Personal services income (PSI) is an issue currently drawing the attention of the ATO PSI is income that an individual taxpayer earns
predominantly as a direct reward for his or her personal efforts by, for
example, the provision of services, exercise of skills or the
application of labour. Examples of PSI are fees earned by a professional
person on his or her own account, income payable under a contract for
services or where the payment under the contract relates wholly or
principally to the labour of the person concerned.  The PSI rules in the tax law limit deductions available to
individuals in receipt of PSI if they are not able to satisfy the
required personal services business tests. The fundamental rule is that
an amount is not deductible to the extent it relates to gaining or
producing PSI if the income is not payable to the individual as an
employee and the amount would not be deductible if the income were
payable to the individual as an employee.The rules also attribute income derived by an interposed entity,
after allowing for a limited range of deductions, to the individual
providing services to the interposed entity. The PSI rules do not apply
to individuals or interposed entities carrying on a "personal services
business". For the average person, these rules rapidly descend
into a complicated mess and the ATO is concerned that people
are not applying the law correctly. If you have any concerns about PSI in your business contact Alan at Basman Returns on 0419 671 602 to find out more. |
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