Taxation Of Income For Individual’s Fame Or Image: ATO Crackdown

28 January 2019

Lance Cunningham, BDO’s National Tax Director has commented on the Treasury Consultation Paper on the tax treatment of payments for a person’s fame or image.

Background:

  • A number of high profile celebrities, sportspeople and entertainers have arrangements with related entities so that the related entity is contractually entitled to payments attributable to the persons fame or image.
  • The ATO have previously accepted that, for sports persons utilising these arrangements, payments from third parties for the use of the sports person’s fame or image could be alienated to the related entity and not taxable to the sports person. It was expected that such a view would have also applied to similar arrangements for other high profile celebrities and entertainers.
  • In the now withdrawn ATOID 2004/511 and PCG 2017/D11 the ATO previously accepted that, in relation to professional sports persons, these arrangements vested property in the related entity by creating a licence between a sports person and the related entity so that the entity could legally receive payments from third parties for the use of the sports person’s fame or image and such payments would be taxed to the related entity and not the sportsperson.
  • In the 2018/19 Federal Budget the Federal Government announced that it would change the law to ensure that high profile individuals cannot alienate to related entities the income associated with their fame or image.
  • The Treasury Consultation paper indicates that there are some legal uncertainties about the ATO’s previous view in the withdrawn ATOID 2004/511 and PCG 2017/D11.  The consultation paper says that, while an individual can licence their fame and image to other entity, the licence would not assign any property to the other entity so the ownership of the fame or image remains with the individual and therefore the individual is assessable on any income associated with their fame or image.

Lance commented: “The Consultation paper does not provide much support for this new view and it appears that the ATO may also not have a great deal of confidence in this view because, if it did it would be expected that the ATO would test it the Courts.  Instead the Federal Government will be changing the law to enshrine this new view in legislation, thus avoiding the ATO having to argue the case in the courts.”

Related media coverage:

ABC News -  https://www.abc.net.au/news/2019-01-29/tax-aimed-at-rich-celebrities-and-sportspeople-faces-hurdles/10755346