PSI (Personal Services Income) Rules Assessment
Do the PSI rules apply to your practice structure? Run the four tests.
PSI assessment
Answer yes to any ONE test to be a Personal Services Business (PSB).
1. Results test
Not passed
2. Unrelated clients test
Not passed
3. Employment test
0%
Not passed
4. Business premises test
Not passed
PSI rules apply
Personal Services Income is earned and NONE of the four tests are passed. The PSI rules apply. Income cannot be split with associates and certain deductions are not available.
Medical practitioners are frequently caught by PSI rules when operating through a service entity or trust.
Deductions not available
- Rent, mortgage interest, or rates for premises occupied as a residence
- Payments to associates for non-principal work
- Super contributions for associates doing non-principal work
The Personal Services Income rules limit who can receive your income and what deductions you can claim. If PSI rules apply, you cannot split income with family members and you lose certain deductions. For medical practitioners operating through trusts or companies, this is one of the most important structural questions.
The four tests
To be a Personal Services Business and escape the PSI restrictions, you must pass at least one of four tests: the results test, the unrelated clients test, the employment test, or the business premises test.
The results test is the most common pass for consultants: you are paid to produce a specific result, you provide your own equipment, and you fix your own mistakes at your own cost. The unrelated clients test requires at least two unrelated clients and direct outreach such as advertising.
What happens when PSI applies
If you are not a PSB, the PSI rules apply. Your income is attributed to you personally, regardless of what entity invoices it. You cannot split it with associates, and deductions are limited.
Specifically, you cannot claim rent or mortgage interest for premises that are also your residence, and you cannot claim payments to associates for non-principal work. Super contributions for associates doing non-principal work are also disallowed.
Medical practitioners are frequently caught
A GP or specialist operating through a service entity or family trust is a classic PSI scenario. The practitioner personally delivers the services, the income is mainly for their skills, and there are often no employees doing principal work.
If this describes your structure, review it with an adviser who understands both the PSI rules and the medical practice context. The 80% rule — if more than 80% of your PSI comes from one client — makes passing the unrelated clients test much harder.
Frequently asked questions
What are the four PSI tests?
The results test, the unrelated clients test, the employment test, and the business premises test. You must pass at least one to be a Personal Services Business and escape the PSI restrictions.
Why are medical practitioners often caught by PSI?
A practitioner operating through a service entity or family trust is a classic PSI scenario: they personally deliver the services, the income is mainly for their skills, and there are often no employees doing principal work.
What happens if the PSI rules apply?
Your income is attributed to you personally regardless of what entity invoices it. You cannot split it with associates, and certain deductions — such as rent for premises that are also your home — are disallowed.
Related calculators
This calculator provides general information only and is not tax advice. It does not account for your individual circumstances. Confirm figures against the relevant legislation or with a registered tax agent before relying on them for a lodgement.
Reviewed by eHealth Systems Pty Ltd