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Does your income include an individual's personal services income?
Personal services income (PSI) is income that is mainly a reward for an individual's personal efforts or skills (or would mainly be such a reward if it was derived by the individual).
A trust may derive income which includes the PSI of one or more individuals. Examples of PSI include income:
- for the services of a professional practitioner in a sole practice
- derived under a contract which is wholly or principally for the labour or services of an individual
- for the exercise of professional skills by a professional sportsperson or entertainer
- for the exercise of personal expertise by a consultant.
PSI does not include income that is mainly:
- for supplying or selling goods, for example, from retailing, wholesaling or manufacturing
- generated by an income-producing asset, for example, from operating 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 the income of the trust includes an individual's PSI, print X in the Yes box at N. Otherwise print X in the No box at N.
If you printed X in the Yes box at N, complete and attach a Personal services income schedule 2010 to the trust tax return. The Personal services income schedule 2010 has a more detailed explanation of the PSI rules.
If the trust receives an individual's PSI other than in the course of conducting a personal services business and does not promptly pay it to the individual as salary or wages:
- the net amount of PSI is attributed to the individual and is not assessable to the trust, and
- certain related expenses are not deductible under the special rules.
Expenses specifically denied include rent, mortgage interest, rates and land tax for the residence of individuals (or their associates, such as a spouse) whose efforts or skills mainly generate the PSI for the trust, the costs of a second private use car, and payments of salary or wages and superannuation for associates to the extent such payments relate to non-principal work.
The denied expenses include the total amount of the deductions allowed to the individual for a net personal services income loss. See the Personal services income schedule 2010 for more information.
Include adjustments for PSI at item 5Reconciliation items. See worksheet 1.
Last modified: 13 Aug 2014QC 22968