In the recent Douglass case, the Federal Court said the taxpayer didn't pass the 'results test'.
Here's what happened:
Mr. Douglass, an electronics engineer, ran an engineering consulting business with his wife. He was the only one providing services. In 2013 and 2014, he worked as a lead engineer for a mining project through a labor hire firm.
The Australian Tax Office (ATO) audited him and said his income should be considered personal services income (PSI), not business income. Douglass disagreed, saying his business passed the 'results test', meaning he was paid to achieve specific outcomes, not just for his time.
But the Administrative Appeals Tribunal (AAT) sided with the ATO, saying there wasn't enough evidence to show Douglass was hired to produce specific results. They said it's common for engineers to work towards project completion, but that's not the same as a 'results test'.
Douglass appealed to the Federal Court, arguing that industry customs should count in the 'results test', but the court disagreed. They said industry practices are only part of the consideration, not the deciding factor.
The court also upheld penalties against Douglass for not reporting his income properly, calling it gross carelessness.
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 (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 (4) – Fortunatow’s Case (1)
- 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)
