Does your income include an individual’s personal services income?
- No – Print X in the No box at label N Does your income include an individual's personal services income?. You do not need to answer any more questions at item 30
- Yes – Print X in the Yes box at label N if the income of the trust includes an individual’s PSI. Complete the remaining labels at item 30.
Personal services income (PSI) is income that is mainly a reward for an individual’s personal efforts or skills, or would mainly be such a reward if it was derived by the individual. If more than 50% of the income received under a contract is for an individual's personal efforts or skills, then all income from that contract will be PSI. If 50% or less of the income received under a contract is for an individual's personal efforts or skills, then none of the income for that contract is PSI.
A trust may derive income which includes the PSI of one or more individuals.
Examples of PSI include income:
- for the services of a professional practitioner in a sole practice
- derived under a contract which is wholly or mainly for the labour or services of an individual
- for the exercise of professional skills by a professional sportsperson or entertainer
- for the exercise of personal expertise by a consultant.
PSI does not include income that is mainly:
- for supplying or selling goods, for example, from retailing, wholesaling or manufacturing
- generated by an income-producing asset, for example, from contracting to provide a bulldozer
- for granting a right to use property, for example, the copyright to a computer program
- generated by a business structure, for example, a large accounting firm.
If the trust receives an individual’s PSI other than in the course of conducting a personal services business and does not promptly pay it to the individual as salary or wages:
- the net amount of PSI is attributed to the individual and is not assessable to the trustee, and
- certain related expenses are not deductible under the special rules.
For more information, see TR 2022/3 Income tax: personal services income and personal services businesses.
Total amount of PSI included at item 5 income labels
Print at label A Total amount of PSI included at item 5 income labels the total amount of income gained by you during the year that is PSI of one or more individuals that you have included at item 5 Income. At this item, exclude any exempt or non-assessable non-exempt components of the PSI, for example, GST.
Total amount of deductions against PSI included at item 5 expense labels
Print at label B Total amount of deductions against PSI included at item 5 expense labels the total amount of expenses against PSI included at item 5 Expense.
Did you satisfy the results test in respect of any individual?
- No – Print X in the No box at label C Did you satisfy the results test in respect of any individual? if you did not satisfy the results test in respect of one or more individuals.
- Yes – Print X in the Yes box at label C Did you satisfy the results test in respect of any individual? if you satisfied the results test in respect of one or more individuals.
You will meet the results test in an income year if, for at least 75% of the PSI of the individual doing the personal services work:
- the PSI is paid to achieve a contractually specified result under your contract or agreement
- you provide the tools or equipment necessary (if any) to do the work, and
- you are liable for the cost of rectifying defects in the work performed.
The PSI is considered to be paid to achieve a result when the individual is required to produce a specified result or outcome, and payment is conditional upon that result or outcome being achieved. The essence of the contract or agreement has to be to achieve a result and not just to do the work as required.
Do you hold a personal services business (PSB) determination in respect of any individual?
- No – Print X in the No box at label D Do you hold a personal services business (PSB) determination in respect of any individual? if you did not hold a PSB determination in respect of any individual.
- Yes – Print X in the Yes box at label D Do you hold a personal services business (PSB) determination in respect of any individual? if you held a PSB determination in respect of any individual.
To apply for a personal services business determination, complete a Personal services business determination application.
Did you satisfy the unrelated clients test, employment test or business premises test in respect of any individual?
Labels E1 Unrelated clients test, E2 Employment test and E3 Business premises test require information in relation to any individual for whom you did not satisfy the results test or hold a PSB determination, and where each source of their PSI income yielded less than 80% of their total PSI.
If 80% or more of the PSI in the income year comes from one client (and their associates), you:
- cannot self-assess whether you meet the unrelated clients test, employment test or business premises test, and
- do not complete labels E1, E2 and E3.
When considering the 80% rule, do not take into account income that is not PSI (for example, investment income or income from the sale of goods or the use of an income-producing asset, or income an individual received as an employee).
If you are a commission agent your PSI will be treated as coming from each customer, provided you meet all of the following conditions:
- You are an agent of the principal but not an employee.
- You receive income from your principal for services that you provide to customers on the principal’s behalf.
- At least 75% of that income is performance-based commissions or fees.
- You actively seek other customers to whom you could provide services on the principal’s behalf.
- You do not provide any services to the customers, on the principal’s behalf, using premises that the principal (or their associate) owns or has a leasehold interest in, unless you use the premises under an agreement entered into at arm’s length.
If you meet all of these conditions and, as a consequence, less than 80% of the PSI is treated as coming from each customer, you can self-assess against the unrelated clients test, the employment test and the business premises test. You do not need a determination from the Commissioner to be a personal services business although you may apply for a determination if you are unsure.
Show whether you satisfied any of the personal services business tests for any individual for whom:
- you did not satisfy the results test or hold a PSB determination
- each source of their PSI income yielded less than 80% of their total PSI.
Unrelated clients test
If you satisfied the unrelated clients test, print X in the box at label E1.
You will meet the unrelated clients test in the income year if:
- the individual doing the personal services work generates PSI from 2 or more clients who are not associated with each other, or with the individual, or with you, and
- those clients were obtained as a direct result of making offers to the public, for example, by advertising.
Do not count clients obtained as a result of registering your name with a labour-hire firm, placement agency or similar organisation.
Separate government departments are deemed not to be associates of each other for the purposes of this test.
If you are a commission agent who meets all of the conditions for the special rules, you will pass the unrelated clients test if your services are provided to at least 2 customers as a direct result of your making offers or invitations to the public on behalf of your principal.
Employment test
If you satisfied the employment test, print X in the box at label E2.
Subject to certain exceptions below, you will meet the employment test in the income year if you:
- have employees, engage subcontractors or engage entities that perform at least 20% (by market value) of the principal work, or
- have one or more apprentices for at least half the income year.
‘Principal’ work is the main work that generates the PSI and does not usually include support work such as secretarial duties.
You can count a spouse or family member of an individual whose PSI you receive and who you engage to do principal work. You can also count companies, partnerships or trusts that you engage to do principal work unless they are associated with you or an individual whose PSI you receive.
You cannot count any individual whose PSI you receive.
Business premises test
If you satisfied the business premises test, print X in the box at label E3.
You will meet the business premises test if, at all times during the income year, you maintain and use business premises:
- that are mainly used by you for work in earning PSI, (that is, more than 50% of the activities conducted at the premises were directed at producing an individual's PSI) of which you have exclusive use
- that are physically separate from premises used for a private purpose by
- the individual doing the personal services work
- their associates
- your associates, and
- that are physically separate from the business premises of your clients or their associates.
The phrase at all times during the income year is taken to mean the whole period during which activities are conducted for the purposes of generating personal services income.
You do not need to maintain and use the same business premises throughout the year, but you must satisfy all the above criteria.
Treatment of attributed PSI on your trust tax return
If PSI is attributed to an individual, the income is not assessable to the trust. Include the PSI on the trust tax return as follows:
Include the attributed amount in the amount shown at item 5 Business income and expenses – label A Income reconciliation adjustments, as calculated in Worksheet 1. The attributed amounts are income subtraction amounts. If the income subtractions exceed the income add backs, the total is a negative amount. If a negative amount, print L in the box at the right of item 5 Business income and expenses – label A Income reconciliation adjustments on the tax return.
Treatment of net PSI loss on your trust tax return
A net PSI loss is transferred to the individual. The trust cannot use this loss against any other business income or carry forward the loss. The total amount of the deductions to which the trust is entitled is reduced by that amount. Include the PSI loss amounts on the trust tax return as follows:
Include the net PSI loss amounts in the amount shown at item 5 Business income and expenses – label B Expense reconciliation adjustments, as calculated in Worksheet 1.
For more information, see:
Continue to: Taxations of financial arrangements – item 31