If you are a contractor or consultant and you earn personal
services income, special tax rules may affect what amounts you
include in your assessable income and what deductions you
can claim. Personal services income rules can apply to sole
traders, partnerships, companies or trusts.

PERSONAL SERVICES INCOME (PSI)
Personal services income is income that is mainly a reward for,
or the result of, your personal efforts or skills.
Examples of personal services income include:
■ income earned by consultants from exercising personal
expertise
■ income of a professional practitioner in sole practice
■ income payable under a contract that is wholly or principally
for the labour or services of a person
■ income derived by a professional sportsperson or entertainer
from the exercise of professional skills.
Personal services income does not include income that
is mainly:
■ for supplying or selling goods
■ for granting a right to use property
■ generated by an income producing asset, such as income
derived from the use of a truck
■ generated by a business structure, for example, a large
accounting firm.
WORKING OUT IF THE PSI RULES
APPLY TO YOU
If you are conducting a personal services business or you
hold a personal services business determination from us,
the personal services income rules do not apply to you.
You qualify as a personal services business if any of the
following apply:
■ you meet the results test
■ less than 80% of your personal services income in an income
year comes from each client and you meet one of the other
three personal services business tests (the unrelated clients
test, employment test or business premises test)
■ you obtain a determination from us confirming that you are
a personal services business.
You can apply for a determination if any of the following apply:
■ you are not sure whether you meet one or more of the
personal services business tests
■ you don’t meet the results test and 80% or more of your
personal services income comes from one client
■ unusual circumstances prevent you from meeting one
or more of the tests.

If you don’t meet the results test and 80% or more of your
personal services income comes from one client, the personal
services income rules will affect you unless you get a
determination from us.
WHEN THE PSI RULES APPLY
If you are a sole trader, the personal services income rules limit
the deductions you can claim. For example, claims you can
make are limited for:
■ rent, mortgage interest, rates or land tax on your residence
■ wages or super payments for associates.
For companies, partnerships or trusts:
■ there are limits on the deductions you can claim
■ we regard the income (less certain reductions) for tax
purposes as your income and you must include it in your
personal assessable income
■ the company, partnership or trust will have an additional
PAYG withholding obligation on the income attributed to you.