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Personal Services Income 2016

What is Personal services income?

PSI – Under the Income Tax Assessment Act Personal services income is income produced mainly from your personal skills or efforts as an individual. It doesn't matter whether you are a sole trader or operating through a company, trust or other structure. If the PSI rules apply to you there are restrictions on the types of expenses that are tax deductible for you or your business structure.

You can receive PSI in almost any industry, trade or profession, however, some common examples include financial professionals, information technology consultants, engineers, construction workers and medical practitioners. PSI does not affect you if you are and employee receiving only salaries and wages.

Income is classified as PSI when more than 50% of the amount you received for a contract was for your labour, skills or expertise.

The first thing you need to do is work out if any of your income is classified as PSI. If it is, you then need to work out if special tax rules (the PSI rules) apply to that income.

Follow the links below for more information and find out about:

o    Working out if the PSI rules apply

o    What to do when the PSI rules apply

o    What to do if the PSI rules don't apply

o    Record keeping for PSI

o    Seek further advice

If you would like more information, please contact:

Are you ready for FBT?

FBT  - Fringe Benefits Tax – the year runs from 1 April to 31 March.

Fringe benefits tax is a tax employers pay on certain benefits they provide to their employees, including their employees' family or other associates.  The benefit may be in addition to or part of their salary or wages package.

Follow the links below for more information:

o    Types of fringe benefits

o    Do you need to pay FBT?

o    How to register for FBT

o    How to report, lodge and pay FBT

o    FBT exemptions and concessions

If you are a director of a company or trust, benefits you receive may be subject to FBT.  FBT is separate to income tax and is calculated on the taxable value of the fringe benefits provided.

You will need to lodge your FBT return by 21 May, however, if you use a tax agent to prepare your FBT return, different lodgement arrangements apply. 

If you need help with FBT or more information, please contact:


Key changes to tax time 2015

If you would like to know more about any of the following topics please contact

Temporary budget repair levy commencing 1 July 2014

Mature age worker tax offset abolished

Net medical expenses tax offset phase-out

Medicare levy increase from 1 July 2014

Dependent (invalid and carer) tax offset name change

Dependant spouse tax offset to be abolished

Notice of assessment and tax receipt delivery for myGov account holders

Small business concessions

Accelerated depreciation for primary producers

Research and development tax offset changes

SMSF bank account and electronic service address details

SMSF supervisory levy

SMSF tax rate changes

Conservation tillage refundable tax offset repealed

Managed investment trusts - a new tax system

Company loss carry-back tax offset repealed

Commonwealth penalty units

Each year your SMSF auditor will form an opinion on the fund's financial statements and its compliance with super laws. Generally, as long as you follow the rules, the auditor will give you an unqualified Independent Auditor's Report (IAR).

If your SMSF auditor forms the opinion that the financial reports are inaccurate or you have not complied with the super laws, they will qualify the IAR. Your auditor is also required by law to report certain matters to the ATO in an Auditor Contravention Report (ACR).

The ATO are aware that some trustees (or their advisers) have terminated an auditor engagement when the auditor raised issues or concerns, and appointed a different auditor instead. While it is your right to appoint the SMSF auditor of your choice, you should be aware that an auditor's obligation to report to the ATO exists whether they complete the audit engagement or not. Even if they are removed from an engagement, they are still required to report identified contraventions.

Auditors can also report any additional information they believe is relevant. The ATO encourages auditors to advise if they believe they were removed from an engagement because they raised an issue or concern with the trustees. This information will be considered when the ATO undertake a risk assessment of your fund.

Your auditor is a professional who can help you to understand how a contravention occurred and discuss options to fix it. It is better to work with your auditor when an issue is identified rather than try to cover it up or ignore it.

Is your auditor communicating effectively with you?

When was the last time you sat down with your auditor to discuss his findings about your internal control of your business?

Have you discussed with your auditor the risk of fraud in your business? Fraud is an ongoing problem for businesses and addressing such risks regularly is vital. You need to be discussing these matters with your auditor to safeguard your business.

When was the last time you assessed the skills and effectiveness of your auditor? The Institute of Chartered Accountants has released a guide on assessing your auditor's performance.  Ask us for a copy.

Did you know that your auditor is required to self- assess any threats to independence arising from a long association and document how those risks have been mitigated?

If you want to know more, please feel free to contact us.

Self-Managed Super Funds - is your fund compliant?

The growth in SMSF's in Australia is enormous. Here are some facts:

  • SMSF's are growing at a rate of around 2,500 new funds every month
  • There are now 500,000 plus SMSFs in Australia
  • There are now more than one million SMSF members in Australia
  • 3,000 to 3,500 new SMSF trustees are created each month

Can you be sure your SMSF is compliant with tax law and the SIS Act?

Are you aware of the penalties the ATO can impose on trustees for breaches of the SIS Act?

Do you discuss these matters with your accountant or tax agent?

Can you be sure that your documentation is up to scratch?

The obligations on trustees to get their SMSF paperwork right are ever increasing. Trustees must ensure their SMSF's investment strategy matches the investments made. Trustees must consider insurance for members and document their decision.

Is your SMSF independently audited?

Talk to us today if you want to know more.