Personal Services Income and deductions for Allied Health

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(Newbie)Newbie

8 Oct 2024

It's common within some Allied Health professions to pay a set (significant) percentage of their income (e.g. 40%) to the clinic they operate from, in order to cover room hire, admin support and supervision etc.

As far as I can tell, psychologist income counts as Personal Services Income (though not sure if the ability to be sued counts as being 'responsible for fixing defects in your work', and therefore passes the Personal Services Business test).

This is a two-part question.

Part 1:

If it does count as PSI, then is there a way around the error when trying to claim a deduction for that 40% of income taken by the clinic in the PSI part of the 'Business/sole trader and partnership income' section, which flags that the deduction is too high for PSI? Or are you meant to enter higher expenses such as this in the general deductions section of the return?

Part 2:

If you pass the rules test do you have to file as a PSB or can you choose to report the income as PSI? And do PSBs pay 25% company tax rates or regular income tax rates?

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Taxduck

(Taxicorn)Taxicorn

9 Oct 2024

In your situation it is highly likely the PSI rules would not apply and you would self-assess as a PSB. So income and expenses would be entered on the business schedule. You would probably meet the business premises test and the 80% rule. May also meet the results test.

Working out if the PSI rules apply | Australian Taxation Office (ato.gov.au)

You can't add deductions to the "general deductions section of the return" as these work deductions (D1 to D5) are solely for employees.