Topics on Personal Service Income (8) – Ariss’s Case (2)

Written by Ideas Group | Jul 12, 2020 10:07:10 AM

Key Takeaways from the AAT's Decision in Ariss’s Case

The Administrative Appeals Tribunal (AAT) had to address several key issues in Ariss's case, particularly around Personal Services Income (PSI). The case focused on payments received by ARMS for IT services provided by Ariss, specifically in Oracle specialization.

Key Decisions:

Classification of Income as PSI: The AAT determined that the income in question was indeed PSI because it was earned primarily through Ariss's personal skills and efforts.
Results Test and PSI Rules: Despite Ariss's argument that the PSI rules should not apply due to meeting the 'results test', the AAT found otherwise. The decision highlighted that Ariss was paid a daily rate, not specifically for project completion, indicating payment for services rather than for specific results.
Failure to Meet the Personal Services Business (PSB) Tests:
- Results Test: Ariss didn't satisfy this test in any of the income years considered (2010, 2012, and 2013) as his payment structure did not align with producing specific results.
- Unrelated Clients Test: There was no evidence of Ariss marketing his services to the public; his work was primarily secured through existing business contacts.
- Employment Test: Ariss had no employees or apprentices, negating this criterion.
- Business Premises Test: The tribunal noted that Ariss operated from a home office, which did not qualify as separate business premises under the regulations.

Conclusion: Due to these findings, the payments received for Ariss's professional services were classified as PSI and thus directly taxable to him.

If you have any questions or need further clarification about how this decision might impact your tax situation, please don’t hesitate to contact Tax Ideas Accountants & Advisers at +61 2 83181545. You can also book a consultation directly through our online calendar.

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