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.
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- Topics on Personal Service Income (1) – Overview of the PSI Rules (1)
- Topics on Personal Service Income (2) – Overview of the PSI Rules (2)
- Topics on Personal Service Income (3) – Overview of the PSI Rules (3)
- Topics on Personal Service Income (5) – Fortunatow’s Case (2)
- Topics on Personal Service Income (6) – Fortunatow’s Case (3)
- Topics on Personal Service Income (7) – Ariss’s Case (1)
- Topics on Personal Service Income (8) – Ariss’s Case (2)
- Topics on Personal Service Income (9) – Douglas’s Case
