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The personal services income (PSI) rules apply to income that is earned mainly from the personal efforts or skills of a person.
It does not matter whether the income is earned by the individual in their own name or through an entity such as a business. The rules do not apply to income earned from being an employee.
A business structure
This can be a confusing concept. It does not mean that you conduct a business through an entity such as a company or a trust.
The term “business structure” is used to define a business (operated through any structure) that is large enough for it to be concluded that the income of the business is not being earned from the individuals in the business. Rather, the income is being earned by the “business structure”. This can still apply to quite small businesses.
The results test
This is an important test. If you pass the test, the PSI rules do not apply to you. An individual passes the results test if in relation to at least 75% of the individual’s PSI:
Unrelated clients test
This test is passed if:
Broadly, this test is passed if:
Business premises test
Broadly, this test is passed if business premises are maintained:
Personal services determination
The ATO can give you a ruling that the PSI rules don’t apply to you in certain circumstances. For example, there could be “one-off” changes in your circumstances that cause you to fail the PSI tests. You can apply to the ATO to have the PSI rules ignored by the ATO. If the ATO rules in your favour, this is called a “personal services determination”.
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