schedule for each type of income.

Income

This section deals with:

PSI – voluntary agreement

Follow the instructions to complete this label.

Do you receive any PSI that is subject to a PAYG voluntary agreement?

The amount you show at label M is the total income you receive that is subject to a PAYG voluntary agreement, including amounts of tax withheld. You'll be able to calculate this amount from your completed payment summary schedule.

Completing this question

Add up all the Gross payment amounts on your completed payment summary schedule that have a V in the corresponding Type box. Write the total at P1 Personal services income (PSI) – label M. Don't show cents.

If you complete P1 Personal services income (PSI) – label M, you must also complete question 14 – label G in your supplementary tax return.

PSI – where Australian business number not quoted

Follow the instructions to complete this label.

Do you have any amounts of tax withheld from your PSI for failure to quote your ABN?

The amount you show at label N is your total PSI from which an amount is withheld because you didn't quote your ABN, including the amounts of tax withheld. You'll be able to calculate this amount from your completed payment summary schedule.

Completing this question

Add up all the Gross payment amounts on your completed payment summary schedule that have an N in the corresponding Type box. Write the total at P1 Personal services income (PSI) – label N. Don't show cents.

If you complete P1 Personal services income (PSI) – label N, you must also complete question 14 – label H in your supplementary tax return.

PSI – labour hire or other specified payments

Follow the instructions to complete this label.

Do you receive any PSI under a labour-hire arrangement or from a specified payment?

Specified payments include:

  • tutorial services you provide for the Indigenous Student Success Programme (formerly known as the Indigenous Tutorial Assistance Scheme) of the Department of the Prime Minister and Cabinet
  • income from translation and interpretation services for the Translating and Interpreting Service National of the Department of Home Affairs
  • income as a performing artist in a promotional activity.

The amount you show at label O is the total income you receive from labour hire or other specified payments, including amounts of tax withheld. You'll be able to calculate this amount from your completed Individual payment summary schedule.

Don't include income you receive as an employee of a labour-hire business. These amounts will appear on your PAYG payment summary – individual non-business and you should show them at question 1 in your tax return.

Completing this question

Add up all the Gross payment amounts on your completed payment summary schedule that have an S in the corresponding Type box. Write the total at P1 Personal services income (PSI) – label O. Don't show cents.

If you complete P1 Personal services income (PSI) – label O, you must also complete question 14 – label J in your supplementary tax return.

PSI – other

Follow the instructions to complete this label.

Do you receive any other PSI?

Work out the total amount of other PSI and write this amount at P1 Personal services income (PSI) – label J.

If you're registered or required to be registered for GST, don't include any GST amounts in your assessable income.

Deductions

If the PSI rules apply, this affects the deductions you can claim against your PSI. They don't affect your legal, contractual or workplace arrangements and you won’t be treated as an employee as a result of the PSI rules.

The information on this page is a guide only. You may need further information to determine whether a deduction is available in your circumstances, Taxation Ruling TR 2003/10 Income tax: deductions that relate to personal services income explains the PSI deduction limitation rules.

For more information, see claiming deductions when receiving PSI.

What deductions you may be able to claim

Subject to exceptions, the general rule is that you may claim an amount used to gain or produce your PSI if you could claim that amount if the income was payable to you as an employee.

The following are examples of items you may be able to claim a deduction for:

  • premiums for workers compensation, public liability and professional indemnity insurance
  • financial institution and other account-keeping fees and charges
  • tax-related expenses, such as the cost of preparing and lodging a tax return or business activity statement (BAS)
  • registration or licensing fees
  • expenses for advertising, tendering and quoting for work
  • deduction for decline in value of depreciating assets
  • simplified depreciation (if you're a small business entity)
  • running expenses for your home office, such as heating and lighting for using a room in your house as a home office (not including rent, mortgage interest, rates or land taxes)
  • salary and wages for an arm’s length employee (not an associate)
  • contributions to a complying super fund on behalf of an arm’s length employee (not an associate)
  • reasonable amounts paid to an associate for principal work
  • contributions to a complying super fund or retirement savings account up to the super guarantee amount for an associate doing solely principal work.

Don't include any amount that was a super contribution for yourself. You must claim any deduction for your own super contributions at question D12 in your supplementary tax return.

What you can't claim

You can't claim an amount for the following that relates to earning your PSI:

  • rent, mortgage interest, rates or land tax for your residence (or the residence of an associate)
  • amounts paid to an associate for non-principal work, for example, support such as secretarial work
  • contributions to a super fund for an associate doing solely non-principal work.

Deductions for payments to associates for principal work

Answer this question to complete label K.

Do you have deductions for payments to associates for principal work?

Add up the total amount of payments made to associates for principal work. Write the total at P1 Personal services income (PSI) – label K.

Total amount of other deductions against PSI

Answer this question to complete label L.

Do you have other allowable deductions against your PSI?

  • No – Go to Net PSI.
  • Yes – Read on.

You need to know

In answering this question, you include only non-commercial business losses deferred from a prior income year if they relate to a business activity which is the same as, or similar to, one of your 2024–25 business activities.

If a sole trader has a PSI loss, and they aren't a personal services business, then that PSI loss sits with the individual who generated the income. For an explanation of how the non-commercial business loss rules work, see How to attribute PSI, and P9 Business loss activity details.

Your non-commercial business loss deduction may be reduced if you either:

  • earn net exempt income in 2024–25
  • become bankrupt or are released from any debts by the operation of an Act relating to bankruptcy.

For more information, see How to defer your losses.

Completing this question

Add up the total amount of all other expenses (including non-commercial business losses deferred from a prior income year) that you can deduct from your PSI. Write the amount at P1 Personal services income (PSI) – label L.

Don't include amounts already recorded at P1 Personal services income (PSI) – label K.

If you're registered or required to be registered for GST, your deductions shouldn't include the amount that relates to input tax credit entitlements.

Net PSI

To work out your net PSI go through the following steps:

Step 1: Add up the amounts shown at P1 Personal services income (PSI) – labels M, N, O and J.

Step 2: Add up the amounts shown at P1 Personal services income (PSI) – labels K and L.

Step 3: Subtract the amount calculated at step 2 from the amount calculated at step 1. Write your answer at P1 Personal services income (PSI) – label A.

Step 4: Transfer the amount at P1 Personal services income (PSI) – label A to question 14 – label A of your supplementary tax return.

If the amount is a loss, you must:

  • print L in the Loss box at the right of P1 Personal services income (PSI) – label A
  • print L in the Loss box at the right of question 14 – label A in your supplementary tax return.

Other business income

Answer the following question to complete this item.

Do you have any business income other than PSI?

Finishing your schedule

If the only income you need to show on your schedule is PSI, you only complete:

Check that you:

  • Transfer your net PSI amount from P1 Personal services income (PSI) – label A to question 14 – label A in your supplementary tax return.
    If this amount is a loss, check that you printed L in the Loss box P1 Personal services income (PSI) – label A.
  • Complete and attach your Individual PAYG payment summary schedule to your tax return (if you receive PSI that was subject to withholding).

Continue to: Business information – P2 to P6

Return to: Instructions to complete the BPI schedule 2025

 

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