For many local business owners working with a Tax Accountant Hobart can rely on, some recent updates from the Australian Taxation Office are worth noting.
The ATO has flagged Personal Services Income (PSI) as an area of increased compliance focus, particularly where individuals are operating through companies or trusts.
If you’re a contractor, consultant, or service-based professional, it may be time to take a closer look at how your income is structured.
What is Personal Services Income?
In simple terms, PSI is income that is mainly generated from your personal skills, knowledge, or effort.
Common examples include:
- Independent contractors
- IT professionals and consultants
- Designers, marketers, and freelancers
Even if you operate through a company or trust, the income may still be considered PSI depending on how the work is performed.
Why is the ATO Paying Attention?
The Australian Taxation Office has indicated that some individuals may be using business structures in ways that don’t align with PSI rules.
This doesn’t necessarily mean anything is being done incorrectly—but it does mean:
- The ATO is looking more closely
- Certain arrangements may be reviewed
- Some taxpayers may be asked to clarify how their income is earned
In short, it’s about making sure that income is being reported in the correct way.
Who Might Be Affected?
This increased focus may be relevant if:
- You primarily earn income from your own labour or expertise
- You work with one or a small number of clients
- You invoice through a company or trust structure
For many small business operators, this is simply part of how they’ve always worked—so it’s important not to assume anything has changed, but equally important not to ignore the update.
What Does This Mean in Practice?
At this stage, the ATO’s messaging is more about awareness than enforcement action.
However, a review could potentially involve:
- Looking at how income is earned
- Understanding who performs the work
- Checking whether existing structures align with PSI guidelines
For most people, this is simply about ensuring everything is in order—not about expecting major changes.
A Good Time for a Quick Check-In
Moments like this can be a useful reminder to review how your business operates.
If you’re unsure how PSI applies to your situation, a quick conversation can provide clarity and peace of mind. Working with a professional ensures that your structure continues to support your business goals while staying aligned with current expectations.
At Hills Accounting Hobart, we regularly assist local contractors and small business operators with understanding how these rules apply in real-world situations.
Learn More
For further general information, you can visit the ATO’s overview by clicking here.
Final Thoughts
There’s no need for alarm—but there is value in staying informed.
As they say, only two things in life are certain… and staying on top of your tax obligations is one of them.
With the Australian Taxation Office placing a spotlight on PSI, now is a sensible time to make sure your business structure reflects the way you actually work.
And if in doubt, a simple check-in today could help avoid complications down the track.
Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs. For advice tailored to your circumstances, have a chat with us at Hills Accounting Hobart.
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