- Match Payments
- Appearance fees
- Clinic / coaching fees
- Awards, media, club and league
- Sportsman’s events
- Media appearance fees
- Transfer fees
- Sign on fees
- Income protection insurance payment received
- Prize money
- Non - cash prizes from sport
- Any other sports related income
As detailed above, any non-cash benefits are assessable when they are received from a personal sponsor or via an endorsement contract will most likely be assessable income in the hands of the sports professional. The tax attributable will be based on the value of the good or service received by the sports person.
You will need to discuss this with your accountant to ensure these items are treated correctly.
Benefits received by the sports professional from their employer in relation to their employment is subject to Fringe Benefits Tax. However, Fringe Benefits Tax is payable by the employer.
Note that Fringe Benefits received by an individual including sports professionals are Reportable on the year end Payment Summaries where they exceed the Reportable Thresholds.
Income averaging is a tax concession that is available to certain professional sportspersons.
Income averaging provisions are designed to enable a sportsperson to be protected from higher tax brackets in certain years due to higher than normal sport earnings.
Effectively tax payable on sports earnings are evened out over 5 years.
Sports people with little non-sporting income and have sports income fluctuating between years benefit greatly from these averaging concessions. These can be of significant benefit to a sportsperson in just starting their sporting career.
- Training gear and equipment
- Memberships relating to your work
- Phone calls related to your work, landlines and mobile phones
- Income protection insurance premiums
- Home office expenses
- Internet connection costs
- Certain cleaning expenses
- Travel costs incurred between a player’s residence and official training or games will in most cases by deductible (where the player’s residence is considered a base of operations)
- Work related Motor vehicle expenses depreciation, maintenance and running cost
- Player agent fees
- Tax Agent fees
- Sports related medical expenses in due to injuries, or to prevent or reduce the effect of an injury.
- Travel costs incurred between a player’s place of employment and official training location
- Cost incurred in re-negotiating contracts
- Tickets to a club or industry function, social functions
- Cost of meals (unless while traveling) regardless if dietary needs required to maintain or increase weight
Professional sportspersons need to understand that the ATO does not undertake a detailed review of tax returns when they are lodged. A notice of assessment will be issued based on the information provided in the return.
The ATO may at a future time undertake an audit, an ATO officer will check the tax return to ensure compliance with Tax Legislation. Generally, for tax purposes, you must keep your records in an accessible form (either printed or electronic) for five years.
The ATO have indicated their intention is to focus on employment and related expense deductions and sportspersons generally.
There are significant severe penalties that the ATO may impose in the event Taxable Income is increased as a result of a tax audit. The maximum is up to 75% of any extra tax found payable, plus late payment penalties plus interest.
Working with your Tax Advisor is imperative to ensure that sportspeople are compliant with their returns and the information provided is true and correct.
Deductions need to be supported by documentary evidence to be allowable for Taxation Purposes, this documentation can take many forms from a simple receipt or a log book for vehicle expenses. These expenses need to be maintained as prescribed in the ITA Act.
Documentation is not required when lodging a Tax Return but must be produced when requested by the ATO.
There are general items that the documentation must contain in order to satisfy ATO requirements.
- Date when the expense was incurred
- Name of the vendor supply the good or service & their ABN
- The amount of the expense
- A description of the nature of the good or service provided
The value of the work - related expense also has an impact on the documentation required, any work - related expense less than $300 a year the substantiation rules do not apply (except motor vehicle expense). Where total expenses exceed $300 a year then documentation is required for the entire value not just the amount above the $300.
For single items, less than $10 and totaling $200 or less it is sufficient to keep a diary of expenses. The diary should contain the same information as required above and each entry should be signed.
Please note Motor Vehicles Expenses have their own special provisions.
Blume Accounting have access through Xero to an online program that allows your bank and credit card transactions to automatically feed into the bookkeeping program.
This program will allow recording of expenditure in the various categories required, like motor vehicle expenses, memberships, equipment, meals & entertainment.
Allowing you to automate recording of expenses that have taxation implications, it also provides visibility of spending analysis of your other spends.
Receipts can be captured by pic and upload into Xero, the ATO accepts pics of receipts eliminating the needs to keep and store originals
As all work-related expenses, expenses incurred in earning sports related income are allowable for tax purposes if they can be substantiated.
There have been High Court of Australia decisions that have set a precedent that players are considered to be carrying on a small business.
Provided that a player earns less than $2 million per year then the player is entitled to claim deductions as Small Business Taxpayers.
Equipment used in earning sports income is generally considered to be a depreciating asset. Equipment acquired after 12 May 2015 to 30 June 2017, as a Small Business Taxpayer, sportspersons are entitled to an immediate deduction for the cost of acquiring equipment that costs less than $20,000 if installed ready for use by then end of income year.
Typical equipment like weights, fitness equipment, bicycles, and other pieces of equipment used exclusively for the purposes of generating sports income that cost less than $20,000 can be immediately claimed as a deduction.
For equipment that costs $20,000 or move will need to be allocated to the general small business poll and depreciated (written off) over time. Assets allocated to the pool will be depreciated at 15% in the first income year with a 30% deduction on the opening pool balance for the current year and each income year thereafter.
Equipment acquired prior to 12 May 2015, equipment less than $1000 to be depreciated 100% provided that they are used to produce sports income.
Several methods are available for the deducting the running costs of a motor vehicles used to produce sports income. You are entitled to use a different method each year to obtain the maximum allowable deductions available.
From 30 June 2015, the only methods available to professional sportspersons are:More than 5000 business km’s in a year (annualised)
A log book must be kept for at least 12 consecutive weeks to establish the proportion of travel which is related to business. The resultant percentage is then multiplied by the actual motor vehicle expenses incurred for the year to arrive at the tax deduction amount. Clearly notating business v’s private travel is critical, as are opening and closing odometer readings.
The log book details can be used for the following 4 years, however where there is a material shift in usage it may be prudent to maintain a new log book to establish a new %.
Where you suffer an injury or other condition that is caused, aggravated or accelerated by the activity of playing sport professionally, costs incurred are generally regarded as tax deductible. The types of costs include costs personally incurred in regards to personal trainers, massages, vitamin supplements and other related medical type expenses.
If costs have been reimbursed via employer or insurance provider then they are not claimable to the extent of the reimbursement. Additionally, documentary evidence will need to be maintained to substantiate the expense.
- Tax Agent / Accountants fees
- Donations over $2
- Motor Vehicle (with log book)
- Fuel and oil
- Loan interest
- Lease payments
- Repairs & Maintenance
- Motor vehicle purchase
- Car hire
- Sun Protection
- Protective gear
- Uniforms (with logo’s)
- Mobile phone costs
- Home office (average hours per week basis)
- Health and fitness
- Printing, stationary and postage
- Seminars, educational workshops
- Advertising and promotion
- Computer equipment and software
- Laptops, iPad, surface pro’s etc.
To self-file a return taxpayer has until 31st October each year.
If you engage the services of a Registered Tax Agent then an automatic extension is granted to May the following year.