Are you familiar with psi tax withheld? If you`re an employee, you might have noticed a deduction on your payslip labeled as `PSI tax withheld.` This is a tax that is imposed on an individual`s personal services income (PSI). PSI refers to income earned from personal efforts or skills, such as consultancy or freelance work.

As an employee, if you receive PSI income, your employer may be required to withhold an amount for PSI tax purposes. This amount is then remitted to the Australian Taxation Office (ATO) on your behalf.

However, if you`re confident that your PSI income is not subject to PSI tax, you can enter into a voluntary agreement with your employer. The voluntary agreement allows you to avoid having PSI tax withheld from your salary.

To enter into a voluntary agreement, you must meet certain criteria set out by the ATO. You must be an individual earning PSI income, such as a sole trader or freelancer, and your PSI must be from a business activity that you carry out independently. You should be able to demonstrate that you have the power to delegate work to others and operate as a genuine independent contractor.

It`s important to note that a voluntary agreement only applies to your current employer. If you change employers, you must enter into a new agreement with your new employer.

To enter into a voluntary agreement, you can use the ATO`s online tool, the Voluntary agreement pre-filling service (VAPS). This tool allows you to fill in your details and check your eligibility for a voluntary agreement. Once you`ve confirmed your eligibility, you can provide your employer with a copy of the VAPS form to complete.

Before entering into a voluntary agreement, it`s essential to consider the implications carefully. If you`re unsure whether your PSI income is subject to PSI tax, it`s recommended to seek the advice of a tax professional.

In conclusion, PSI tax withheld can be a confusing topic for employees who receive PSI income. However, entering into a voluntary agreement with your employer can help you avoid the deduction of PSI tax from your salary. Just make sure you meet the ATO`s criteria and seek professional advice if you`re unsure about your eligibility.