Free of charge: What is Alienation of Personal Services and how does it Affect You?
Unformated preview of the document: 'What is Alienation of Personal Services and how does it Affect You?' (Part 2):
you can use the Personal Services Business Self-Assessment Guide and Checklist (NAT 3416).
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Last Modified: Wednesday, 30 January 2008
Step 3: What is the 80% rule?
If you don't meet the results test and 80% or more of your personal services income in the income
year comes from one client, you cannot self-assess whether you meet the other tests at step 4. The
changes to the tax law apply to you unless you get a determination from the Tax Office.
If you don't meet the results test, you can self-assess against the other tests at step 4 if less than
80% of your personal services income comes from each client.
You can work out whether you meet the other tests at step 4 without contacting the Tax Office. If
you prefer, you can use the Personal Services Business Self-Assessment Guide and Checklist (NAT
3416).
Step 4: What are the other tests?
If you meet one or more of the following tests in the income year, the changes will not apply to you.
Unrelated clients test
You will meet the unrelated clients test in the income year if you can answer YES to the following
question:
• Does the individual doing the personal services work have personal services income from
two or more clients who are not associated with each other or with you (or the individual, if
you are a personal services entity)?
The personal services work must also be provided as a direct result of making offers to the public
(for example, by advertising or word of mouth). Do not count clients obtained by putting your name
with a labour hire firm, placement agency or similar organization.
Employment test
You will meet the employment test in the income year if you can answer YES to either of the
following questions:
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1. Do you have employees or engage sub-contractors or entities who perform at least 20% (by
market value) of the principal work?
Principal work is the main work that generates the personal services income and does not usually
include support work such as secretarial duties. You can count a spouse or family member who does
principal work, but not companies, partnerships or trusts associated with you. If you operate
through a personal services entity, don't count yourself as an employee.
2. Do you have apprentices for at least half the income year?
Business premises test
You will meet the business premises test if you can answer YES to ALL of the following questions.
At all times in the income year do you maintain (that is, have a right to occupy) and use business
premises that are:
• owned or leased by you?
• mainly used to conduct the work (that is, more than 50% of the use) from which the
personal services income is gained or produced?
• used exclusively by you?
• physically separate from the private residence of the individual doing the personal services
work, or their associates?
• physically separate from the business address of your clients, or their associates?
The phrase 'at all times in the year of income' requires you to have business premises on each day
during the income year in which in which activities are conducted which produce the personal
services income.
If you do not pass any of the tests
The changes to the tax law will apply to you and this may affect your tax obligations, unless you receive a personal services
business determination.
Unformated preview of the document: 'What is Alienation of Personal Services and how does it Affect You?': Part 1, Part 2