QUESTION 4

Shelley been an employed software designer for many years and has decided to start up her own business. She incorporates a company as she thinks this will help minimise her tax liability and get the benefit of asset protection.

The business commenced on 1 July 2019. Shelley used prior networks to get work as she figured that this would be cheaper than advertising her business. This tactic worked and she had three clients in her first year. The contract from each client was for three months and were each of equal value.

Shelley entered into the same agreement with each of the clients. The agreement provided she would get paid $150 per hour and that she would supply her own laptop with any additional tools to be provided by the client. If the work completed did not meet the clients expectations, Shelley agreed to only charge $50 per hour to update the software to meet the clients needs.

Shelley worked from a loft above her home garage. On the lower level in the garage she stored garden tools and parked the family car. While Shelley did all the software design work, she did pay her teenage daughter for completing administrative tasks.

Will Shelley be carrying on a Personal Services Business (PSB) within the meaning of Division 87 of the Income Tax Assessment Act 1997?