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PSI Determination

Discussion in 'Accounting, Tax & Legal' started by RDVS, 27th Mar, 2012.

  1. RDVS

    RDVS New Member

    Joined:
    27th Mar, 2012
    Posts:
    2
    Location:
    Regional SA
    Does PSI apply to our situation?

    ABCD Pty Ltd is a family trust business specialising in agriculture consulting.

    It employees 2 fulltime Consultants A&B (both shareholders) and then during the harvest time another 3 staff (2 qualified field staff + 1 admin).

    The business has a professional office separated from the place of residence, rented exclusively for 12mth of the year.

    Consultant A's income is solely from one client. However, to meet the demands of forfilling this contract another 4 people are required to be employed.

    The contract is worth $255,000 and the 3 employees contribute 62% towards the income ($160,000). Consultant A contributes the remaining 38% of income ($95,000).

    Is this a business PSI or does Consultant A attract PSI due to the nature of the contract from one client?

    Is the structure of the business (Trust) complex enough that PSI is not attributable?

    Other informtion to consider:
    ABCD Pty Ltd earns another $125,000 for unrelated clients (15-20) from Consultant B.

    In regards to the results test, all work is paid by the hour, no tools are necessary and not liable for any defected work.

    Appreciate any professional feedback or advice to this matter
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Sounds like ABCD is the trustee the trust and running the business.

    A and B would be employees of the 'business'. Do they get a wage or subcontract? If they subcontract then they might have to pass their own PSI rules.

    For ABCD does it pass the results test? maybe - it would only get paid if it acheives certain results.

    Does ABCD receive 80% of its income from one client?

    Sounds like it doesn't, so does it pass any of:
    1. Unrelated clients test
    2. employment test, or
    3, business premises test?

    Employment test is whether it employs not related employees who perform at least 20% of the principal work.
     
  3. RDVS

    RDVS New Member

    Joined:
    27th Mar, 2012
    Posts:
    2
    Location:
    Regional SA
    Thanks TerryW

    A&B are paid a salary of between $70-80k each. The one major client makes up 67% of total income into the business. The remaining income (33%) is generated by another 15-20 cleints.