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Cannot determine if work for Toptal is PSB or PSI

Newbie

Views 891

Replies 3

Dear ATO team and the community members,

Toptal is a freelance US company and all the income a freelance web developer earns through Toptal is a foreign income.

According to the ATO PSI Tool it is also a PSI - I guess that is because a Toptal contractor gets rewarded for their skills and knowledge (unless I misunderstand that).

However, the nature of the work a Toptal contractor does according to the Toptal Agreement makes me think that it is a PSB.

May you please help me determine whether a Toptal contractor passes the Result Test. Below I’m quoting relevant entries from the Toptal Contract that make me believe that a Toptal contractor does pass the Result Test. However, I am not sure. Your help on this is very appreciated.

So, you pass the Result Test if for at least 75 percent of your personal service income you satisfy all of the following conditions:

1. You are paid to produce a specific result under a contract, not just for your time. While it is common in certain industries to charge clients based on hours spent to complete the work, it is not about how you structure your prices. The question is whether the payment is dependent upon contract being fulfilled, whether in full or in stages. If you are paid on hourly basis, regardless of whether you produce certain outcome or not, it is unlikely you will pass the Result Test.

Extract from the contract:
==========
> 5. Relationship of the Parties; Independent Contractor; No Employee Benefits.
a. Notwithstanding any provision hereof, Talent is an independent contractor and is not an employee, agent, partner or joint venturer of Toptal or any Client, and nothing in this Agreement shall render Talent an employee, agent, partner or joint venture of Toptal or any Client, and Talent shall not hold himself out as such. Talent does not have any authority to incur any obligation or expenditure in the name of or for the account of Toptal or Client and will not bind or attempt to bind, or hold himself out as having any authority to bind, Toptal or Client to any contract or other obligation. Talent represents that Talent is customarily engaged in an independently establishedtrade, occupation, profession or business of providing services such as the Work performed under this Agreement. Talent will accept direction pertaining to Clients’ desired goals and Work Output, but Talent shall not be subject to Toptal or Client’s control and direction as to the details and means by which the goals are attained and results are achieved. Talent will be solely responsible for controlling the manner, means, methods, and hours in which the Work is performed. Talent is also solely responsible, at Talent’s expense, for selecting, acquiring, and maintaining work space, equipment, and supplies, as well as training, registrations, and certifications (if any), sufficient to perform the Work. Regardless of any discussions between Talent and Toptal regarding rates, Talent has determined Talent’s own rates for the Work (as stated on the Toptal Platform or a “Talent Schedule” document prepared and certified by the Company). As expressly stated herein and otherwise, Talent bears the economic risk of its Work and any Direct Agreement(s) with Clients, and Toptal’s only obligation to Talent hereunder is to use commercially reasonable efforts to facilitate and collect fees for Work (as a service to Talent and Client).
b. Talent will not be eligible to participate in any of Toptal’s or Client’s employee benefit plans, fringe benefit programs, group insurance arrangements or similar programs. Neither Toptal nor Client will provide workers’ compensation, disability insurance, Social Security or unemployment compensation coverage or any other statutory benefit to Talent, and Talent shall be solely responsible for keeping and maintaining throughout the term of this Agreement, adequate insurance coverage, including workers’ compensation insurance, in accordance with applicable statutes. Talent will comply at Talent’s expense with all applicable provisions of workers’ compensation laws, unemployment compensation laws, federal Social Security law, the Fair **bleep** Standards Act, federal, state and local income tax laws, and all other applicable federal, state and local laws, regulations and codes relating to terms and conditions of employment required to be fulfilled by employers or independent contractors under applicable law. Talent is required to pay and shall be solely liable for all applicable taxes, contributions, fees, assessments etc. including, without limitation, federal income tax and state
Toptal, LLC - Proprietary Information
Toptal Freelance Talent Agreement - 103017 5
Term; Termination. This Agreement will commence on the Effective Date and continue in effect until terminated under this Section Toptal may terminate this Agreement for Talent’s breach upon written notice to Talent. Each party also may terminate this
income tax, on any fees, paid to him under this Agreement. Talent agrees to indemnify, defend and hold harmless Toptal and each Client from any and all claims, damages, liability, settlement, attorneys’ fees and expenses, as incurred, on account of the foregoing.
==========

2. You are required to provide your own tools and equipment to perform your service. You are taken to have satisfied this requirement if the type of work you do does not require any tools or equipment.

Extract from the contract:
==========
> Talent is also solely responsible, at Talent’s expense, for selecting, acquiring, and maintaining work space, equipment, and supplies, as well as training, registrations, and certifications (if any), sufficient to perform the Work.
==========

3. You are liable for the costs of rectifying the defects. You must bear the entrepreneurial risks, including the risk of having to indemnify your clients for the losses they suffer as a result of provision of your services.

Extract 1 from the contract:
==========
As expressly stated herein and otherwise, Talent bears the economic risk of its Work and any Direct Agreement(s) with Clients, and Toptal’s only obligation to Talent hereunder is to use commercially reasonable efforts to facilitate and collect fees for Work (as a service to Talent and Client).
==========

Extract 2 from the contract:
==========
> 7. Limitation of Liability. IN NO EVENT WILL TOPTAL WILL BE LIABLE TO TALENT OR ANY THIRD PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS OR THE LIKE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, TOPTAL’S PERFORMANCE HEREUNDER, OR THE USE OR INABILITY TO USE TOPTAL’S SERVICES, EVEN IF TOPTAL HAS BEEN SPECIFICALLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND REGARDLESS OF THE CAUSE OF ACTION (WHETHER IN CONTRACT, TORT, BREACH OF WARRANTY OR OTHERWISE). TOPTAL’S AGGREGATE LIABILITY WITH REGARD TO THIS AGREEMENT WILL IN NO EVENT EXCEED THE GREA TER OF (A) THE AGGREGA TE COMPENSATION PAID OR PAYABLE TO TALENT UNDER THIS AGREEMENT DURING THE SIX (6) MONTHS IMMEDIA TELY PRECEDING THE DA TE ON WHICH SUCH CLAIM ARISES AND (B) TEN THOUSAND ($10,000) DOLLARS. TALENT ACKNOWLEDGES AND AGREES THAT THIS LIMITATION OF LIABILITY IS A SPECIFIC INDUCEMENT FOR TOPTAL TO ENTER INTO THIS AGREEMENT AND FAIRLY ALLOCATES THE RISKS BETWEEN THE PARTIES WITH RESPECT TO THE BENEFITS DERIVED.
==========

To pass the Result Test, all the above three conditions have to be satisfied.

— Your help is very appreciated, many thanks!
1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 2

Hi @anaustralian 

 

Thanks for your post.

 

We can’t give tailored advice here for your circumstances, we can just give general advice and point you to the information on ato.gov.au

 

You may want to consider contacting our Early engagement for advice team or seek advice from us or your tax professional.

 

Thanks

JoA

3 REPLIES 3

Most helpful response

Former Community Support

Replies 2

Hi @anaustralian 

 

Thanks for your post.

 

We can’t give tailored advice here for your circumstances, we can just give general advice and point you to the information on ato.gov.au

 

You may want to consider contacting our Early engagement for advice team or seek advice from us or your tax professional.

 

Thanks

JoA

Newbie

Replies 1

Thanks @JoA for your prompt reply. This is actually not tailored to my cirtumstances, it is a typical contract that Toptal signs with freelance software developers, and there are many ones in Australia who work through Toptal. So it would be as generic as advice about working for other freelancer networks, like e.g. Upwork (a bit more popular here in Australia). Would you be able to go through the details I provided and give feedback? -- Many thanks

Community Moderator

Replies 0

Hi @anaustralian

 

Thanks for getting back to us.

 

We understand where you are coming from, but we can't provide that level of advice via this forum. If you know that this is a common scenario, you may want to provide that feedback to our early engagement team.

 

All the best.

 

Thanks, Chris