PSI diagnostic

Under the Income Tax Assessment Act 1997 (ITAA 1997) s84-5, income is an individual's Personal Services Income (PSI) if it is mainly a reward for their personal efforts or skills, including income received through another entity. Only individuals can have PSI. The section applies whether the income is for doing work or producing a result, and a contract does not prevent income being PSI. Ask your tax agent how the PSI rules and Personal Services Business tests apply to each engagement. The diagnostic is a way to organise questions for that discussion.

Open PSI diagnostic on a Plus or Pro plan. It shows income streams derived from eligible recorded shifts in the last 12 months. Check the workplace names, income sources and amounts against your own records before interpreting the result. A rolling 12-month view may differ from the income year you need your adviser to assess, and work outside Sessional needs to be considered separately.

ITAA 1997 s87-15(1) and (2) provide for a Personal Services Business (PSB) determination in force or meeting at least one of these four tests in the income year, subject to the 80% rule in s87-15(3) explained below. The statutory conditions are:

• Results test, s87-18(1). For at least 75% of the individual's PSI in the income year, excluding income referred to in s87-18(2), all three conditions must be met: the income is for producing a result; the individual is required to supply the plant and equipment or tools of trade needed for the work; and the individual is, or would be, liable for the cost of rectifying any defect in the work. Bring the contract and explain what you deliver, what you must supply and who pays to correct defects.
• Unrelated clients test, s87-20(1). During the income year, the individual or personal services entity must earn income from providing services to two or more entities that are not associates of each other or of the individual or personal services entity. The services must be a direct result of offers or invitations to the public at large or a section of the public, for example advertising. Under s87-20(2), availability through an agency is not treated as making offers to the public. Gather records of how each engagement was obtained.
• Employment test, s87-25(1) and (3). An individual must engage others who together perform at least 20%, by market value, of the individual's principal work for the income year; associates that are not individuals are excluded from those engaged for this test. Alternatively, an individual or personal services entity meets the test by having one or more apprentices for at least half the income year. Bring agreements and records of the work performed for your adviser to review.
• Business premises test, s87-30(1). At all times during the income year, the individual or personal services entity must maintain and use premises meeting all four conditions: mainly used for activities producing PSI; for their exclusive use; physically separate from premises they or their associates use privately; and physically separate from the premises of clients and their associates. Bring the lease or other premises agreement and describe where the work is done.

For each question, select Yes, No or Unsure, then choose Run diagnostic. Review the initial selections against your own circumstances before running it. The result includes a headline, reasoning, warnings and individual test results labelled Likely pass, Likely failor Unclear.

ITAA 1997 s87-15(3) applies when 80% or more of an individual's PSI in an income year comes from the same entity, or one entity and its associates, and the results test is not met. If the PSI is included in a personal services entity's income, it is that entity's results test in relation to the individual that matters; otherwise it is the individual's results test. Income referred to in s87-15(4) is excluded from this concentration calculation.

When both conditions apply, the PSI is not taken to be from conducting a PSB unless a PSB determination relating to that individual's PSI is in force when the income is gained or produced. If the determination was made on a personal services entity's application, the PSI must also be income from that entity conducting the PSB. Passing one of the other three tests alone does not overcome s87-15(3). Ask a registered tax agent to assess the conditions and whether a determination is relevant.

The dashboard groups shift income by income source and workplace name. The diagnostic then combines streams with the same payer name to estimate concentration. On the dashboard, that name comes from the workplace record, which may differ from the organisation that actually pays you.

A share of 80% or more triggers the diagnostic's concentration warning. This is a calculation from the supplied records, not a ruling on the legal test. It does not establish relationships between payers or confirm a tax outcome. Ask your tax agent to review the payer grouping, the relevant income period and the results test before interpreting the warning.

• Your answers suggest a possible PSB test pass. At least one test looks like a pass and the s87-15(3) restriction does not apply on your answers. Review the evidence with your tax agent.
• Review the results test and 80% rule. At least 80% of entered income comes from one payer and you answered no to the results test, so s87-15(3) may restrict reliance on the other tests unless a PSB determination is in force.
• Review the results test before relying on other tests. Payer concentration is at least 80% and the results test is unresolved.
• Your answers do not establish a PSB test pass. This is a prompt to review the answers, not a conclusion about your liability.
• Diagnostic inconclusive. Several test results are unclear. Gather the missing information and review it with your accountant.