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| Home » Topics on Tax » Personal services income |
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Personal services income |
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Personal services income is defined as an honor for, or the result of, your personal attempts or skills, can affect tax duties for contractors and consultants. You can take this example for a clear understanding of the personal services income.
For example a carpenter is engaged by an interior decoration company to build some wooden designs. The company provides the required tools and the carpenter is paid at the completion of the job. This is personal services income as the payment to the carpenter is mainly a reward for the labor of the carpenter. Had the carpenter incorporated his own company the interior decoration company would have engaged the carpenter’s company.
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The carpenter’s company would presumably have paid the carpenter a salary or reward for his services.
The salary to the carpenter and the income received by the carpenter’s company form the personal services income. The salary is considered to be the personal services income because it is the direct wage for the labor of the individual.
The new tax measures that have come into effect on the 1st of July 2000 regarding the personal service income are:
If an individual earns personal services income apart from being an employee then this measure could affect the deductions available to him/her against that income.
A company, partnership or trust which has an individual’s personal services income, this income will be taxed as a personal service income. The issue of this new measure is to restrict the amount of discounts the entity can claim. There is also Pay As You Go (PAYG) withholding duties regarding personal services income that is treated as taxable income of an individual. If you are carrying a personal services business or you gain personal services as an employee the measures seldom apply.
Thus, these are the various features of personal service income.
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