PSB stands for Personal Services Business.

If you earn Personal Services Income (PSI), you can still be treated as running a Personal Services Business (PSB)—which is a good thing—if you pass certain tests set by the ATO. Being classified as a PSB means the PSI rules don’t apply to you, so you get more flexibility with tax deductions and how you structure your business.

To qualify as a PSB, you must pass at least one of these tests:

1. Results Test

You get paid to produce a specific result, not just for your time or effort. You also provide your own tools/equipment and fix your own mistakes at your own cost.

2. Unrelated Clients Test

You have two or more unrelated clients, and you find your work through advertising or similar efforts (not just referrals or agencies).

3. Employment Test

You employ others to do at least 20% of the work (not just admin help). Or you hire an apprentice for at least half the year.

4. Business Premises Test

You have business premises that are separate from your home and your clients’ locations, and you use them mainly for your business.

If you pass none of the tests, the PSI rules apply, and your income is treated as your personal income, even if it’s earned through a company or trust