Passing the ‘result test’
To meet the 'results test' under Section 87-18(1) for an income year, at least 75% of an individual's or PSE's PSI (or PSI of individuals in the PSE's assessable income) must fulfill these conditions:
Result-Oriented Income: The income should be for achieving a specific outcome, not just for providing services based on time. Payment is tied to achieving agreed-upon results, as per legal precedents like World Book (Australia) Pty Ltd v FCT 108 ALR 510 and TR 2001/8, paragraph 114.
Supplying Tools: The individual or PSE must provide plant, equipment, or tools necessary for the work. However, if no such tools are needed, this condition is still met. Refer to TR 2001/8, paragraphs 124 and 130.
Liability for Defects: The individual or PSE must bear the cost of fixing any defects in the work performed, indicating a commercial risk. See TR 2001/8, paragraph 131.
S.84-18(4) considers industry customs or practices when determining if these conditions are met. For instance, in Taneja v FCT [2009] AATA 87, it was affirmed that if industry norms dictate payment for results, it supports the individual's or entity's claim. However, written agreements specifying payment for non-result-based tasks don't meet this test. This safeguards against misinterpretation and ensures consistency with legislative intent.
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