Tax Office: PSI mail-out in January 2012

During this month, the Tax Office will write to some taxpayers who have reported personal services income (PSI) and may have incorrectly self-assessed themselves as conducting a personal services business (PSB).

For tax agents, if one of their clients is selected for this mailout, they will receive a letter in advance that will include:

• a copy of the client letter, and
• a list of affected clients.

The Tax Office has emphasised that it is important for tax agents to identify whether their clients have earned PSI and conducted a PSB in an income year because entitlement to certain deductions and reporting obligations may be affected. The Tax Office's mailout is part of ongoing work to raise awareness about PSI obligations.

Action to be taken

Due to the mailout, the Tax Office has encouraged tax agents to review and discuss with their clients their self-assessed PSB status in 2009-10. If affected taxpayers believe they have incorrectly self-assessed their status, they should make a voluntary disclosure.

Further, taxpayers should also consider the PSI rules when lodging their 2010-11 income tax return. If a taxpayer has income that passes one or more of the four PSI tests for the income year, the PSI rules will not apply for that year.