It’s rare for an athlete to enjoy thinking about paying tax, but paying the tax man can actually be a positive thing. For athletes, it means you’re earning income which is a dream come true for many. It can take years of hard work honing skills to be able to make a living from sport. During prime earning years, it’s essential for professional athletes - both individual competitors like golfers, and team players like cricketers - to know how to structure their income for tax purposes. Together with our Private Wealth team, our Sports & Leisure experts share some of the key questions athletes should be asking for tax purposes.
When things get grey
As in any business sector in Australia, it’s important for athletes to know when their sport has shifted from hobby to career. For athletes who play a team sport and are paid salaries, like footballers or cricketers, this is a little more straightforward. On the other hand, individual athletes, who may not be employed directly by a team or sporting organisation (e.g. swimmers, golfers), should consider seeking professional advice once they begin to actively earn income from various sources from the sport they compete in.
Our advisers can help you determine whether you’re in the business of sport. If you are, you’ll need to begin thinking about how to structure your income for tax purposes. There are a lot of questions specific to professional athletes, such as:
- Will you need an ABN?
- What about a TFN?
- Is your prize money or grant money tax deductible?
Get specialised help
Just like athletes who improve their skills in a specific sport, so too do professional advisers. You’ll want to find one who has experience advising professional athletes, because there are many specific rules governing sportspeople.
Professional athletes are eligible, for example, for a special professional income averaging tax offset, which is likely to result in a significant reduction in tax payments. It exists because authorities recognise the unique way athletes are paid - perhaps winning significant prize money during an Olympic year and less the following season. As income adds up, it makes a massive difference if you can average it out over time.
Get organised early
Professional athletes have many expenses that relate directly to earning their income. It’s essential to track these expenses over the year in an organised way, preferably using a separate business account for all work-related income and expenses.
Our advisers can help you structure your earnings from sport with other business income - like fees for private coaching, income from a rental property or proceeds from a family business. No two individual situations will be alike, and different tax structures will benefit different individuals, be it running the business as an individual versus running it through a company, trust or partnership each of which have their own advantages and complexities.
If you would like to learn more, watch our in-depth general tax for professional athletes webinar or download our Professional Athlete Tax Checklist. Alternatively, contact us for more specific advice in relation to your unique situation.