The Personal Services Income (PSI) rules involve four tests against which you can self assess whether the measures apply. These are the:
- results test
- unrelated clients test
- employment test, and
- business premises test
To pass the results test, the income you receive under a contract or arrangement must be paid to you as a result of achieving a specified result or outcome. This means that you must be:
- engaged to complete a specified job, and
- paid on completion of that job.
If you are paid on an hourly basis or daily rate for the services you provide, it is unlikely you’ll pass the first condition of the results test. Payment arrangements must be based on you achieving an outcome, not just payments for the time worked.
Additionally, under your contract, you must be:
- required to provide the necessary tools or equipment to do the work, and
- liable for rectifying any defects in your work
When using the four tests to work out if the personal services income measures apply to your income, the results test is used first. The unrelated Clients test is used where you fail the results test. It basically means that 80% or more of your business must come from more than 1 unrelated source.