The Tribunal also held the taxpayer did not meet either the “unrelated clients” test or the “business premises” test.

Accordingly, over $67,000 was included as personal income of the draftsperson (not the company) in the years in question. 

Many consultants and contractors operate as a sole trader or through a company, partnership or trust. In many cases, the income received for the work they do may be classified as PSI if certain tests are not passed.

As well as imposing marginal tax rates on the PSI earnings, the PSI rules limit the deductions that an individual may claim.

If we ask seemingly obscure questions about the number and type of clients, do not be surprised – we could be concerned about the PSI rules, or payroll tax, or workers compensation insurance.