Personal Services Income: Consequences of PSI Rules

So what if the PSI rules apply? Dive into specific tax consequences for individuals, sole traders and Personal Services Entities (PSE) such as limited deductions, income attribution rules, and more.

In this session, we cover:

• Recap of PSI rules

• Application of PSI rules to sole trader

  • PSI rules under Division 85

  • Hypothetical employee test

  • Exceptions to s.85-10(1)

• Specific non-deductible amounts

  • Non-allowable expenses

  • Rent, mortgage interest, rates and land tax

  • Payments to associates

    • Who is an associate?

    • What is principal work?

    • Superannuation payments for associates

• Specifically excluded entities

  • Entities not subject to limits on deductibility

  • When is a worker an employee?

• Application of PSI rules to PSE

  • Overview of Division 86

  • General deductibility rule

• Limits on deductions offset against PSI by PSE

  • Entity maintenance deductions

  • Car expenses

  • Superannuation contributions

  • Prompt payment of salary

• Apportioning entity maintenance deduction and calculating net PSI

  • Method statement s.86-20

• Other issues to consider for PSEs

Date recorded: 30 May 2025