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Edited version of private advice
Authorisation Number: 1051995423167
Date of advice: 23 June 2022
Ruling
Subject: Personal services income
Question
Is the income The Trust receives, for structural and mechanical design drafting services, personal services income (PSI)?
Answer
No.
The income of The Trust is generated from the income yielding structure of a business rather than PSI.
The definition of PSI is contained in subsection 84-5(1) of the Income Tax Assessment Act 1997. The definition states that income (including ordinary income or statutory income) that is mainly a reward for an individual's personal efforts or skills is personal services income.
The Trust has many employees and is not dependent on a particular individual's personal skill, efforts or expertise. The income from The Trust is generated by the structure of the business rather than from an individual's personal services. The income from business of The Trust is not personal services income.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The Trust provides structural and mechanical design drafting services (the business).
The Trust has built up goodwill based on the expertise and experience of the individuals who perform the principal work for the Trust.
The Trust engages clients by word of mouth, website, LinkedIn and a logo trademark.
The income received by the Trust is not dependent on any individual's particular skills.
Employees and contractors engaged by the Trust in the 20XX income year are:
|
Name |
Classification |
Employee or Contractor |
Work performed |
|
X |
Senior structural and mechanical design drafting |
Contractor |
Structural and mechanical engineering drafting |
|
X |
Senior structural and mechanical design drafting |
Contractor |
Engineering drafting checker |
|
X |
Senior structural and mechanical design drafting |
Contractor |
Structural and mechanical engineering drafting |
|
X |
Senior structural and mechanical design drafting |
Employee |
Structural and mechanical engineering drafting |
|
X |
General drafting and document control |
Employee |
Structural engineering drafting and document control |
|
X |
Civil engineering drafting |
Employee |
Civil engineering drafting |
|
X |
Senior structural and mechanical design drafting |
Employee |
Structural and mechanical engineering drafting |
The Trust has stated that principal work for the clients includes structural drafting, mechanical design drafting and document control. Each individual providing services to the Trust, whether as contractor through an entity or as an employee, performs principal work for the Trust.
The employees and contractors of The Trust operate together on client projects and provide the different levels of experience, knowledge and any equipment needed. Each job is not completed by any one person, but rather as a team to achieve a result.
There are no contracts between the Trust and any contractors, employees, or clients. Contractors are paid on The Trust receiving a tax invoice and employees are paid on a regular payment cycle by The Trust. Services to clients are provided on demand.
Invoices to The Trust from contactors show service charges for principal work.
Employees of the Trust have PAYG withheld from their salary and wages paid by the Trust. Contractors are paid by the Trust on the provision of a Tax Invoice.
Equipment used in The Trust's business includes various software and computers.
All work by The Trust's employees and contractors are carried out either at the individuals home office or the client's premises.
Relevant legislative provisions
Section 84-5 of the Income Tax Assessment Act 1997