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.