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Does a Personal Services Income Affect Your Tax

Personal services income, according to the Australian Taxation Office (ATO), is money received as compensation for your efforts or skills as an individual. The question now is: Do you provide services or goods that rely on your unique talents? Consequently, the money you earn is regarded as personal services income (PSI). It can affect tax obligations and deductions and can be received in almost any industry. Accountants in a Melbourne accounting firm have comprehensive knowledge of all tax-related topics. You can also ask them about PSI if you don't know about it.

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Does a Personal Services Income Affect Your Tax

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  1. Does a Personal Services Income Affect Your Tax? According to the Australian Taxation Office (ATO), personal services income is an income that is a reward for your skills or efforts as an individual. Now, the question arises, do you offer services or products that depend on your personal skills? If so, the income you receive is considered personal services income (PSI). What is Personal Services Income (PSI)? Income is termed as PSI when over 50% of the income you’ve received from a contract for your personal skills or efforts as a reward, rather than being produced by the use of assets, from a business structure or the sale of goods.

  2. What Deductions Can Be Claimed When Receiving PSI? Deductions can be claimed if an expense is incurred or paid in producing or gaining assessable income. The expense can’t be private, domestic or capital. Being a sole trader, you can claim deductions against PSI in your individual tax return. • Gaining work cost, e.g. tendering, advertising, and quoting for work • Licensing and registration fees • Account-keeping fees • Insurance costs, including professional indemnity insurance fees • Wages or salary and other expenses for an employee engaged, which is not an associate • A part of home office expenses, such as lighting, heating, internet and phone • Income-generating assets’ depreciation Deductions that can’t be claimed against PSI

  3. Mortgage interest, rent, land tax and rates • Payments to associates for non-principal work • Super contributions for associates’ non-principal work Non-Deductible Expenses Non-deductible expenses are not allowed to claim against your PSI. These expenses can’t be used to minimise PSI awarded to the individual that is included in their individual tax return. To avoid paying double tax, where you pay an associate that is non-deductible under the PSI rules, the amount you’ve received from the associate is not included in their assessable income. Conclusion The blog shares information on personal services income (PSI) along with deductions you can claim as well as deductions you can’t claim. In addition to this, you also came to know what would happen when PSI rules don’t apply. Moreover, if you are still confused about PSI, you can also seek help from Reliable Melbourne Accountants.

  4. Contact Us Website:https://rmelbourneaccountants.com.au/ Contact: 1300 049 534 Mail: enquiry@rmelbourneaccountants.com.au Address: 1/3 Westside Avenue Port Melbourne VIC 3207 Australia

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