06 Jun 12 Reporting of personal services income and business income
The ATO advises that before the end of the current financial year, it will be writing to some taxpayers asking them to review their tax return for the 2010-11 income year to work out if the business income they have reported may, in full or in part, be classified as personal services income (PSI) and subject to the PSI rules.
If any clients of tax agents have been selected for this mail out, the ATO will send the agent a letter in advance that will include:
- a list of all affected clients
- a copy of the letter.
The ATO encourages agents to review and discuss with their clients whether their business income includes any PSI. If an agent finds, after reviewing their client's tax return that their income includes PSI and the client fails to pass the PSI tests, they will be subject to the PSI rules and they will need to make a voluntary disclosure.
The ATO also encourages agents to consider the PSI rules when lodging 2011-12 returns.