numba | Pass a PSB Test To Pay Less Tax

March 3, 2025| July Solomon

Pass a PSB Test To Pay Less Tax

If your business provides a service and you want to pay less tax, you have three ways to do that.

1- You pass the 50% PSI Test. The 50% PSI Test looks at whether you even have PSI. Great if you don’t. Then you can stop right here.

2 – You pass one of the four PSB tests and qualify as a PSB.

3 – You ask the ATO for a PSB Determination if you fail the last two PSB tests because you didn’t make it over the 80% hurdle

So let’s look at the 4 PSB Tests.

PSB Tests

To qualify as a PSB you need to pass one of the four PSB Tests.

PSB Test no. 1: 75% Results Test

Do you produce a result using your tools at your own risk for at least 75% of your work?

You need to tick a – Result, b – Tools, c – Risk and d – 75% to pass this test. If you do, you qualify as a PSB and can stop right here.

80% Threshold

To pass one of the remaining three tests, you must earn less than 80% of your revenue from your largest client. If your largest client pays you 80% or more, the law will treat you like an employee. So no PSB.

PSB Test no. 2: Unrelated Clients

To pass you must advertise your services to the public and get at least two unrelated clients as a result of that. This ‘as a direct result’ is important. There must be a causal link.

PSB Test no. 3: Employees

To pass you must have at least one employee who does at least 20% of the principal work – measured by market value. Clerical and administrative work doesn’t count.

PSB Test no. 4: Business Premises

To pass, you must work out of business premises that are separate from your home and you have exclusive use. So shared workspaces or home offices don’t count.

PSB Determination

If you fail the employees and business premises test because you went over the 80%, then you can ask the ATO to be nice and give you a PSB determination so you can still qualify as a PSB.