NO.047

Alienation of Personal Services Income – agents

Amendments will be made to the alienation of personal services income tax legislation

that will change the way the legislation applies to certain individuals (including

those working through an entity) who operate under a principal-agent relationship.

Agents whose income is derived predominantly from commission-based payments,

will be treated as having received that income directly from the customers of

the principal as a result of providing services directly to those customers,

even though the payments may have been received from the principal. The amendments

will apply to agents who:

• receive personal services income from providing services (on behalf of the

  principal) to customers, and less than 80 per cent of that income

  is from services provided to each customer;

• receive at least 75 per cent of that income as commission or results-based

  payments, as opposed to retainers or salary-like payments);

• actively seek customers for their principal; and
• do not provide services from the premises of their principal (or the principals

  associate).

Where an agent satisfies the above conditions, the proposed treatment will

enable the individual to satisfy the 80 per cent threshold rule under the legislation

and to self-assess against the personal services business tests, in particular

the unrelated clients test. This will avoid the need for these taxpayers to

obtain a personal services business determination from the Commissioner of Taxation.

The proposed amendments will apply from 1 July 2000.

CANBERRA

29 June 2001

Contacts: David Alexander 02 6277 7340