On the 23 November 2022 the ATO Finalised TR 2022/3, this was then consolidated on 18 January 2023.
TR 2022/3: Income tax: personal services income and personal services businesses
PSI is defined as income that is mainly a reward for an individual’s personal efforts or skills (or would mainly be such a reward if it was the income of the individual).
The new ruling now comprises a comprehensive list of examples (some 41 examples) dealings with various PSI scenarios to help you navigate through the respective tax rules.
The ruling assists with determining whose PSI it is. Paragraph 51 of the ruling states:
51. As a sole trader has a contractual obligation to provide their services, any PSI derived under the contract belongs to the sole trader even if another individual is engaged by the sole trader to assist in the principal work.
In addition the ruling seeks to clarify what is personal services income. There are some examples (5 – 8) that also seek to clarify the distinction between income NOT from a business structure and income from a business structure.
The above is general in nature and not taxation advice, if you require tax advice please contact us.