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Information for Business Owners

Personal Services Income

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.

Income Tax Returns and BAS returns for small businessThe 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.

1 Comment to Personal Services Income:

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Josh Grasser on Sunday, 3 February 2013 5:30 PM
An essential blog! I need to know about tax law for giving my tax on my asset. It is most useful blog about tax law that help me to know about this. Thanks for giving such kind of handful blog. Carry on man!
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