If you are an individual who works as a contractor or runs their own business as either a sole trader or through a company you will need to be mindful of the Personal Services Income (PSI) rules.

Personal services are defined by the Australian Taxation Office (ATO) as a reward for an individual’s personal efforts or skills.

In the nutshell the purpose of the PSI rules is to limit the deductions that an individual can claim if the nature of the work performed by them falls within the definition of “personal services” and the PSI rules apply.

It is important to note that just because an individual derives their income from personal services it does not necessarily mean that the PSI rules will apply.

To work out if the PSI rules apply to you  will need to go through the tests outlined in the ATO step by step flow chart (pictured above).

If you are interested in reading further on this topic follow the link below to the PSI guide published by the ATO.

https://www.ato.gov.au/Business/Personal-services-income/

If you would like us to assist you with further understanding how the rules may apply to your business, do not hesitate to contact us at: service@taxdesk.com.au or you can call us on 0447 215 717.

Alternatively you can also schedule a consultation with us by clicking on the schedule a free consultation button above.