In the growing world of online marketing, and with the increased public profile and popularity of our athletes, there is increased value and interest in the name and image of professional sportspeople.
For example, the AFL’s collective bargaining agreement with the AFL Players’ Association permits players to profit from the use of their image rights through direct/indirect additional agreements with their Clubs. However, the tax implications of such arrangements recently came to a head in a case involving the Brisbane Lions (Brisbane Bears – Fitzroy Football Club Limited v Commissioner of State Revenue  QCA 223).
At issue in the case was whether payments ostensibly for image rights made to the players were to be characterised as taxable wages, and would therefore have been subject to payroll tax. Specifically, the case hinged on whether the players were being paid for the use of their image rights in their position as an employee of the club.
Brisbane argued that such payments were not related to the services the players provided as employees but for the grant of a licence for use of the players’ image rights. Therefore, the Lions submitted that the payments were not subject to payroll tax.
However, the court found in favour of the Commissioner of State Revenue and held that the payments were for the promotional and marketing services provided by the players which encompassed the use of the players’ image rights. Therefore, there was no separate payment outside the scope of the players’ employment for their image rights as this was merely incidental to the services they agreed to provide.
Consequently, given the court found that the players were only paid for their services, and not separately for the use of their image rights, payroll tax was applicable.
The case demonstrates that the court will not easily construe two separate arrangements (one agreement for promotional and marketing services, and another granting a licence for image rights), so there needs to be a clear distinction between payments an athlete receives for promotional services, and payments purely for the use of their image. Sports clubs and athletes are advised to seek legal advice before entering into any such agreement.
In other news in this area, The ATO’s Draft Practical Compliance Guideline 2017/ proposed a ‘safe harbour’ whereby sportspersons who receive payments for the use of their image rights can apportion up to 10% of these payments to be treated as the income of a third-party associated entity. This will have the effect of lowering the sportspersons’ taxable income.
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