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Limited deductions against PSI
The PSI rules affect the deductions you can claim against your PSI. They do not affect your legal, contractual or workplace arrangements - you won't be treated as an employee as a result of the PSI rules. You may need further information to determine whether a deduction is available in your circumstances. Taxation Ruling TR 2003/10 - Deductions that relate to personal services income explains the PSI deduction limitation rules. This ruling is available on our website or to find out how to get a printed copy, see More information.
What deductions you may be able to claim
Subject to specific exceptions, the general rule is that you may claim an amount that is incurred in gaining or producing 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
- bank 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
- STS depreciation
- 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 superannuation fund on behalf of an arm's length employee (not an associate) up to the age-based deduction limit
- reasonable amounts paid to an associate for principal work
- contributions to a complying superannuation fund or retirement savings account up to the superannuation guarantee amount for an associate doing solely principal work.
Do not include any amount that was a superannuation contribution for yourself. Any deduction for your own superannuation contributions must be claimed at item D13 on your tax return. See question D13 in TaxPack 2006 supplement.
What you cannot claim
You cannot claim an amount for the following if it related to gaining your PSI:
Last modified: 01 Sep 2006QC 18499
- 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
- contributions to a superannuation fund for an associate doing solely non-principal work.