Boris worked for ABJ Electrical as an employee for 12 years but on 1 July 2019 he was asked by his employer to obtain an ABN and to submit invoices as he would be paid as a contractor. Boris's work duties have not changed at all and he only provides services to ABJ Electrical is still paid on a hourly rate and Boris does not supply his own tools or have his own liability insurance (as he is covered by ABJ's policy). How will this arrangement be treated under Australia's specific anti-avoidance rules?

Question

Quizplus · Accepted Answer

Boris would fail the personal services income (PSI) rules because his work arrangement with ABJ Electrical essentially remains that of an employee, not an independent contractor. His duties haven't changed, he works for a single client, is paid an hourly rate, doesn't supply his own tools, and doesn't have his own liability insurance, indicating that he is still effectively an employee under the guise of a contractor. This situation is targeted by the PSI rules to prevent companies and individuals from avoiding tax and employment obligations.

Boris Worked for ABJ Electrical as an Employee for 12