Taxation Laws Amendment Act (No. 6) 2001 (169 of 2001)

Schedule 6   Personal services income

Part 1   Agents

Income Tax Assessment Act 1997

2   After section 87-35

Insert:

87-40 Application of this Division to certain agents

Object of this section

(1) The object of this section is to modify the operation of this Division for agents who bear entrepreneurial risk in the way they provide services.

Agents covered by this section

(2) Subsection 87-15(3) and section 87-20 apply, in the manner specified in this section, to an individual or *personal services entity if:

(a) the individual or personal services entity is an agent of another entity (the principal ) but not the principal's employee; and

(b) the agent receives income from the principal that is for services that the agent provides to other entities ( customers ) on the principal's behalf; and

(c) at least 75% of that income is commissions, or fees, based on the agent's performance in providing services to the customers on the principal's behalf; and

(d) the agent actively seeks other entities to whom the agent could provide services on the principal's behalf; and

(e) the agent does not provide any services to the customers, on the principal's behalf, using premises:

(i) that the principal or an *associate of the principal owns; or

(ii) in which the principal or an associate of the principal has a leasehold interest;

unless the agent uses the premises under an arrangement entered into at arm's length.

Whether personal services income is from one source

(3) If the agent is an individual, in applying subsection 87-15(3) to the *personal services income of the agent during an income year, any part of the agent's personal services income from the principal that:

(a) the agent gains or produces during the income year; and

(b) is for services that the agent provided to a customer on the principal's behalf in the income year or an earlier income year;

is treated as if it were personal services income from the customer, and not personal services income from the principal.

(4) If the agent is a *personal services entity, in applying subsection 87-15(3) to an individual's *personal services income that is included in the entity's *ordinary income or *statutory income during an income year, any part of the individual's personal services income from the principal that:

(a) the agent gains or produces during the income year; and

(b) is for services that the individual or the agent provided to a customer on the principal's behalf in the income year or an earlier income year;

is treated as if it were personal services income from the customer, and not personal services income from the principal.

The unrelated clients test for a personal services business

(5) In determining whether, during an income year, the agent meets the unrelated clients test under section 87-20, any services the agent provided in the income year or an earlier income year:

(a) for which the agent gains or produces, during the income year, personal services income from the principal; and

(b) that were provided to a customer on the principal's behalf;

are treated for the purposes of paragraph 87-20(1)(a) as if the agent, and not the principal, provided them to the customer.