BASIC CHAPTER 14 Q1 BUSINESS SECTION

S1

The taxpayer is genuinely in business, and is in the STS.

P1

Personal services income (PSI)
Did you receive any personal services income?	YES	Read on.
Part A
Did you satisfy the results test?	YES	Go to item P2.
Have you received a PSI business determination?
Did you receive > 80% of your PSI from one source?

What is personal services income (PSI)?

PSI is when it is the person’s skills and abilities which are being contracted. The following are NOT PSI:

• Sale of stock – the customer wants the used car or frying pan, rather than the salesman;
• Main asset businesses (e.g. an articulated truck) – the customer wants the use of the main asset, rather than specifically wanting the person who owns the main asset;
• An employee for a large company – the customer is doing business with the company, rather than with that specific employee.

The results test

For at least 75% of their income:

• Under their contract or arrangement, the taxpayer was paid to achieve a specified result or outcome. This means that the taxpayer was not just doing ongoing work as an employee would do, but was hired to do a specific job, which is how a genuine business operates.

AND

· The taxpayer had to provide his own tools and equipment. Again, this is how a genuine business operates. An employee uses the tools and equipment of the employer.

AND

• The taxpayer was liable for rectifying defects in their work. This too is characteristic of a business contract.

Thus the results test is designed to separate the genuine businesses from the virtual employees. If ALL the three questions of the results test are passed, then the income and expenses go at item 14.

Item P2	Description	Furniture restoration
Item P3	Number of business activities	1
Item P4	Status of your business
Item P5	Business name of main business	Harry’s Restoratorium
Item P6	Business address of main business	823 High Street Hendon SA 5014 (must be a street address)
Item P7	Did you sell any goods using the internet?	N