If you're a labour hire business you will need to declare your employees under a labour hire arrangement on your employees Tax File Number (TFN) declarations and STP submissions. This will be turned on automatically for your platform.
Reporting as labour hire will result in the employee having a Personal Services Income(PSI) Statement and need to lodge their tax return accordingly.
When an individual works under a Labour Hire agreement, they will receive a PAYG payment summary – business and personal services income.
From an employee's perspective, they may think that they have been incorrectly reported to the ATO as a business or sole trader because when they try and do their tax return themselves they are prompted for an ABN which they likely do not have.
Please note the information below is directly from the ATO's Labour Hire and PSI Income Statement query.
To assist your labour hire employees lodging their individual tax return through ATO Online where the Business/Sole trader checkbox is ticked and the employee advises they do not have a business please refer to the information below:
This check box will be selected if the employee received a business type income statement or payment summary. This item will be selected if the employee received payments made:
- under a voluntary agreement
- under a labour-hire arrangement
- that are other specific payments, or that are personal services income (PSI).
If these types of payments have been received, the employee will need to include their income and deductions in the relevant section in the Business/sole trader section. They can use the PSI tool to work out if they are PSI, or in business.
If it has pre-filled as personal services income under the business/sole trader section, then the employee should only have to answer questions about the nature of their personal services income, and the entity that paid that income. If it is asking the employee for their business name and address, then they have have selected "Business income or loss" when you should only need to select "Personal Services income" if the employee is not operating a business.
They may also need to use the personal services income tool to help you complete the other labels.
Did you receive any personal services income? - TICK YES
Did any activity satisfy the results test? * TICK NO
Have you received a personal services business determination(s) that was in force for the whole of the period you earned PSI? * TICK NO
Did you receive 80% or more of your PSI from one source? * TICK YES
(Enter details from a payment summary)
For Payment Type click 'Labour Hire'
Click Save and Continue
Click ADD/EDIT on Deductions and enter any deductions.