What is Personal Services Income (PSI) and does it affect me in Australia?

Personal Services Income (PSI) is income produced mainly from your personal skills or efforts as an individual. It often applies to IT consultants, engineers, and creative professionals. If the PSI rules apply to you, the ATO treats you more like an employee for tax purposes, which limits the types of business deductions you can claim (e.g., you generally can't claim rent or certain home office costs). To determine if you are a 'Personal Services Business' (and thus exempt from PSI rules), you usually need to pass one of several tests: - **The Results Test:** You are paid to produce a specific result, you provide your own tools, and you are liable for fixing mistakes. - **The 80% Rule:** No more than 80% of your income comes from a single client, AND you meet one of the other tests (Unrelated Clients Test, Employment Test, or Business Premises Test). If you are a simple sole trader providing services, it's vital to check if PSI rules apply to your income.

• Applies if income is mainly from your personal skills
• Can limit the business deductions you can claim
• The 'Results Test' is the most important way to be exempt
• The 80% rule: don't rely too heavily on one client
• Check the ATO's PSI tool to see if you are affected