P1 personal services income (PSI)
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
End of attention
You do not have to complete item P1 if your PSI is gained as an employee. Item P1 concerns sole traders only.
You also do not have to complete item P1 if your PSI was received through a company, partnership or trust.
Did you receive personal services income?
No, Print X in the No box at item P1 on your schedule. Go to P2 Description of main business or professional activity.
Yes, Print X in the Yes box at item P1 on your schedule. Read on.
You need to know
PSI is income that is mainly a reward for an individual's personal efforts or skills.
Examples of PSI are:
- income of a professional practitioner in a sole practice
- income payable under a contract which is wholly or principally for the labour or services of a person
- income derived by a professional sportsperson or entertainer from the exercise of professional skills
- income derived by consultants from the exercise of personal expertise.
PSI does not 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 a bulldozer)for granting a right to use property (for example, the copyright to a computer program), or
- generated by a business structure (for example, a large accounting firm).
If you have earned PSI but not as an employee, you may not be able to claim 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. This depends on whether you:
- have a personal services business determination from the Commissioner stating that your PSI was from conducting a personal services business for the whole of the period you earned PSI, or
- satisfied one of the four tests in Part A.
If you earned PSI as a sole trader, you need to read on and answer one or more of the questions in Part A to determine whether deductions in relation to your PSI are affected by the PSI rules.
The PSI rules do not affect your legal, contractual or workplace arrangements - you won't be treated as an employee as a result of the rules.
Last modified: 01 Sep 2006QC 18499