PSI self-assessment

Personal Services Income is income that is mainly a reward for an individual's personal efforts or skills (ITAA 1997 s84-5). Nearly all locum clinical work is PSI: you sell your time. PSI by itself is not a problem, but if you fail all four Personal Services Business (PSB) tests the ATO attributes the income back to you personally, regardless of any Pty Ltd or trust you invoice through. That can defeat income splitting, retained profits, and certain deductions your entity structure was meant to unlock.

If more than 80% of your PSI in a year comes from a single client or payer, you cannot self-assess as a PSB even if you pass one of the four tests. You either treat the income as PSI (attribute it back to the individual) or apply to the ATO for a Personal Services Business Determination. The rule is measured per-payer, not per-income-source: two different agencies each paying 40% of your income are two distinct payers and do not trigger the rule.

Results test: paid for a specific result, you supply your own tools, you bear rectification risk. Unrelated clients test: two or more unrelated clients acquired through public offers (website, advertising, directory, word of mouth). Employment test: one or more employees (not associates) doing at least 20% of the principal work. Business premises test: separate business premises used exclusively, not home, not client site. Passing any one is enough, subject to the 80% rule gate.

A PSB Determination is an ATO administrative decision that confirms you run a Personal Services Business even where the 80% rule would block self-assessment. With a Determination in place, PSI attribution rules do not apply for the year the Determination covers. You can retain profits in a Pty Ltd, split income with family members (subject to Part IVA), and claim a wider deduction set. Determinations are annual and need a fresh application each year.

The net PSI earned through your Pty Ltd or trust is attributed to you personally and taxed at your marginal rate in the year earned. The entity cannot retain profits, cannot distribute to associates as ordinary trust distributions, and the deduction set narrows significantly (no home office rent paid to yourself, no mortgage interest on home used for work, no payments to associates beyond fair market value for genuine principal-work services). Super contributions and genuine business expenses stay deductible at the entity level.

Lodge the application through the ATO business portal. You describe the engagements, the source of income concentration, and why you still run a genuine business. The ATO weighs the same four tests but can grant a Determination where unusual market conditions cause the 80% concentration (for example, a single long-term contract in a thin rural market). Turnaround is typically 28 days. Bring the paperwork to a registered tax agent before lodging: a rejected Determination is worse than not applying, because it puts the ATO on notice that you knew the rule and tried to step around it.

Any income that is mainly a reward for what you personally did: clinical consultations, procedures, reports, medico-legal opinions, locum shifts. Income that is mainly a reward for an asset you own (rent, dividends, royalties) is not personal services income. If more than half of your total income is clearly passive, PSI rules do not engage at all and you answer "no" to the applicability question. For most locums the answer is yes because clinical time is the whole income stream.