The Personal Services Income regime continues to be scrutinized and challenged by the Australian Taxation Office. One aspect of the PSI was recently challenged in the case of Park vs. Commission of Taxation (2011) AATA567. In this case, an I.T. Specialist taxpayer who provided services through a Company Structure claimed that the Personal Services Income rules did not apply to him because the results test was satisfied by the Company.
It was identified in this case that the services provided were through a labour hire firm where the I.T. Specialist was required to submit weekly timesheets for approval. In the end, there was no evidence that the company was engaged to produce results although the Contractor was contracted to work on many substantial projects. Therefore, the Tribunal found that the taxpayer did not conduct a Personal Services Business during the relevant years as the “results test” was not satisfied. The income was therefore attributed to the I.T. Specialist and a penalty was applied.
This specific case further reinforces the ATO’s focus on the Personal Services Income regime. In addition, it confirmed that the Administrative Appeals Tribunal felt a 25 percent penalty was appropriate and reasonable.
It is to be reminded that the area of PSI is complex and if taxpayers do not get it right, significant penalties will ensue.