Personal services income (PSI): do the rules apply to you?
If you earn income mainly from your own skills or effort – for example as an IT contractor, consultant or tradie – the personal services income (PSI) rules may apply. They can affect how much tax you pay.
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What is PSI?
Income is PSI if more than 50% of the amount you are paid under a contract is for your personal skills or effort, rather than for using assets, selling goods or the work of others.
The tests
The PSI rules do not apply if you are a personal services business. You usually are if you pass one of these tests:
- Results test – for at least 75% of your PSI you are paid for a result, you supply your own tools, and you are liable to fix defects
- Unrelated clients test – you get work from two or more unrelated clients through offers to the public
- Employment test – you pay others to do at least 20% of the principal work
- Business premises test – you have separate business premises that meet the conditions
The 80% rule: If 80% or more of your PSI comes from one client (and its associates), you generally can only self-assess using the results test. Otherwise you may need a determination from the tax office.
If the PSI rules apply
- The income is generally taxed to you personally, even if paid to your company or trust
- You cannot split it with family members through the structure
- Some deductions are limited – for example rent or mortgage interest for your home, and payments to family
⚠️ General information only – not tax or legal advice. The PSI rules are complex and depend on your contracts and circumstances. This page is a simple overview as at November 2026 and does not consider your personal circumstances. Laws, rates and thresholds change, and outcomes are decided by the tax office or the courts – UV TAX cannot guarantee any result. Please get advice for your situation before acting.
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0466 268 405Frequently asked questions
What is personal services income?
It is income where more than 50% of what you are paid under a contract is for your personal skills or effort.
Can I use a company to pay less tax as a contractor?
If the PSI rules apply, the income is generally taxed to you personally even if it is paid to your company or trust.
What is the results test?
For at least 75% of your PSI you are paid for a result, supply your own tools and are liable to fix defects.
What is the 80% rule?
If 80% or more of your PSI comes from one client, you can generally only self-assess under the results test.
Related
General information current as at November 2026.