Is Disability Support Work PSI?
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Are you an active disability support worker? How about if you own your own business with disability support work as your primary source of income? Both of these cases may cause you to be subject to PSI, which comes with specific tax regulations.
Income earned by sole traders and certain partnerships in the disability support work sector is considered PSI, calling on the need to understand the different steps to determine if your income qualifies.
What Is PSI?
PSI, commonly referred to as personal support income, is a category of income for personal effort and skills. The Australian Taxation Office upholds specific requirements and stipulations for this income category to reduce the number of individuals trying to cheat the system.
There is a difference between PSI and PSB, which is a personal support business. A PSB is subject to business tax rates that can significantly exceed the individual tax rates, making it critical to comprehend when it applies.
How Do I Determine If I Have PSI?
Individuals in most industries can be subject to PSI requirements, especially in the disability support sector. Going through the four steps below will help you determine if your disability work income is PSI:
Step #1: Determine If You Have PSI
To analyse if you have received PSI, you will need to look at individual contracts. If more than 50% of the income you earned was from utilising your skills, knowledge, or expertise, all of the income will be considered PSI. On the other hand, if the contract did not meet the 50% test, none of the income will be PSI.
Step #2: Analyse The Results Test
After you’ve determined that some of your income is PSI, you will need to understand if the income is PSI or PSB.
If you are paid to produce specific results, provide your own equipment, and are liable for mistakes, the income is a PSB and PSI does not apply. However, if you don’t meet those three criteria, you can move on to the next step.
When only a portion of the contracts meets the test requirements, you will need to have all three requirements met for 75% of the year for the income to be classified as a PSB.
Step #3: Understand The 80% Rule
If your income is PSI and not PSB, you can apply the 80% rule test. This test goes into detail on how much income was earned from each client. If more than 80% of your income comes from one client, you may be considered an employee instead of a sole trader.
On the contrary, if 80% or less of your income is derived from one source, you can move on to the next step.
Step #4: Completing The Remaining Tests
When your income is derived from multiple sources and you pass the 80% test, you can move on to the three remaining tests which are the unrelated client, employment, and business premises tests.
If any of these tests pass, your income is a PSB and not subject to PSI rules.
Many disability support workers will be subject to PSI rules because of the nature of their business; however, analysing the four steps above will be critical to differentiate between PSB and PSI income.
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