Trusts and PSI for locums

Personal Services Income, usually shortened to PSI, is income that is mainly a reward for an individual's personal efforts or skills. The definition is in the Income Tax Assessment Act 1997, section 84-5. Clinical locum income is commonly earned for the practitioner's own work, so the PSI gateway is often relevant regardless of which entity sends the invoice.

A trust is expressly included in the definition of a personal services entity by ITAA 1997 s86-15(2). That means using a trust does not, by itself, move personal services income outside the PSI rules. The facts of the work and the Personal Services Business tests still determine how Division 86 operates.

• Results test, ITAA 1997 s87-18.The engagement must satisfy the statutory conditions about producing a result, supplying the necessary equipment, and being liable to rectify defects. Locum shifts paid by time, session, or billings commonly reflect the practitioner's work rather than a separately contracted result.
• Unrelated clients test, ITAA 1997 s87-20. The income must come from two or more unrelated clients obtained through offers to the public. Section 87-20(2) says that being available to provide services through an agency is not treated as making offers to the public. Agency-sourced locum work therefore does not satisfy that limb merely because the agency places the practitioner with multiple workplaces.
• Employment test, ITAA 1997 s87-25. Another entity must perform the required share of the principal work. Administrative help is not the clinical work for which a practitioner is engaged, so a solo locum commonly does not satisfy this test.
• Business premises test, ITAA 1997 s87-30.The premises must meet the Act's exclusive-use and separation requirements. A locum delivering services at a client's clinic generally does not meet those premises conditions for that work.

The PSI analysis follows the income and the way the services are provided, not the label on the invoice. For many locum arrangements, the results, employment, and business premises tests do not fit the working facts. Agency-sourced work also encounters the express rule in s87-20(2), which closes the offers-to-the-public limb of the unrelated clients test.

This does not establish that every locum has the same outcome. Direct client acquisition, responsibility for a contracted result, use of other entities for principal work, premises, payer concentration, and an ATO determination can change the legal analysis. None of those questions is answered merely by invoicing through a trust.

ITAA 1997 s86-15 attributes the relevant net PSI to the individual whose efforts or skills produced it. Section 86-30 then treats the corresponding amount as neither assessable nor exempt income of the personal services entity. The mechanism prevents the same attributed amount from also remaining assessable income of the trust.

Division 85 can also limit deductions connected with PSI. These rules describe the statutory treatment of attributed income. They do not determine the trust's other income, deed terms, accounts, deductions, or any person's complete tax position, which is why Sessional does not produce a trust estimate.