# Worked Example — Bounty #10

**Companion file to:** `01-brief.md`

## The scenario

**Entity:** VWX IT Consulting Pty Ltd
**Directors/Shareholders:** Jason (100%)
**Financial year:** FY2024–25
**PSI (gross):** $340,000
**Clients:**

| Client | Revenue | % of PSI | Contract type | Relationship to Jason |
|---|---:|---:|---|---|
| BigBankCorp | $210,000 | 61.8% | 12-month rolling engagement | Unrelated |
| MidTierAccounting | $85,000 | 25.0% | Project-based | Unrelated |
| StartupTechCo | $35,000 | 10.3% | Project-based | Unrelated |
| Jason's brother-in-law | $10,000 | 2.9% | Ad-hoc | Related |
| **Total** | **$340,000** | **100%** | | |

## The engine spec's target evaluations

**Step 1 — Is this PSI?**
Yes — the income is characterised as PSI under s 84-5 (paid mainly for Jason's personal skill).

**Step 2 — 80% rule test (s 87-15(3)):**
BigBankCorp represents 61.8% of PSI. This is less than 80%, so the results test is **not** mandatorily-imposed. The entity may satisfy any of the four PSB tests.

**Step 3 — Unrelated clients test (s 87-20):**
The test:
- (a) The individual gains or produces income from providing services to two or more entities that are unrelated to the individual and to each other; AND
- (b) The services are provided as a direct result of the individual making offers or invitations to the public at large (or a section of the public).

Sub-test (a): BigBankCorp + MidTierAccounting + StartupTechCo are all unrelated to Jason and to each other. **PASS.**

Sub-test (b): This is the load-bearing sub-test. Did Jason obtain these clients by "offers or invitations to the public"? Word-of-mouth referrals typically do not satisfy this test. A LinkedIn profile advertising services might. A website, active marketing, or bidding on public tenders would.

If Jason obtained BigBankCorp through a former-colleague introduction, that alone does not satisfy the test. If Jason additionally maintains an active website and has done tender responses to other government-sector work, the test may be satisfied.

**Step 4 — Alternative PSB tests:**

- **Results test:** would require (i) Jason produces a result, (ii) Jason supplies plant/tools/equipment to produce the result, (iii) Jason is liable for cost of rectifying defective work. IT consulting engagements structured as time-and-materials rarely satisfy this test.
- **Employment test:** would require Jason to engage other individuals to perform ≥ 20% of the principal work. Fails if Jason is solo.
- **Business premises test:** would require exclusive-use premises, not shared or home-office. Fails if Jason works from a home study.

## The spec's predicted verdict

Subject to whether sub-test (b) of the unrelated clients test is satisfied by Jason's marketing evidence:
- If YES: VWX IT is a PSB, attribution does not apply, ordinary corporate tax treatment.
- If NO: VWX IT is not a PSB, PSI is attributed to Jason under Div 86, taxed at his marginal rate.

## What the reviewer is being asked

1. Is the 80% test correctly framed (mandatory-imposition of results test if > 80% from one source)?
2. Is sub-test (b) of the unrelated clients test correctly interpreted — what evidence typically satisfies it?
3. Are the results, employment, and business-premises tests correctly framed?
4. What about the related client ($10,000 from brother-in-law) — does related-party PSI need separate treatment?
5. Attribution mechanics under Div 86 — is there anything the spec is missing?