The ATO has issued Taxation Ruling TR 2022/3, Compendium on Personal Services Income (PSI) and related web guidance and how they apply to an individual or entity. The PSI rules are designed to prevent individuals from reducing or deferring income tax.
TR 2022/3 combines Taxation Rulings TR 2001/7 Income tax: the meaning of personal services income and TR 2001/8 Income tax: what is a personal services business. Both TR 2001/7 and TR 2001/8 have been withdrawn.
TR 2022/3 maintains the principles set out in those rulings, while taking legislative changes and judicial decisions into account. The Ruling is designed to address concerns, including within the contractor industry, that the PSI rules are difficult to understand and apply.
TR 2022/3 also explains when Part IVA of the ITAA 1936 (general anti-avoidance rules) applies to situations outside the PSI rules. Example 41 of the Ruling demonstrates in what circumstances the ATO may consider apply Part IVA.
TR 2022/3 and the PSI web guidance are the first phase in a significant education/ refamiliarisation program. Further phases will include online learning and development of ATO PSI advice and guidance materials in late 2023.