Is disability support work classified as PSI?

Yes, disability support work income earned as an independent sole trader is classified as Personal Services Income (PSI) by the Australian Taxation Office, because it is generated mainly through your personal efforts, skills, and time. PSI stands for Personal Services Income, not "personal support income."

This matters because PSI rules restrict the tax deductions you can claim as a sole trader. However, not all deductions are blocked. Insurance premiums, work-related travel, uniforms, and training remain deductible under PSI rules. This guide covers how the ATO tests work, what you can and cannot deduct, the difference between ABN contractor platforms and employment platforms, and the insurance you need as an independent NDIS support worker.

TL;DR

• The PSI Reality: Most NDIS sole trader income is PSI because it is produced by your personal care skills and physical effort. The ATO classifies it based on how the income is earned, not your business structure.
• The Deduction Constraint: Failing the ATO's Personal Services Business (PSB) tests means you cannot claim standard business overhead deductions like home office occupancy, rent, or mortgage interest.
• The 80% Rule: If 80% or more of your annual care income comes from a single participant or agency, you automatically fail the primary business test.
• Zero Workplace Safety Nets: Independent sole traders on ABN contractor platforms like Mable are not covered by any employer's workers' compensation or liability insurance. You need your own cover.

What Is Personal Services Income for NDIS Support Workers?

Personal Services Income is income that is mainly a reward for your personal efforts or skills, as defined by the Australian Taxation Office. You can earn PSI as a sole trader, or through a company, partnership, or trust. For disability support workers, the connection is straightforward. When you provide personal care, domestic assistance, community access support, or behavioural guidance to an NDIS participant, you are being paid for your time, labour, and personal expertise. That income fits the ATO's definition of PSI.

PSI classification is based on how each contract generates income, not on whether you have an ABN or how your business is structured. Even if you operate through a company, if the income is mainly from your personal efforts, the PSI rules can still apply.

How to Determine If Your NDIS Income Is PSI

The ATO provides a step-by-step framework to assess whether your income is PSI, and if so, whether you qualify as a Personal Services Business (PSB) which removes some of the deduction restrictions.

Step 1: The 50% labour origin test

Look at each contract individually. If more than 50% of the income you earned under that contract is a reward for your personal efforts or skills, all income from that contract is classified as PSI. If 50% or less is for personal efforts, none of the income from that contract is PSI.

For most disability support workers billing hourly rates for hands-on care, the answer is clear: the income is almost entirely a reward for your personal labour. It is PSI.

Step 2: The results test

This test determines whether your PSI qualifies as a Personal Services Business. To pass, you must meet all three criteria at the same time: you are paid to produce a specific result (not paid by the hour), you provide your own tools and equipment, and you are liable for rectifying defects in your work at your own cost.

Most NDIS support workers are paid per hour or per shift, not per result. This means most fail the results test and their income remains subject to PSI rules.

Step 3: The 80% client concentration threshold

If you do not pass the results test, check whether 80% or more of your PSI comes from one client and their associates. If it does, you generally cannot self-assess as a Personal Services Business using the unrelated clients, employment, or business premises tests. You may need to apply to the ATO for a PSB determination.

Step 4: The remaining PSB tests

If less than 80% of your PSI comes from one client, you may be able to self-assess against the remaining PSB tests: the unrelated clients test (you regularly advertise and seek work from the public), the employment test (you employ others to do at least 20% of the work), and the business premises test (you maintain a separate business premises used mainly for work and not shared with a client). Passing any one of these tests may qualify your income as a Personal Services Business, removing the PSI deduction restrictions. If you are unsure, confirm your position with a registered tax agent.

What Tax Deductions Are Restricted Under PSI Rules?

If the PSI rules apply to your income, some deductions you might expect to claim as a sole trader are blocked. Others remain available.

What you CAN still deduct

Even under PSI rules, you can deduct expenses that are directly connected to earning your income. These include:

• Work-related travel and car expenses (travelling between participants, not commuting from home to a regular workplace).
• Required uniforms, high-visibility clothing, and personal protective equipment such as gloves, sanitisers, and disposable aprons.
• Training courses, first aid certifications, NDIS worker screening checks, and professional development directly related to your care work.
• Phone and internet expenses used for work (the work-related portion).
• Insurance premiums for public liability and professional indemnity, as these are directly connected to producing your assessable income under section 8-1 of the Income Tax Assessment Act 1997. Confirm the specific deductibility with a registered tax agent.

What you CANNOT deduct

Under PSI rules, you cannot claim:

• Rent, mortgage interest, or council rates on your home (even if you do admin work from home).
• General home office occupancy expenses.
• Payments to an associate (such as a spouse or family member) for administrative or bookkeeping work, unless they are doing work that would otherwise need to be done by an outside provider.
• Entity maintenance costs for a company or trust structure set up mainly to receive your PSI.

The distinction is practical: expenses directly tied to doing the care work remain deductible. Expenses related to running a business structure or maintaining a home office are restricted.

Independent Contractor vs Employee: Where PSI Overlaps With Sham Contracting

Not every NDIS support worker is a sole trader. The platform you work through determines your employment status, your tax treatment, and whether PSI applies at all.

ABN contractor platforms vs PAYG employment platforms

Some NDIS platforms operate as ABN contractor marketplaces. On these platforms, you use your own ABN, set your own rates, manage your own tax, and arrange your own insurance. Mable and Kynd are examples of this model. Income earned through these platforms is your sole trader business income and is subject to PSI rules.

Other platforms employ support workers directly as casual employees. Hireup, for example, operates as a direct employer: tax is withheld from your pay, superannuation is paid on your behalf, and you are covered under the platform's workers' compensation arrangements. Income earned as an employee through Hireup is salary or wages, not PSI. The PSI rules do not apply to employment income. Before assuming your platform income is PSI, confirm your employment status directly with the platform you work through.

The sham contracting warning

Some businesses ask workers to get an ABN and invoice as contractors to avoid paying superannuation and other employment entitlements. If someone controls your hours, provides your tools, and directs how you do the work, you may be an employee, not a contractor. The ATO and the Fair Work Ombudsman actively investigate sham contracting arrangements. For more on this topic, see upcover's guide on ABN and working holiday visas.

Superannuation rules and expectations

The superannuation guarantee applies to employees, not to sole traders invoicing their own clients. If you are employed (even as a casual), your employer must pay the super guarantee on all your ordinary time earnings from the first dollar. The rate is 12% as of 1 July 2025. There is no minimum earnings threshold.

If you are a sole trader, you are not legally required to pay yourself super, but you can choose to contribute voluntarily. However, if a hiring business engages you as a contractor primarily for your personal labour (rather than for a specific business result), that business may still be required to pay super on your behalf under the ATO's expanded definition of "employee" for super purposes. Confirm your specific position with a registered tax agent.

What Insurance Do Independent NDIS Support Workers Need?

When you work as a sole trader through an ABN contractor platform, you are not covered by any public liability, professional indemnity, or personal accident insurance. If something goes wrong on the job, the liability sits with you personally.

Public liability insurance for physical risks

Public liability insurance may help cover claims if you accidentally injure a third party or damage their property while providing care. This is relevant for support workers who assist with physical transfers, work inside participants' homes, manage community access outings, or handle mobility equipment.

Scenario: the patient transfer injury

An independent support worker is assisting an NDIS participant with a hoist transfer from a wheelchair to a bed. During the transfer, the worker loses grip and the participant falls, sustaining a hip injury. The participant makes a claim for medical costs and rehabilitation. Public liability insurance may respond to claims arising from accidental third-party injury during the provision of care services, subject to policy terms. Illustrative scenario only. Coverage depends on the terms of the individual policy.

Professional indemnity insurance for clinical advice

Professional indemnity insurance may help cover claims if a participant alleges that your professional service or advice caused them harm. This is relevant for independent support workers who manage medication schedules, implement behavioural support plans, or provide nutritional or lifestyle guidance.

Scenario: the medication scheduling error

An independent support worker manages a participant's daily medication routine. The worker accidentally administers the wrong dosage at the wrong time due to a scheduling misread. The participant suffers an adverse reaction and the family makes a formal claim alleging negligent care. Professional indemnity insurance may respond to claims arising from errors in the provision of professional services, subject to policy terms. Illustrative scenario only. Coverage depends on the terms of the individual policy.

Many NDIS participants, plan managers, and platforms require a valid Certificate of Currency before engaging a sole trader. For the full guide to NDIS insurance requirements, see our analysis on  does a disability support worker need public liability insurance. For cost ranges, see our price spec sheet on how much NDIS support worker insurance cost.

How upcover Arranges Insurance for NDIS Sole Traders

upcover is a digital-first insurance broker helping Australian sole traders and small businesses arrange the right insurance without the paperwork or phone queues. upcover arranges public liability and professional indemnity insurance for independent NDIS support workers across Australia, with access to 80+ insurance partners.

• 70,000+ businesses covered across Australia.
• 4.9/5 customer rating.
• Instant Certificate of Currency on policy confirmation.

Get an instant quote through upcover's dedicated sole trader insurance options page.

FAQ

Is independent disability support work always considered PSI?

In most cases, yes. If more than 50% of the income you earn under a contract is a reward for your personal efforts and skills, all income from that contract is PSI. Because disability support work is almost entirely performed through personal labour, the income typically qualifies as PSI under ATO rules.

Can an NDIS sole trader claim travel and car expenses under PSI rules?

Yes. Travel between participants and work-related car expenses remain deductible under PSI rules, as they are directly connected to earning your income. Commuting from home to a regular workplace is not deductible. The ATO allows either the cents-per-kilometre method or the logbook method for calculating car deductions.

What happens if 80% or more of my income comes from one participant or agency?

If 80% or more of your PSI comes from one client and their associates, and you have not passed the results test, you generally cannot self-assess as a Personal Services Business using the remaining PSB tests. You may need to apply to the ATO for a PSB determination. Diversifying your client base across multiple participants or plan managers is the most practical way to avoid this restriction.

Do platforms like Mable provide public liability insurance for sole traders?

Mable arranges group insurance that covers support workers for sessions booked and invoiced through the platform. That cover applies only to platform-arranged work. Private client arrangements outside the platform are not covered, and the group policy may have limitations that differ from a standalone policy. Sole traders who take on clients both through a platform and directly typically arrange their own independent policy to cover all activities.

Note: From 1 July 2026, all NDIS digital platform providers must register with the NDIS Quality and Safeguards Commission under the National Disability Insurance Scheme (Provider Registration and Practice Standards) Amendment (Mandatory Registration and Other Matters) Rules 2026.

Can I deduct insurance premiums under PSI rules?

Yes. Public liability and professional indemnity insurance premiums are deductible under section 8-1 of the Income Tax Assessment Act 1997 if the policy is directly connected to earning your assessable income. This deduction remains available even when PSI rules restrict other business expenses.

What is the difference between PSI and PSB?

PSI is the default classification for income from your personal efforts. PSB is a status you achieve by passing ATO business tests (results test, 80% rule, unrelated clients test, employment test, or business premises test). If you qualify as a PSB, the PSI deduction restrictions do not apply and you can claim the full range of business deductions.

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_{The information in this article is general in nature and provided for informational purposes only. It does not constitute personal tax, legal, or insurance advice. References to Personal Services Income rules, ATO tests, tax deductions, superannuation rates, and platform employment models are based on publicly available information current at the time of writing. Always confirm your specific tax position with a registered tax agent or the Australian Taxation Office. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}