What is Promptly Paid PSI?

Promptly paid Personal Services Income (PSI) refers to amounts that a business pays by the 14th day after the end of the relevant PAYG payment period during which the PSI was received. This concept is crucial for businesses, particularly sole traders, partnerships, companies, or trusts that receive income primarily from an individual's skills or efforts.

Understanding Promptly Paid PSI

The term "promptly paid" establishes a specific deadline for the payment of Personal Services Income attributed to an individual. This ensures timely recognition and appropriate tax treatment of such income.

Key components of Promptly Paid PSI:

• Payment Deadline: The payment must occur no later than the 14th day following the close of the PAYG (Pay As You Go) payment period.
• Relevant Period: This period is defined by when your business actually received the Personal Services Income.

What is Personal Services Income (PSI)?

Personal Services Income (PSI) is income generated mainly from an individual's personal efforts or skills, rather than from the use of assets or a business structure. It's often earned by contractors, consultants, and professionals. If more than 50% of the income received for a contract is for an individual's personal efforts or skills, it's considered PSI.

Practical Example of Promptly Paid PSI

To illustrate the "promptly paid" deadline, consider a business that lodges its activity statements quarterly:

• Scenario: A business receives PSI during the January to March quarter.
• Deadline: The business must pay this PSI by the 14th day after the end of the March quarter.
• Result: This means the PSI received between January 1st and March 31st must be paid by April 14th.

This table provides a clearer overview of the deadlines based on common quarterly PAYG periods:

Meeting this deadline is essential for compliance and ensuring the correct attribution of income for tax purposes.