Fix mistakes at your own cost

You’re required to fix mistakes at your own cost.

To meet this condition, you must be liable for the cost of rectifying any defects in your work. You do not need to actually perform the work that fixes the mistake, so long as you’re liable for the cost of the defect to be fixed.

A contract which states that you’re required to fix mistakes at your own cost may indicate that you have fulfilled this condition. However, this condition will only be fulfilled if this term in the contract can actually be enforced by the client should mistakes in your work happen.

You will not meet this condition if you invoice the client for time spent to fix defects in your work, or if you fix mistakes during your usual working times under the contract. This is because you will not have been liable for the cost of fixing mistakes, as in both these situations the client will have paid for the time taken to correct defects.

Example

Jordan is a software specialist who provides services through his company JordanCo. JordanCo has contracted with a large firm. JordanCo's contract doesn't specify whether he is personally responsible for correcting his mistakes.

In practice, Jordan invoices for fixing any mistakes he makes. Therefore, JordanCo does not meet the third condition of the results test.

Personal services income

Steps Progress

What is PSI?

4 mins

Is the income PSI?

5 mins

Income that is not PSI

9 mins

Whose PSI is it?

7 mins

Working out if the PSI rules apply: self-assess as a personal service business (PSB)

2 mins

The 80% rule

5 mins

Results test

8 mins

Unrelated clients test

5 mins

Employment test

5 mins

Business premises test

7 mins

Obtaining work through an agency

5 mins

Apply for a personal services business determination (PSBD)

3 mins

What to do when the PSI rules apply

2 mins

What to do when the PSI rules apply: claiming deductions

11 mins

What to do when the PSI rules apply: how to attribute PSI

8 mins

What to do when the PSI rules apply: PAYG

18 mins

What to do when the PSI rules apply: completing your tax return

4 mins

What to do if the PSI rules don’t apply

3 mins

Record keeping for PSI

1 mins

Help for PSI

1 mins

Case study: instructions

1 mins

Case studies: sole trader

11 mins

Case studies: partnership

12 mins

Case studies: company

12 mins

Case studies: trust

12 mins

Related courses

1 mins

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