► Find a freelancer
Logo Australia Freelance-Market
  • Freelancer 6
  • Freelancer 7
  • Freelancer 25
  • Freelancer 30
  • Freelancer 6
  • Freelancer 17
  • Freelancer 14
  • Freelancer 16
  • Freelancer 18
  • Freelancer 29
  • Freelancer 22
  • Freelancer 15
  • Freelancer 2
  • Freelancer 26
  • Freelancer 24
  • Freelancer 33
  • Freelancer 21
  • Freelancer 20
  • Freelancer 23
  • Freelancer 19
  • Freelancer 12
  • Freelancer 3
  • Freelancer 13

Free of charge: What is Alienation of Personal Services and how does it Affect You?

Freelancer-Documents

The following article is provided by the Australian Tax office and helps freelancers and consultants determine whether their personal services income is affected by the changes to the tax law. The Alienation of Personal Income rules are very important and should be understood by all individuals working as an independent freelancer. (PDF file, 6 pages, 367 KB)

Request this document for free by email:  captcha-1  ► Show all documents 

Unformated preview of the document: 'What is Alienation of Personal Services and how does it Affect You?' (Part 1):

Page 1
Last Modified: Wednesday, 30 January 2008
Alienation of personal services income: contractors and consultants
(Note: Please refer to the original document located at Original at
http://www.ato.gov.au/businesses/content.asp?doc=/Content/15900.htm&page=10&H10)
Changes to the tax law that affect contractors and consultants
On 1 July 2000 the New Business Tax System (Alienation of Personal Services Income) Act 2000
introduced changes to the tax treatment of personal services income earned by contractors and
consultants. The changes to the tax law apply only to personal services income.
Work out whether you are affected by these changes
Follow the steps outlined in the following flowchart and use the following notes to work out
whether your personal services income is affected by the changes to the tax law. If the personal
services income is paid to a company, partnership or trust, the words 'you' and 'your' refer to that
entity.
If you had a prescribed payments system (PPS) declaration in force at 13 April 2000, the changes to
the tax law apply from 1 July 2002.
If you are a commission agent, special rules apply. Contact the ATO for more information by phoning
13 28 66.
The following sections will help you determine whether you are affected by these changes
• Unsure?
• Important
• Step 1: What is personal services income?
• Step 2: What is the results test?
• Step 3: What is the 80% rule?
• Step 4: What are the other tests?
• If you pass one or more of the tests
• If you do not pass any of the tests
Page 2
Last Modified: Wednesday, 30 January 2008
Unsure?
If you are not sure about any step in the flowchart or checklist, or whether the changes to the tax
law apply to you, you can:
• phone 13 28 66
• speak to your tax adviser, or
• apply to us for a determination.
o Alienation of personal services income: application for determination – personal
services business – form (NAT 3360)
o Alienation of personal services income: application for determination – personal
services business – instructions (NAT 3363), or
o by phoning 1300 720 092.
Important
Even if you are not affected by the alienation of personal services income legislation, the general
anti-avoidance provisions of Part IVA may apply to a scheme where the dominant purpose is to
reduce a taxpayer's income tax liability, for example, by income splitting. More information on this is
available in the fact sheet General anti-avoidance rules and how they may apply to a personal
services business (NAT 8028).
You can seek a private binding ruling from the Tax Office on any issue of law, including whether you
receive personal services income, whether you meet any of the tests for conducting a personal
services business, or whether the Part IVA provisions apply to you.
Page 3
Last Modified: Wednesday, 30 January 2008
Page 4
Last Modified: Wednesday, 30 January 2008
Step 1: What is personal services income?
This is income that is mainly a reward for an individual's personal efforts or skills. It does not include
income that is mainly:
• for supplying or selling goods (for example, from retailing, wholesaling or manufacturing)
• generated by an income-producing asset (for example, a bulldozer)
• for granting a right to use property (for example, the copyright to a computer program), or
• generated by a business structure (for example, an accountant working for a large
accounting firm).
If personal services income is channeled through a company, partnership or trust (a personal
services entity), it is still the individual's personal services income for income tax purposes.
The changes to the tax law only apply to personal services income.
Step 2: What is the results test?
If you earn personal services income, you will meet the results test in the income year if, in respect
of at least 75% of this income, you can answer YES to ALL the following questions about your work.
• Under your contract or arrangement, is the personal services income paid to achieve a
specified result or outcome?
• Do you have to provide the tools or equipment necessary (if any) to do your work? (If no
tools or equipment are required, answer YES.)
• Are you liable for rectifying defects in your work?
You can work out whether you meet the results test without contacting the Tax Office. If you

Unformated preview of the document: 'What is Alienation of Personal Services and how does it Affect You?':  Part 2

We use cookies for an optimal user experience. By continuing, you agree to our use of cookies.