Have you heard about Personal Service Income? PSI can be the answer to what you are thinking now! Let's explore the options for you.
Information Technology (IT) is a buzz phrase that related to computer and highly specialised in the field, which also means that IT workers are essential to every aspect of our modern business life. As being the lifeblood of the vital behind-the-scene mechanism in a technology department earns the reward for its excellent pay out of the skills of a professional IT worker. More often than not, information technology workers are entitled to receive Personal Service Income (PSI) irrespective of the employment is on a salaries and wages basis.
It is important to first find out the criteria of being qualified as PSI, and if it is, an individual needs to ensure that if any specific tax rules are applicable to the income. If the PSI is not qualified for the current condition, the business will be a Personal Services Business (PSB). Once an individual is classified as a PSB, apart from the requirement of declaring any PSI on a tax return, there is no changes to the individual tax obligations.
- It is not necessary to be in a business structure of a sole trader for being qualified to receive PSI.
- A PSI can equally be produced through a structure of company, partnership or trust as long as the PSI rules are applicable, the respective income is to be treated as Individual Income for tax purposes.
As for PSB determination, two ways to be classified as using Personal Service Income Tool or Completing the PSB determination application form. Unusual business circumstances occur if following is met
- Business is temporary (< 12 Months) and out of the ordinary
- An individual passed the test in one or more previous income years
- An individual can reasonably expect to pass the test in following income year
Also accept either of the following
- A personal serviced work commenced during the income year and one can reasonably expect to pass one of the PSB tests the coming year
- The service has only been provided to one client during the income year, but the individual passes the PSB tests in one or more prior income years and can reasonably expect to pass them in the coming year
Should you be discerned with the classification or understanding the process in taking the test, please come and talk to us Tax Ideas Accountants & Advisers & find out more through our online resources flyers.