Topics on Personal Service Income (6) – Fortunatow’s Case (3)


Topics on Personal Service Income (5) – Fortunatow’s Case (2)


Topics on Personal Service Income (4) – Fortunatow’s Case (1)

Here's a simpler explanation of what happened in Fortunatow’s case:

Mr. Fortunatow, also known as "the taxpayer," worked as a business analyst through his own company. He got his job contracts from agencies like Hays and RM Walters, who then connected him with big clients like government departments, banks, and others.

He kept his LinkedIn profile updated to show his skills and availability for new projects. Usually, he was hired to do specific tasks within a certain time.

Over two years, his company made around $166,000 and $121,000, but he didn't pay himself a salary or report any income on his personal taxes. Instead, his company paid that money to a family trust as "management fees," which the company claimed as a tax deduction. This way, no one paid taxes on the money earned.

But after the tax office audited him, they said his company didn't qualify as a Personal Services Business (PSB), and they attributed the income to him personally. Fortunatow disagreed and appealed to the Administrative Appeals Tribunal (AAT).

The AAT looked at whether Fortunatow met two tests: the "results test" and the "unrelated clients test." They said he didn't meet the results test because he was paid for his work, not for achieving specific results. Also, they found that he got all his work through agencies, not directly from clients, so he didn't meet the unrelated clients test either.

If you need more information, you can reach Tax Ideas Accountants & Advisers 

at +61 2 83181545 or book an appointment

Topics on Personal Service Income (3) – Overview of the PSI Rules (3)







Passing the other personal service business tests

To pass the other personal service business (PSB) tests, you need to consider the following:

  1. The 80/20 Test: Less than 80% of your Personal Services Income (PSI) should come from one source (client or their associates) during the income year (S.84-15(3)).

  2. Other PSB Tests: a) Unrelated Clients Test: You must earn income from providing services to at least two entities not associated with each other or with you. These services should result from public offers or invitations, such as advertising or word of mouth referrals (S.87-20(2)).

    b) Employment Test: If entities other than you perform at least 20% of your principal work or you have apprentices for at least half of the income year, you satisfy this test (S.87-25).

    c) Business Premises Test: You must meet several conditions regarding the business premises, including conducting most activities related to PSI from those premises, having exclusive use of them, and ensuring they're physically separate from private premises and client premises (S.87-30).

If you fail both the results test and the 80/20 test, you can seek the Commissioner's determination regarding conducting a PSB (S.87-15(1)(a)).

For further assistance, you can reach out to Tax Ideas Accountants & Advisers at

+61 2 83181545 or book an appointment via their live calendar.

Topics on Personal Service Income (2) – Overview of the PSI Rules (2)


Topics on Personal Service Income (1) – Overview of the PSI Rules (1)


The PSI rules focus on whether income earned by an individual or a personal service entity (like a company or trust) is considered personal services income (PSI). PSI is income mainly earned from personal effort and skills. If over half of the income is from personal effort or skills, it's PSI.

PSI earned by an individual or a personal service entity cannot be divided. It's always taxed directly to the person who earned it. This means the individual pays taxes directly, or the entity pays taxes on their behalf.

When does someone have a personal services business (PSB)? An exception to the PSI rules is if the person or entity earning PSI is running a PSB. A PSB is when the individual or entity meets certain tests set by the tax law. If they pass these tests, they are considered to have a PSB. Otherwise, the PSI rules apply, and income cannot be divided, and only certain deductions can be claimed.

For questions, reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment with our live calendar. 


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