PSI Rules for Doctors and Medical Professionals
Personal Services Income (PSI) rules exist to prevent individuals from reducing tax by diverting income earned mainly through personal skill or effort into a company, trust, or partnership. For doctors who bill through a practice entity — particularly specialists, locums, and contracted practitioners — PSI rules can directly limit which deductions and income-splitting strategies are available.
When PSI Rules Apply to Doctors
If most of your income is earned through your personal skill rather than the use of an asset, sale of goods, or a genuine business structure with staff and infrastructure, that income may be classified as PSI — regardless of which entity it’s paid into.
The Personal Services Business Tests
- Results test: paid to produce a result rather than for hours worked
- Unrelated clients test: income from two or more unrelated clients/practices
- Employment test: engaging others to perform a significant part of the work
- Business premises test: maintaining and using your own business premises
Why This Matters for Structuring
If your income is classified as PSI and you don’t meet a personal services business test, deductions are limited largely to what an employee could claim, and income generally can’t be split with a spouse or retained in a company at a lower tax rate.
Related Resources
- Back to Accounting and Tax Services for Doctors
- Practice Entity Structuring for Doctors
- Tax Planning for Physicians
- Accounting & Tax for Locum Doctors
PSI status can change your entire tax position. We review your income sources and contracts against the personal services business tests so your structure and deductions stay compliant.