What Doctors Need to Know About Personal Services Income (PSI)
- johnry8
- Sep 23
- 2 min read
If you’re a doctor working as a contractor, sole trader, or through a company or trust, you may be earning what the ATO calls Personal Services Income or PSI. This is income that is mainly a reward for your personal effort or skills.
Understanding how PSI works matters because it affects how you report income, what deductions you can claim, and whether your business structure is giving you any tax advantage. Getting it wrong can lead to ATO audits, unexpected tax bills, and denied deductions.
What Is Personal Services Income?
PSI is income that comes mostly from your personal work, not from selling products or using significant business assets. For doctors, this usually applies when:
You are paid for the time you spend consulting or performing medical services
You do not have employees doing the work for you
You provide services to one or just a few clients or clinics
How It Affects You
If your income is classified as PSI, special tax rules apply. You might not be able to:
Split your income with a spouse or family member through a company or trust
Claim deductions for rent, mortgage interest, or payments to associates
Retain profits in your company at a lower tax rate
You will need to work out whether you pass the results test or one of the other PSI tests. This help determine if you are genuinely running a business or just earning income from your personal labour.
Best Practices for Doctors Earning PSI
Review your structure annually with your accountant to stay compliant
Keep clear records showing how you deliver your services
Avoid arrangements that look like artificial income splitting
Use the ATO’s PSI decision tool to check if the rules apply to you
Be careful when claiming deductions through your business
What We’ve Seen
Many doctors set up companies or trusts for tax planning but don’t realise that PSI rules can override these benefits. In our experience, doctors who are proactive with their structure and compliance avoid unnecessary headaches down the track.
Could PSI rules be affecting your setup without you knowing?