If you earn PSI, and the PSI rules apply to that income, the types of deductions you can claim may be affected.

In general, when you earn PSI, you’re treated as though you’re in the same position as an employee.

This means your business may claim deductions against PSI received if:

• the expenses are incurred in producing the income, and
• you (as an individual who earns the income) would be entitled to the deduction.

This applies to all PSI, whether it is earned as a sole trader or through a company, partnership or trust.

You must keep records of your transactions, including expense claims, for 5 years after they are prepared, obtained or the transactions completed, whichever occurs later. You will also need to show whether the expenses relate to PSI or other income.

Where PSI is generated by more than one individual in a business, you need to allocate the deductions which relate to the income received by each individual.