Personal Services Income Case

The Administrative Appeals Tribunal has found that a company was not conducting a personal services business (PSB) as it did not satisfy the results test. Accordingly, the Tribunal held that the income of the company should be attributed to a taxpayer as personal services income (PSI).

If a taxpayer satisfies the results test, the taxpayer will be deemed a PSB and therefore excluded from the PSI regime. The results test requires the taxpayer to satisfy three conditions:

• the income derived is paid to achieve a specific result or outcome;
• the taxpayer provides any necessary tools or equipment to do the work; and
• the taxpayer is liable to rectify any defects in the work.

Tip: In determining whether a taxpayer meets the conditions of the results test, it is the economic substance and not the legal substance that is important.