Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-42 - PERSONAL SERVICES INCOME  

Division 87 - Personal services businesses  

Subdivision 87-A - General  

SECTION 87-40   Application of this Division to certain agents  

Object of this section

87-40(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.

Agent rules do not apply

87-40(1A)    

The rules in section 960-105 (Certain entities treated as agents) do not apply to this section.

Agents covered by this section

87-40(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

87-40(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.

87-40(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

87-40(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.