Loading
Trying2Home(Enthusiast)Enthusiast
25 June 2021

Hi all,Can someone please explain to me what being a PSB means, what are the implications (if any)?I did the PSI tool, and the result returned:The PSI rules do not apply

Your income is PSI.

You have self-assessed yourself as a personal services business.I don't know what that means for deductions, for tax brackets, for lodgement. I've read a lot about PSI on the ATO website but still can't find anything clear other than "When you're a PSB, there are no changes to your tax obligations, except that you need to declare any PSI on your tax return."If there are no changes whatsoever to how we are taxed or how we put through deductions, why the determination?For some context:I am in a partnership with one other individualOur work is labour service-based, we ourselves complete this work and are paid by the clients we work for at an agreed job cost (not hourly)If we make any mistakes, we also have to fix them ourselvesWe have no employeesThank you so much!

10,518 views
5 replies
10,518 views
5 replies

Most helpful response

Most helpful reply

RichATO(Community Support)Community Support
26 June 2021

Hi @Trying2Home

The area of PSI is a very confusing one to unravel and we always recommend that you seek professional advice from a registered tax agent about your specific situation.


You have used the PSI tool and have self-determined that your partnership is a PSB and earns PSI income.


And yes you are correct about what this means - you don't have any limitations on the eligible business deductions you can claim but you must declare the PSI income on both your partnership tax return and your individual tax return.


Why do we differentiate between a PSB entity and an individual earning PSI ?

Simply the reason is to be able to see through an individual's business structure which may being used to shelter profits which are really being generated by the individual's efforts and should be taxed at the standard individual PAYG rates.

ATO

All replies

Most helpful reply

RichATO(Community Support)Community Support
26 June 2021

Hi @Trying2Home

The area of PSI is a very confusing one to unravel and we always recommend that you seek professional advice from a registered tax agent about your specific situation.


You have used the PSI tool and have self-determined that your partnership is a PSB and earns PSI income.


And yes you are correct about what this means - you don't have any limitations on the eligible business deductions you can claim but you must declare the PSI income on both your partnership tax return and your individual tax return.


Why do we differentiate between a PSB entity and an individual earning PSI ?

Simply the reason is to be able to see through an individual's business structure which may being used to shelter profits which are really being generated by the individual's efforts and should be taxed at the standard individual PAYG rates.

ATO

Trying2Home(Enthusiast)Enthusiast
27 June 2021

Hi @RichATO Thanks so much for that information - I follow, until the last point. If operating as a PSB presents no limitation on deductions or change to tax rates, then you say "efforts should be taxed at the standard individual PAYG rates" - aren't both these things (rates) one in the same?Or am I confusing that for the reverse, and you're saying that individuals who are earning PSI could try to share/shelter profits, but being determined as a PSB shows that there are multiple people earning PSI under the one business structure?

Loading
What does being a PSB actually mean? | ATO Community