Personal services income

How to lodge

To apply for a private ruling about personal services income:

• complete and submit a private ruling application form
• provide the supporting information listed below.

To lodge an objection about personal services income:

• complete and submit the relevant form
  • Objection form – for taxpayers
  • Objection form – for tax professionals
• provide the supporting information listed below.

Check first whether your question is answered in Personal services income.

Supporting information

Providing this information up front will reduce delays.

If you've previously given us any of the information listed below, you don't need to resend it.

The information we need for a private ruling or objection about personal services income includes:

• an explanation of the services that you provide – a list of all your contracts for the income year and for each contract
• the name of the client
• the name of the labour hire firm or similar organisation (if any) involved in the provision of your services
• the income received in that year
• the period covered by the contract
• if your services were provided as part of a team, a brief explanation of how the team operated
• copies of the main contracts for the provision of your services (including any contracts with labour hire firms or similar organisations)
• details of any unusual circumstances that apply or applied to you in the income year.

Tests

There are a number of tests relevant to making a determination about personal services income. The information required in relation to these tests includes:

Results test

• a sample of quotes (if any) provided to clients
• a sample of consecutive invoices (at least 4, if possible) or other documents (for example, time sheets) provided to your main clients
• if you do not have written contracts/agreements with your client, information for the main contracts for the income year    
  • the period covered by the contract/agreement and the contract price
  • the specific outcome or result produced under the contract/arrangement
  • the basis on which you are paid under the contract/agreement – for example, are you paid an hourly or daily rate and when are you paid (for example, weekly, fortnightly or at the end of a job)
  • the basis of payments or instalments for work in progress (if any) – what happens with the progress payments if your work is faulty
  • the circumstances under which your contract could be terminated before producing the specified outcome or result
  • your entitlements on termination – are you entitled to be paid for services you have performed up until the time of termination
  • the tools and equipment that you provide in undertaking the contract
  • the tools and equipment that the payer provides in order for you to complete the contract
  • details of how you rectify defective work
  • whether you are entitled to invoice your client for the time spent and costs incurred for rectifying defects in your work
  • details of your own liability and indemnity insurance.

Employment test

• the names of your apprentices (if any) and the period that you engaged them
• for each of the contracts in which other individuals (including partners) and entities were engaged to perform the principal work, the    
  • name of the client
  • income received
  • names of individuals and unrelated entities who worked on the contract, distinguishing between associates and others
  • value of the principal work performed by the individuals and unrelated entities and an explanation of how that value was calculated together with details of records (for example, time sheets) maintained on work done
  • details of the work the individuals or entities did to help you meet your contractual requirements.

Business premises test

• the date you started to maintain business premises
• the period or periods that business premises were maintained in the income year
• whether you have continuously held premises while conducting activities which earn personal services income
• details of the premises, including the activities carried out there    
  • a description of the nature and extent of any private use, and any other (non-PSI) business use of the premises
  • a full description of the premises including, if possible, photographs and a floor plan
  • evidence that you have exclusive use of the premises (for example, a lease agreement, or a certificate of title)
  • evidence that the premises are physically separate from your or your associates' private premises
  • evidence that the premises are physically separate from the private and business premises of clients and their associates.

Unrelated clients test (private ruling only)

• for each client in the year for which you are applying    
  • the name of the client
  • whether the client is an associate of you or of another client
  • a brief description of services provided
  • an explanation of who provided the services
  • the amount of income received
  • the method by which the contract was obtained (for example, word-of-mouth, advertising, tender, recruitment agency or labour hire)
  • the payer for the contract (for example, client or labour hire firm).

Where there have been unusual circumstances

In some instances unusual circumstances may prevent the tests from being met. In these instances, you should also provide the following details:

• if you met the unrelated clients test met but not the 80% rule because of unusual circumstances  
  • a list of clients for the income year in question and (if not the first year of operation) for the two years prior to the 'unusual' year
  • for each client in your list    
    • a brief description of the services provided
    • an explanation of who provided the services
    • the amount of income received from that client contract
    • the method by which the contract was obtained (for example, word-of-mouth, advertising, tender, recruitment agency or labour hire)
    • the payer for the contract (for example, client or labour hire firm)
  • a description (preferably with evidence) of contract negotiations for the following year
  • a copy of the contracts for the unusual year
• if you did not meet the unrelated clients test because of unusual circumstances  
  • a list of clients for the income year in question and (if not the first year of operation) for the two years prior to the 'unusual' year
  • for each client in your list    
    • a brief description of the services provided
    • an explanation of who provided the services
    • the amount of income received from that client contract
    • the method by which the contract was obtained (for example, word-of-mouth, advertising, tender, recruitment agency or labour hire)
    • the payer for the contract (for example, client or labour hire firm)
    • a description (preferably with evidence) of contract negotiations for the following year
    • a copy of the major contract for the unusual year
• if other tests were not met because of unusual circumstances  
  • evidence of how you met the relevant test in prior years
  • evidence of how you will meet the test in subsequent years.