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PSI is the income generated with your efforts, skills, and knowledge rather than that earned by the use of assets.
For example, PSI can be received through the following business activities:
If the income generated by these activities is less than 50% of your total income, PSI rules do not apply to you.
If you earned PSI, the next step is to assess whether your income falls under PSB. If your PSI is considered PSB, the PSI rules do not apply to you.
You need to pass either of the two options to identify that your income is PSB.
At least 75% of your total PSI is
The 80% rule
If more than 80% of your PSI is from one client and their associates, you are subjected to PSI rules. If less than 80%, meet either of the tests below.
Test 1: Unrelated clients test
You must have received PSI from 2 or more unrelated clients. There must be a direct connection between the offer to the public and you being engaged to perform the work.
OR
Test 2: Employment test
Your business must employ or contract others to help perform work that generates PSI.
To pass the test, at least 20% of the principle work is performed by others OR one or more apprentices are employed for at least 6 months of the income year.
OR
Test 3: Business premises test
To pass this test, you had business premises for the whole financial year and;
Overall, if more than 50% of your income is PSI and not considered PSB, PSI rules apply to your tax return.
PSI rules will be explained in the next article:
