psi_classification_skill

Overview

This skill determines whether income of a personal services entity (PSE) is personal services income (PSI) under Division 84-87 of the ITAA 1997 and whether the entity qualifies as a personal services business (PSB). It summarizes PSI indicators, runs the four PSB tests, and identifies deduction restrictions under Division 86. The output includes test results, deduction impacts, and a confidence score to guide client advice.

How this skill works

The engine inspects contract characteristics, income sources, client relationships, use of tools or premises, and whether others perform work for the entity. It applies the statutory PSI definition and evaluates the Results, Unrelated Clients, Employment, and Business Premises tests from Division 87. When PSI applies but PSB status is not met, the skill maps deduction restrictions per Division 86 and flags salary, rent, home-office, maintenance and superannuation treatment. The function analyzePSI(tenantId, financialYear, options) returns a structured determination and confidence metrics.

When to use it

• Assess whether contractor or consultant income is classified as PSI for a tax year
• Determine if a PSE qualifies as a PSB to preserve or restore deduction access
• Check application of the 80% single-client rule when one client supplies most income
• Evaluate borderline arrangements before claiming or denying deductions under Division 86
• Provide clear evidence-based guidance for client engagements and contract design

Best practices

• Collect full contract documents, invoices, and evidence of who provides tools or premises
• Verify the number and independence of clients across the financial year for the Unrelated Clients test
• Document any payment terms tied to results, provision of equipment, or liability for defects
• Run the engine early in client onboarding to shape contracts that support PSB outcomes
• Use the confidence score and review low-confidence items manually with supporting evidence

Example use cases

• A contractor wants to know if income from a single long-term client is PSI and whether deductions are restricted
• A consulting firm evaluates whether hiring subcontractors meets the Employment test threshold
• An adviser checks whether a contractor’s separate business premises satisfy the Business Premises test
• A tax practitioner assesses deduction exposure (rent, wages to associates, home office) if PSB tests fail
• A client redesigns contract terms to strengthen the Results test and reduce PSI risk