Taxation Laws Amendment Act (No. 6) 2001 (169 of 2001)

Schedule 6   Personal services income

Part 2   Personal services business tests

Income Tax Assessment Act 1997

4   Section 87-15

Repeal the section, substitute:

87-15 What is a personal services business?

(1) An individual or *personal services entity conducts a personal services business if:

(a) for an individual - a *personal services business determination is in force relating to the individual's *personal services income; or

(b) for a personal services entity - a personal services business determination is in force relating to an individual whose personal services income is included in the entity's *ordinary income or *statutory income; or

(c) in any case - the individual or entity meets at least one of the 4 *personal services business tests in the income year for which the question whether the individual or entity is conducting a personal services business is in issue.

Note 1: For personal services business determinations, see Subdivision 87-B.

Note 2: Under subsection (3), the personal services business tests, apart from the results test under section 87-18, do not apply if 80% or more of your personal services income is from one source (but they can still be used in deciding whether to make a personal services business determination).

(2) The 4 personal services business tests are:

(a) the results test under section 87-18; and

(b) the unrelated clients test under section 87-20; and

(c) the employment test under section 87-25; and

(d) the business premises test under section 87-30.

(3) However, if 80% or more of an individual's *personal services income during an income year is income from the same entity (or one entity and its *associates), and:

(a) the individual's personal services income is not included in a *personal services entity's *ordinary income or *statutory income during an income year, and the individual does not meet the results test under section 87-18 in that income year; or

(b) the individual's personal services income is included in a personal services entity's ordinary income or statutory income during an income year, and the entity does not, in relation to the individual, meet the results test under section 87-18 in that income year;

the individual's personal services income is not taken to be from conducting a *personal services business unless:

(c) when the personal services income is gained or produced, a *personal services business determination is in force relating to the individual's personal services income; and

(d) if the determination was made on the application of a personal services entity - the individual's personal services income is income from the entity conducting the personal services business.

Note: Sections 87-35 and 87-40 affect the operation of subsection (3) in relation to Australian government agencies and certain agents.

87-18 The results test for a personal services business

(1) An individual meets the results test in an income year if, in relation to at least 75% of the individual's *personal services income (not including income referred to in subsection (2)) during the income year:

(a) the income is for producing a result; and

(b) the individual is required to supply the *plant and equipment, or tools of trade, needed to perform the work from which the individual produces the result; and

(c) the individual is, or would be, liable for the cost of rectifying any defect in the work performed.

(2) Paragraph (1)(a) does not apply to income:

(a) that the individual receives as an employee; or

(b) that the individual receives as an individual referred to in paragraph 12-45(1)(a), (b), (c), (d) or (e) (payments to office holders) in Schedule 1 to the Taxation Administration Act 1953.

(3) A *personal services entity meets the results test in an income year if, in relation to at least 75% of the *personal services income of one or more individuals that is included in the personal services entity's *ordinary income or *statutory income during the income year:

(a) the income is for producing a result; and

(b) the personal services entity is required to supply the *plant and equipment, or tools of trade, needed to perform the work from which the personal services entity produces the result; and

(c) the personal services entity is, or would be, liable for the cost of rectifying any defect in the work performed.

(4) For the purposes of paragraph (1)(a), (b) or (c) or (3)(a), (b) or (c), regard is to be had to whether it is the custom or practice, when work of the kind in question is performed by an entity other than an employee:

(a) for the *personal services income from the work to be for producing a result; and

(b) for the entity to be required to supply the *plant and equipment, or tools of trade, needed to perform the work; and

(c) for the entity to be liable for the cost of rectifying any defect in the work performed;

as the case requires.