Personal services income review checklist for tax agents

Published 23 August 2026. Last reviewed 23 August 2026. Technically reviewed by the Taxpartna tax team.

1. Identify the individual whose efforts or skills generated the income

PSI is income that is mainly a reward for an individual's personal efforts or skills.

Only an individual can have PSI, even where the income is legally derived through a company, trust or partnership.

The file should identify:

• the individual or individuals performing the principal work
• the entity that contracted with the customer
• the type of services provided
• the contracts or arrangements that generated the income

Where more than one individual works through the same entity, the analysis may need to be performed separately for each test individual.

2. Decide whether the income is PSI

Do not move straight to the personal services business tests.

First determine whether the relevant income is mainly a reward for personal efforts or skills.

The ATO's guidance distinguishes PSI from income that is mainly generated by:

• supplying or selling goods
• an income-producing asset
• granting a right to use property
• a business structure

A large or well-established business can still have some PSI, and a small business does not automatically have PSI. Review the source and character of each material income stream.

Where a contract includes labour, materials, equipment and other components, retain the basis for the PSI conclusion.

3. Check whether the results test is satisfied

If the income is PSI, the results test is the first personal services business test to review.

The results test requires the relevant conditions to be satisfied for at least 75% of the PSI.

The workpaper should address whether the individual is:

• paid to produce a specified result or outcome
• required to provide the equipment or tools needed to perform the work, where equipment or tools are required
• liable for the cost of rectifying defects in the work

The contract is important, but the actual way the work is performed also matters.

Avoid a checklist that simply repeats the three questions with "yes" beside them. The file should contain enough contract or factual evidence to support the answers.

4. Apply the 80% rule if the results test is not met

If the results test is not satisfied, determine how much of the individual's PSI comes from each source.

If 80% or more of the PSI comes from one client and its associates, the taxpayer generally cannot self-assess against the unrelated clients, employment or business premises tests.

In that situation, the PSI rules can apply unless a personal services business determination is in force or another relevant rule changes the outcome.

If less than 80% of the PSI comes from each source, the other personal services business tests can be considered.

For intermediaries such as labour hire firms and agencies, identify the relevant source correctly. The contractual payer can be critical to the analysis.

5. Review the unrelated clients test

Where self-assessment is available, review whether the individual or personal services entity had two or more unrelated clients and whether the services were provided as a direct result of making offers or invitations to the public.

Check:

• number of clients
• whether clients are associated with each other
• how the clients were obtained
• advertising, tenders, website enquiries or other public offers
• whether the work came only through a labour hire firm or placement agency

Having several end customers does not necessarily satisfy the test if the contractual income source is one intermediary.

Special rules can apply to commission agents and should be considered where relevant.

6. Review the employment test

The employment test looks at whether others perform a sufficient proportion of the principal work, or whether apprentices are engaged for the required period.

The review should distinguish principal work from administrative or support work.

Check:

• employees and subcontractors engaged
• work actually performed by them
• market value of the principal work
• relationship between the worker and the entity
• whether related persons are performing principal work or only support tasks

Retain a calculation where the result depends on the percentage of work performed by others.

7. Review the business premises test

Where relevant, check whether the business premises satisfy the statutory conditions for the required period.

The review should consider whether the premises are:

• owned or leased by the taxpayer or entity
• mainly used to conduct the personal services work
• used exclusively by the business
• physically separate from private premises
• physically separate from the business premises of clients and associates

A home office or desk inside a client's premises will usually require closer analysis than a separately leased office or workshop.

8. Check for a personal services business determination

If the taxpayer relies on a Commissioner-issued PSB determination, keep the determination on file and confirm:

• the individual to whom it relates
• the income year or period covered
• the facts on which the determination was based
• whether there has been a material change in circumstances

Do not rely on an old determination without checking its continuing relevance.

9. Review attribution where the PSI rules apply

Where PSI is derived through a personal services entity and the PSI rules apply, review whether the net PSI has been attributed correctly to the individual.

Check:

• gross PSI
• allowable deductions against that PSI
• salary or wages already promptly paid to the individual
• amount attributed
• PAYG withholding consequences where relevant
• tax return disclosures for both the entity and individual

The same income should not be taxed twice, and the entity's workpaper should reconcile to the individual's attributed amount.

10. Review deduction restrictions

Where the PSI rules apply, some deductions can be restricted.

Areas requiring attention can include:

• payments to associates for non-principal support work
• home occupancy costs
• expenses that would not have been deductible to the individual
• entity-level expenses allocated against PSI

The workpaper should identify which deductions were tested under the PSI rules rather than assuming the ordinary business deduction treatment automatically applies.

11. Consider income splitting even where a PSB exists

Passing a personal services business test means the specific PSI attribution rules may not apply to that income. It does not mean every income-splitting arrangement is automatically acceptable.

The ATO's PSI ruling notes that Part IVA and other general tax principles can still be relevant.

Where income is retained in an entity or distributed away from the individual whose efforts generated it, the reviewer should make sure the broader tax position has been considered where material.

12. Check the tax return disclosures

Cross-check the conclusion against the relevant PSI labels in the company, trust, partnership or individual return.

Confirm that:

• PSI has been identified where required
• the results test disclosure is correct
• PSB determination disclosure is correct
• other PSB test disclosures are consistent with the workpaper
• attributed PSI is shown in the correct return

A technically sound workpaper can still lead to an incorrect return if the disclosures are not carried through. Our tax return review checklist for accountants covers the wider return review these disclosures sit inside.

A compact reviewer checklist

• Individual generating the income identified.
• Each material income stream considered for PSI character.
• Results test supported by contract and actual facts.
• 80% rule calculated using the correct source.
• Other PSB tests considered only where self-assessment is available.
• Any PSB determination is current and on file.
• Attribution calculation reconciles between entity and individual.
• Deduction restrictions considered.
• Broader income-splitting risk considered where relevant.
• Tax return PSI disclosures agree with the conclusion.

Where Taxpartna fits

A PSI review often requires the reviewer to pull facts from contracts, workpapers, financial statements and tax return labels.

Taxpartna can assist by locating those facts, comparing the PSI disclosures across documents and flagging missing or inconsistent evidence for practitioner review. It is part of the same AI tax software for Australian firms approach used across the review checklists.

The professional conclusion remains with the registered tax practitioner, particularly where contract interpretation, source analysis or application of the PSB tests requires judgement.

Authoritative sources

PSI conclusions depend on Divisions 84 to 87 of the Income Tax Assessment Act 1997 and current ATO guidance. The following primary sources should be checked when this page is technically reviewed or materially updated.

• ATO - Personal services income (PSI)
• ATO - TR 2022/3 Income tax: personal services income and personal services businesses
• Federal Register of Legislation - Income Tax Assessment Act 1997

Frequently asked questions

Important information. This checklist provides general information for tax review purposes. It does not replace Division 84 to 87 of the Income Tax Assessment Act 1997, ATO guidance or professional judgement. Taxpartna is a quality assurance assistance platform and does not provide tax advice, prepare returns or give final sign-off.