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Personal services business determination application

Apply to us for a determination to clarify if the PSI rules apply to you or not.

Last updated 12 July 2021

This form is to be completed by eligible taxpayers who wish to apply for a Personal services business determination.

Download the formThis link will download a file (PDF, 137KB)

Instructions and form for business operators

Personal services business determination application

How to find out if the personal services income (PSI) rules apply to you.

About these instructions

Use these instructions to help you complete an application for a personal services business determination.

If you need additional space to answer any question, include an attachment with a reference to the relevant question number.

Introduction

A personal services business determination is a notice from us advising the PSI rules don’t apply.

By applying for a determination, you can receive clarification about whether the PSI rules apply to you or not.

As the PSI rules only apply to income that is classified as PSI, you must work out whether you receive PSI before making this application for a determination.

If you are not familiar with the PSI rules or you are unsure if you receive PSI, you should read Personal services income.

If you want written clarification on an issue other than if the PSI rules apply, you should apply for a private ruling from us.

For more information refer to Private ruling application.

When should you apply for a determination?

You should apply for a determination if you:

  • are unsure whether you have passed the results test, employment test or business premises test
  • have unusual circumstances that stop you from passing one of the tests
  • do not pass the results test and 80% or more of your PSI is from one client.

After we receive your completed application, we apply the relevant tests to your circumstances and write back to you letting you know whether:

  • the PSI rules don’t apply
  • the PSI rules do apply.

If you operate a company, partnership or trust, you must complete a separate application for each person who earns PSI for your business.

For the unrelated clients test, by law we can only provide a determination where unusual circumstances have stopped you from passing this test and/or the 80% rule. If you are unsure whether you pass the unrelated clients test and less than 80% of your PSI comes from each client, you should apply for a private ruling.

For more information refer to Private ruling application.

In what circumstances do we advise the PSI rules don’t apply?

Results test, employment test and business premises test

We provide a determination advising the PSI rules don’t apply when:

  • you pass the required conditions for the results test, employment test or business premises test
  • unusual circumstances stopped you from passing the results test, employment test or business premises test.

Unrelated clients test

When 80% or more of your PSI comes from one client.

We provide a determination advising the PSI rules don’t apply when:

  • you pass the required conditions for the unrelated clients test, but unusual circumstances have caused you to have 80% or more of your PSI from one client in the income year
  • less than 80% of your PSI comes from each client, but unusual circumstances stopped you from passing the unrelated clients test
  • unusual circumstances stopped you from passing the unrelated clients test and have caused you to have 80% or more of your PSI from one client in an income year.

We cannot give you a determination just because you pass, or normally pass, the unrelated clients test. You also have to show that you normally get less than 80% of your income from each source.

Unusual circumstances are situations that are completely out of the ordinary and stop you from passing a test or tests. The circumstances must be temporary and there is a reasonable expectation that the normal circumstances will resume in the short term.

Examples of unusual circumstances include where:

  • for a number of years, you have provided personal services to a range of different clients and you decide to accept a long-term contract with a single client, however you can reasonably be expected to return to having a number of clients after this contract is completed
  • you started a business during the income year and you provided services to an insufficient number of clients to pass the unrelated clients test but you can reasonably be expected to pass the test in subsequent income years.

At what time of the year should you apply for a determination?

You can apply for a determination at any time during, or before, the year the income is received in. If the year has not yet finished, we may grant a determination if you could reasonably be expected to pass one of the tests for that year.

You can also apply after the end of the year the income is received in, including after you have lodged your tax return.

What period does the determination cover?

The determination starts from the date given in the notice (which is normally the start of an income year) or otherwise the date of the notice.

The determination ceases if:

  • one or more of the conditions stated are not met
  • we revoke it (for example, where we are no longer satisfied that the PSI rules don’t apply to you)
  • it reaches an expiry date stated in the determination.

A company, partnership or trust’s PAYG withholding obligations regarding PSI cease from the beginning of the withholding period the determination takes effect in.

Can you lodge an objection against a determination decision?

If you apply for a determination and receive advice from us that the PSI rules apply, you may object to this decision.

You may also object if we vary or revoke a determination or set conditions that you are unhappy with. To be valid, your objection must:

  • be in writing
  • be lodged within 60 days of receiving the determination
  • must state fully the grounds you rely on.

If we refuse your application, but your circumstances change, you can apply again.

More information or help with your application

For more information or help with completing your determination application:

  • phone us on 13 28 66
  • speak to your tax adviser.

SECTION A: applicant information

Question 1

Which income year does this application relate to?

Print the income year this application relates to. When completing the application, only provide information relevant to the income year you indicate at this question, unless we ask otherwise.

Question 2

What is your name?

If you are an individual in business and you receive PSI, print your name.

If you operate a company, partnership or trust, print the name of the individual who does the personal services work – that is, the individual this application relates to.

Note: If you employ more than one individual who earns PSI, you must complete a separate application for each of those individuals.

Question 3

What is the tax file number of the individual identified at question 2?

You don’t have to quote a tax file number, however, if you do, your tax information is protected by privacy laws.

Question 4

Does 80% or more of your PSI come from one client?

If you receive any income that is not PSI (for example, investment income, income from the sale of goods or using an income-producing asset), do not take that income into account when working out whether 80% or more of your PSI comes from one client.

If you earn PSI through a labour hire firm, placement agency or similar organisation, you are only earning this income from one client.

Question 5

What is the name of your company, partnership or trust?

Only answer this question if your company, partnership or trust receives PSI from individuals who have PSI (identified in question 2). Print the name that appears on all official documents or legal papers, for example:

  • Ann Citizen, Brian J Smith and Greg Jones (partnership)
  • AXY Pty Ltd (company)
  • Smith Family Trust (trust).

The name may be different from your business name.

Question 6

What is the tax file number of your company, partnership or trust?

Only answer this question if your company, partnership or trust receives PSI of one or more individuals.

You don’t have to quote a tax file number, however, if you do, your tax information is protected by privacy laws.

Question 7

What are your contact details?

Print the postal and/or email address where you want us to send mail relating to your application. This may be the address of:

  • the individual to whom this application relates
  • the company, partnership or trust
  • a tax agent.

Print the name and phone number (including STD code) of a person we can contact about any issue relating to your application. This person must be authorised to discuss or change your application – for example, a tax agent.

If a tax agent completes the application, they should print their reference number in the boxes provided.

Question 8

What is the industry, trade or profession of the individual identified at question 2?

Place ‘X’ against the industry, trade or profession most of the PSI is received from.

Question 9

Describe the personal services work done by the individual identified at question 2.

Describe the personal services work done by the individual identified at question 2 that earns the PSI. For example, a plumber should indicate:

  • ‘construction’ at question 8
  • ‘plumbing’ at question 9.

Section B: results test

Only complete this section for the income year indicated at question 1 if you are applying for a determination on the basis of the results test.

If your company, partnership or trust receives PSI for more than one person, you must complete a separate application for each person.

Note: Make sure you include copies of all relevant contracts you have with your clients and a representative sample of consecutive invoices – three to six, if possible.

Passing the results test

You pass the results test in the income year if you can answer YES to all three of the following questions for at least 75% of the PSI.

  • Under the contract or arrangement, will you only receive payment when the work has been completed – that is, after you produce the contracted result?
  • Do you need to provide the equipment or tools necessary to do the work? (If you don’t need tools or equipment, answer YES.)
  • Are you liable for the cost of rectifying defects in the work?

You can also pass the results test if:

  • the income year you indicated at question 1 has not yet ended
  • there is a reasonable expectation that you can answer YES to all three questions listed above in that year.

We may consider whether it is usual and common practice for workers in your industry to pass these conditions.

Question 10

Describe the result or outcome you must complete under your contract or agreement.

Describe the result or outcome you must complete under your contract or agreement to receive payment. Although there may be some flexibility as to how the work is done, you must complete the result or outcome to be paid.

In most situations, the payment you receive is a fixed sum when you complete the job, not an amount paid for the hours you work. However, regardless of the way you are paid, if your contract says you are only paid on the basis that you complete the result or outcome specified in your contract, then you are paid for achieving a result.

If you do not have a written contract or your contract does not specify that you are paid to achieve a result or outcome, we may consider the normal custom and practice in your industry to work out whether you must complete a result or outcome to be paid.

Question 11

Describe the main tools or equipment you must provide to do your work.

If you do not need plant, equipment or tools of trade to perform the work, you automatically pass this condition – print ‘NO

TOOLS REQUIRED’.

You pass this test if you provide plant, equipment or tools of trade because:

  • you must provide them under your contract or agreement to do your work
  • it is common practice in your industry to do so.

For example, in the construction industry it is common practice for a builder on a large commercial building site to provide scaffolding. A carpenter who uses that scaffolding to get to parts of the building they are working on still passes this condition because the scaffolding is not considered to be plant or equipment needed to do their particular work.

You may also still pass this condition if your client supplies minor tools or equipment items you need to perform the work.

Question 12

Describe how you are liable to pay the cost of rectifying defects in your work.

To pass this condition, you must be liable for the cost of fixing any defects in your work. This includes situations where you:

  • take action to fix the error at your own cost, before the task is complete or legal action is taken
  • are liable to pay the cost of fixing any defect that cannot be repaired by paying damages you are ordered to pay through a legal process.

If you do not have a written contract or your contract does not specify that you are liable for the cost of fixing defects in your work, we may consider the normal custom and practice in your industry to work out whether you are liable for the cost of fixing any defects in your work.

SECTION C: EMPLOYMENT

Complete this section for the income year indicated at question 1 only if you are applying for a determination on the basis of the employment test.

If your company, partnership or trust receives PSI for more than one person, you must complete a separate application for each person.

Passing the employment test

You pass the employment test in the income year if you can answer YES to one of the following questions.

  • Do you get employees, partners (in a partnership) or other contractors to perform at least 20% (by market value) of the principal work?
  • Do you have one or more apprentices for at least half of the income year?

You may also pass the employment test:

  • if the income year you indicated at question 1 has not yet ended
  • there is a reasonable expectation that you can answer YES to either of the two previous questions in that year.

Question 13

What are the names of your employees, or the sub-contractors or other businesses you use (now or in the future) to help the individual identified at question 2 with the principal work?

Provide the names of those individuals (including employees), companies, partnerships and trusts that help with principal work.

Question 14

Describe the principal work done (or expected to be

done) by those named at question 13.

Principal work is the main work that you must complete to receive the PSI. It does not usually include support work such as secretarial duties.

Question 15

What is the market value of the principal work done (or expected to be done) by those named at question 13?

You pass the employment test in the income year if at least 20% (by market value) of the principal work is done by employees, sub-contractors and entities identified at question 13.

Note: You cannot include work performed by:

  • your associates who are not individuals (e.g. companies, trusts, partnerships)
  • individuals who have PSI.

Working out the market value depends on the type of principal work and how it is done, as well as whether all parties are dealing with each other at arm’s length.

If the parties are dealing with each other at arm’s length, the market value of all the principal work is the contract price. If the parties are not dealing with each other at arm’s length, use the market rate you would charge your client if you were operating on an arm’s length basis, for example, the arm’s length charge-out rate used by a labour hire firm.

Question 16

What is the gross amount of PSI the individual identified at question 2 received or expects to receive?

This is normally a combination of the amounts:

  • specified in the contracts or arrangements the individual identified at question 2 enters into to earn PSI for that income year
  • of principal work reasonably expected to be done if the income year indicated at question 1 has not yet ended.

If your business earns PSI through more than one individual, include only the PSI of the individual you identified at question 2.

Question 17

Have you had (or do you expect to have) one or more apprentices for at least half the income year?

An apprentice is a worker under an apprenticeship. This includes workers under government or industry group training schemes but not research and other assistants.

Apprentices can also include those:

  • supplied by the Group Apprentice Scheme to work for the contractor as part of their trade training
  • who work for you for broken periods throughout the income year, as long as the total periods add up to at least six months.

You do not pass this condition of employment test if, for example, you only had two apprentices working at the same time for the first three months of the income year.

Question 18

If you answered YES to question 17, provide the following information about your apprentices:

Provide the following information about the apprentices you had during the income year indicated at question 1:

  • their names and addresses
  • the period you had them during the income year
  • the name of their apprenticeship program (if any).

Section D: Business premises test

Complete this section for the income year indicated at question 1 only if you are applying for a determination on the basis of the business premises test.

If your company, partnership or trust receives PSI for more than one person, you must complete a separate application for each person.

Business premises are premises with the usual physical attributes and fixtures for commercial or business use. For example, a typical shed or garage at home would need major modifications to have these attributes or fixtures.

Passing the business premises test

You pass the business premises test if you can answer YES to all parts of the following question.

At all times in the income year, are your business premises:

  • owned or leased by you
  • used mainly to conduct personal services activities (more than 50% of the activities are directed to personal services work)
  • used exclusively by you
  • physically separate from your residence and associate’s residences
  • physically separate from the business addresses of clients and their associates?

If you start operating your business during the income year, you can still pass the business premises test if you maintain and use business premises for the entire time you operate your business.

You also pass the business premises test if:

  • the income year you indicated at question 1 has not yet ended
  • there is a reasonable expectation you will pass all of the conditions listed above at all times in that year.

Question 19

What is the address of your business premises?

(Provide all addresses if more than one.)

This is the physical street address. It may be different from your postal address or your company, partnership or trust address. This address cannot be a post office box number.

Question 20

Do/will the following apply to your business premises at all times in the income year?

Answer YES or NO to each question.

Are the premises:

(a) owned or leased by you?

(b) mainly used for personal services work (e.g. more than 50% of the time) by the individual identified at question 2?

(c) used exclusively by you?

(d) physically separate from the private residence of the individual identified at question 2, or their associates?

(e) physically separate from the business address of your clients, or their associates?

You must use the premises mainly for the work that earns your PSI. It is not enough to conduct activities from premises you own or lease if those activities do not relate to your personal services work.

You must have exclusive use of the premises. However, you can share the premises with parties who work for you.

The business premises must be separate from any premises the individual who provides the personal services, or any of their associates uses for private purposes. This means that business premises within private premises are not ordinarily physically separate.

The premises must also be physically separate from your clients’ or their associates’ business premises.

When deciding if your premises are physically separate, consider whether:

  • the business premises are detached from other building structures on the land
  • the business premises have separate external access for you and your clients
  • a permanent barrier prevents internal access between the business premises and the remaining premises.

The premises do not need to be the same set of premises throughout the income year. This means you can change premises during the year as long as your premises pass the business premises test during the entire year.

Question 21

At any time in the income year, were your business premises (or do you expect them to be) jointly owned or leased?

To have exclusive use of business premises, you must either own or lease the premises. If you lease and share the entire premises together with another business, you do not have exclusive use of the premises. However, this does not include arrangements where you only share part of the premises such as a reception area and waiting rooms.

Question 22

If you answered YES to question 20(d) or (e), how are your business premises physically separate?

There are several things you need to consider. For example, whether the premises:

  • have separate access for clients
  • are joined to other buildings on the property.

Section E: Unusual circumstances

Complete this section for the income year indicated at question 1 only if you are applying for a determination on the basis of unusual circumstances.

If your company, partnership or trust receives PSI for more than one person, you must complete a separate application for each person.

Unusual circumstances are temporary, short-term circumstances that stop you from passing a test because they are completely out of the ordinary. If you expect them to continue indefinitely, they are not considered to be unusual.

If unusual circumstances stop you from passing more than one test, you will have to photocopy the page and complete it for each test. Attach the completed pages to the back of your application.

We will advise the PSI rules don’t apply if any of the following circumstances apply to you:

  • the income year indicated at question 1 has not yet ended and there is a reasonable expectation that you would have passed the test in that year except for the unusual circumstances that applied the personal services work started in the income year indicated at question 1 and there is a reasonable expectation that you will pass the relevant test in following income years
  • you passed the relevant test in one or more previous years and there is a reasonable expectation that you will pass it in following income years.

Unrelated clients test

You pass the unrelated clients test if you answer YES to both of the following questions.

  • Do you receive PSI from two or more unrelated clients?
  • Do you provide your services as a direct result of making offers or invitations (such as by advertising) to the public?

The personal services must also be provided as a direct result of making offers to the public, for example by advertising or word of mouth. Do not count clients you obtained by putting your name with a labour hire firm, placement agency or similar organisation. Also do not count the labour hire firm, placement agency or similar organisation as a client for this test.

You can only apply for a determination for the unrelated clients test where there are unusual circumstances:

  • you pass the required conditions for the unrelated clients test, but unusual circumstances mean you have 80% or more of your PSI from one client in the income year
  • less than 80% of your PSI comes from each client, but unusual circumstances stopped you from passing the unrelated clients test
  • unusual circumstances stopped you from passing the unrelated clients test and mean you have 80% or more of your PSI from one client in an income year.

Note: We cannot give you a determination just because you pass, or normally passed, the unrelated clients test. You also have to show that you normally get less than 80% of your income from each client. If you pass the 80% rule and are unsure whether you pass the unrelated clients test, you can apply for a private ruling.

You cannot reasonably expect to pass the test based on a possibility or chance alone. It must be at least equally as likely that you will pass the test as that you won’t.

Question 23

Which test did unusual circumstances stop you from passing?

Place ‘X’ against the relevant test.

Question 24

Did you start your personal services work in the income year indicated at question 1?

If you started your personal services work in the year for which you are applying for a determination, answer YES and go to question 28. If you started it in a previous year, answer NO and go to question 25.

Question 25

What was the most recent income year (before the income year indicated at question 1) you passed the test selected at question 23 in?

In what income year, if any, did you last pass the test you selected at 23 if you:

  • started your personal services work before the income year indicated at question 1
  • did not expect to pass the test in the year indicated at question 1?

For example, if you passed the employment test by having apprentices for six months in each of the years ended 30 June 2007 and 2008, include the income year ended 30/06/2008.

Question 26

In which income year (following the income year indicated at question 1) do you expect to pass the test selected at question 23?

When do you expect to pass the test indicated at 23 if you:

  • started the personal services work before the income year indicated at question 1
  • do not expect to pass the test during the year indicated at question 1?

For example, if you started your personal services work on 3 October 2008 and you do not expect to pass the test by 30 June 2009 but expect to pass it in the next year, the income year would be the year ending 30/06/2010.

Question 27

What are the unusual circumstances that existed between the years identified at questions 25 and 26, and how did they stop you from passing the test selected at question 23?

Explain in detail what the unusual circumstances were that stopped you from passing the test indicated at question 23 in the year indicated at question 1 and how that affected you if you:

  • passed the test in previous income years
  • reasonably expect to pass the test in future years.

Also provide the date your business started.

For example, you may have only one contract with a single client in the income year, but you provided personal services to several clients in previous years and reasonably expect to provide personal services to several clients in future years.

Question 28

Explain how you expect to pass the test you selected at question 23 in the years following the income year indicated at question 1.

For each test you selected at question 23, explain how you expect to pass that test in future years.

Section F: Declaration

Sign and date the declaration.

Make sure you have attached copies of the documents Requested.

Post your completed application to:

Australian Taxation Office

PO Box 3000

Penrith NSW 2740

QC21259