PSI 80% Rule Explained: Can You Still Pass the Results Test?

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

Personal services income (PSI) rules can re-characterise income that mainly rewards your personal effort or skills. The 80% rule is the first filter.

Step 1: Check the 80% rule

If 80% or more of your PSI comes from one client (and their associates) in the income year, you cannot self-assess against the unrelated clients, employment, or business premises tests. You can only self-assess the results test. If you don’t pass the results test, you need a PSB determination from the ATO to be treated as a personal services business.

If less than 80% of your PSI comes from one client, you can self-assess against any of the four PSB tests.

Step 2: Results test (the one test you can still use)

You pass the results test if, in general, you:

• Are paid to produce a result (not just for time).
• Provide your own tools and equipment to do the work.
• Are liable for the cost of rectifying defects in your work.

All three criteria must be satisfied to pass the results test, and the test must be met for at least 75% of your PSI to self-assess as a PSB.

Step 3: Other PSB tests (only if the 80% rule is not triggered)

If the 80% rule is not triggered, you can self-assess against:

• Unrelated clients test
• Employment test
• Business premises test

Passing any one test is enough to be a personal services business for that year.

Key takeaways

• The 80% rule limits which tests you can use.
• If 80%+ PSI is from one client, the results test is your only self-assessment option.
• If you don’t pass, a PSB determination is required.

Sources

• Self-assessing as a PSB (ATO)
• ITAA 1997, Divisions 84-87 (Personal services income and PSB tests)