Sport really is ‘big business’
The recent High Court decision in The Commissioner of Taxation v Stone has changed the way athletes must now think about their finances. The full bench of the High Court has ruled that the sporting activities of sponsored athletes can be regarded as business activities and any subsequent winnings, appearance fees and government grants should be taxed accordingly.
The case began when Joanne Stone lodged her 1998/99 tax return. At the time she was Australia’s top female javelin thrower, having won silver at the 1997 World Championships and first place in the 1998 World Cup. She competed at the Sydney and Atlanta Olympic games. Joanne had received more than $139,000 worth of sponsorship, government grants and prize money during the financial year but only declared her $40,000 police officer salary in her tax return. The Commissioner of Taxation argued that the money earned from her athletic abilities should also be subject to tax and so a six-year legal battle ensued.
The High Court decided that Joanne’s lifelong pursuit of sport and the earnings received from grants, prizes and appearances constitute taxable income. The ruling has implications for hundreds of elite athletes and sports people who may now have to pay back taxes. This includes 1300 Olympic athletes who have pocketed an average $15,000 each from the medal incentive scheme over the last eight years.
While the decision means athletes receiving government grants and sponsorships will now have to keep extensive financial records, there are also benefits to the ruling. In treating a sporting career as a business, athletes may be able to claim training, equipment and travel costs as legitimate business expenses.
The Australian Olympic Committee had been seeking clarification of the issue and so paid Ms Stone’s $1.139 million legal bill. The ATO has since paid back $555,000 of this.
From the LIV Bookshop
Taxation and Sport in Australia, Clarke & Miller, $43.95
Sport & Law, Healey, $44.95
Useful Web links
Taxpayers Australia - www.taxpayer.com.au
Australian Taxation Office - www.ato.gov.au
Play by the Rules - www.playbytherules.net.au
Disclaimer:
The information in this newsletter is not intended to be a complete statement of the law relating to the issues raised. Accordingly, no person should rely on this information without first obtaining specific advice from Brendan Kelly or Sam Marash of our office. | 
