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Personal services business and the results test

Published on 11 Aug 2015

You will avoid attributed personal services income and be operating a personal services business if you can satisfy the results test.  This is set out in Section 87-18 of the Income Tax Assessment Act 1997.

In a recent case (Prasad Business Centres Pty Ltd v FC of T AAT (2015) AATA 411) the Administrative Appeals Tribunal confirmed the Tax Office’s decision not to provide a personal services business determination as requested.

The Tribunal held that the results test was not satisfied because:

  • The relevant contract remunerated the principal only for time he spent working on certain projects;
  • Whilst the contract required the producing of a result, the income under the contract was not dependent on that result;
  • Under the contract, the income entitlement was based on the number of days worked; and
  • If the contract was terminated early, the principal was still entitled for payment to work done.

To pass the results test, under Section 87-18, the contract must specify entitlement to payment for producing a result along with two other conditions relating to the provision of plant and equipment and also the rectification of defects.



Andrew and Tony Lovett

11 August 2015

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