Understanding Personal Service Income for Aussie SMEs: Rules, Examples & ATO Compliance

MELBOURNE, Australia - Oct. 24, 2025 - PRLog -- Many Australian contractors and consultants risk unexpected tax penalties each year simply because they misclassify their income. In a new article, "Understanding Personal Service Income for Aussie SMEs: Rules, Examples & ATO Compliance," Nanak Accountants and Associates breaks down the Australian Tax Office's (ATO) Personal Services Income (PSI) rules in clear, practical terms.

Principal Accountant Puneet Singh says the confusion around PSI often arises when individuals operate through companies or trusts but perform work based on their personal skills. "Just because you have an ABN or a company doesn't mean you're automatically a business in the eyes of the ATO," Singh explains. "If most of your income is from your personal effort or expertise, PSI rules likely apply and getting that wrong can lead to denied deductions or penalties."

The guide outlines the ATO's 80% and results tests, how to determine if income qualifies as PSI, and steps to report correctly. It also explains how businesses can achieve Personal Services Business (PSB) status to retain legitimate deductions and manage tax efficiently.

"Understanding PSI isn't just about compliance , it's about strategy," Singh adds. "If you get it right, you can plan smarter, claim appropriately, and avoid ATO scrutiny."

Nanak Accountants encourages contractors, consultants, and freelancers to review their income structures annually and seek professional advice to stay compliant.

Read the full article: https://nanakaccountants.com.au/understanding-personal-se...

About Nanak Accountants and Associates
Nanak Accountants and Associates is a Melbourne-based accounting and advisory firm specialising in small business tax, compliance, and financial growth strategies. Led by Principal Accountant Puneet Singh, the firm helps Australian SMEs navigate complex tax rules with confidence.

Visit: https://nanakaccountants.com.au