Personal Services Income:

Personal services income is the ordinary or statutory income which is gained mainly as a reward for an individual's personal efforts or skills. Income that is gained by an interposed entity, such as a company, partnership or trust, from the efforts or skills of an individual also falls within the definition of personal services income. An experienced Commercial and Taxation Lawyer may be able to consider your factual circumstance to ensure that any applicable personal services income is dealt with in the most efficient and effective manner.

Examples of income from personal services are salary or wages; income of a professional person practising on his or her own account without professional assistance such as a medical practitioner in a sole practice; income payable under a contract which is wholly or principally for the labour or services of a person; income derived by a professional sportsperson or entertainer from exercise of his or her professional skills (not including income from endorsement by the person of a sponsor's products); and income derived by consultants, for instance computer consultants or engineers from the exercise of personal expertise. Proper and sound legal advice from a Taxation Lawyer makes solid commercial sense to ensure your deal with your personal services income properly.

Income that does not relate primarily to the services and skills supplied by an individual will not be held to be personal services income. Therefore, payments that relate mainly to the assets an entity holds or supplies (such as stock or equipment) will not be payments of personal services income. This reflects the principle that only individuals can have personal services income.

The Commissioner of Taxation considers that the characterisation of income as  personal services income is a question of fact depending on the circumstances of each case, including the substance of the agreement under which the services are provided. In the context of the definition of personal services income, “mainly'' means more than half of the relevant amount of the ordinary or statutory income is a reward for the personal efforts or skills of an individual. This requires the exercise of practical judgment as to whether the value contributed by the efforts or skills of the individual exceeds the value of all other inputs, such as the efforts of other workers, and the use of plant and equipment or machinery, or intellectual or other property or goodwill. Review and consideration by a qualified commercial and taxation lawyer who can have consideration of your financial situation can assess on whether or not you are affected by personal services income and what strategies should be implemented to deal with this.

If you need further legal advice on your tax appeal matter, you may book an appointment with us by telephone on (02) 9233 4048 or by email to info@navado.com.au.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.