RECENT press suggested that the government had done a back flip and decided not to proceed with its previously announced alienation of personal income legislation.
A recent ruling issued by the Australian Taxation Office indicates this is not the case. The 80 per cent test that was mooted some time ago is still very much alive.
A personal services business is considered to be carried on, if the person undertaking the business
satisfies any of the following tests:
l the unrelated clients test.
l the employment test, or
l the business premises test.
To satisfy the unrelated clients test, the individual or entity must provide services to two or more unrelated entities that are neither associated with each other nor the individual or personal service entity, and the services are provided as a direct result of making offers or invitations to the public at large or to a section of the public.
An individual satisfies the employment test if he/she engages one or more entities during the income year and that entity, or those entities together perform at least 20 per cent of the market value of the individual’s primary and principal work for the year.
Individual or personal service entities that maintain and use
business premises at all times during the year, at which the individual or entity mainly conducts activities from which personal services income is gained or produced, could satisfy the business premises test. There are conditions attached to the business premises qualification.
If a person is considered to be carrying on a personal services business, they are not in receipt of personal services income and the alienation rules may not apply.
