Sportsperson management fees – High Court decision & ATO response

The ongoing fight over the Australian tax Office’s decision to refuse tax deductions for fees paid by sportsperson to their managers was finally decided by the Australian High Court  in June and now the ATO his issued its response. 
For the background to this see our earlier articles at tax-office-loses-2-court-cases-on-sportsperson-fees-appeals and sportsperson-management-fees-tax-deduction .

The Courts decision was that the taxpayers’ appeals were allowed. The fees were deductible. Now the ATO has release a Decision Impact Statement .

The tax office had argued that the footballers were employees and that the fees paid for the negotiation of the playing contracts were incurred only to obtain new employment contracts and had no connection with the course of the taxpayers earning income from their non-playing businesses.
However The High Court unanimously held in both cases that the fees were deductible as being incurred by the taxpayers in the course of gaining or producing assessable income from carrying on a business of commercially exploiting their sporting prowess and associated celebrity.

The Tax Office will now amend Taxation Ruling TR 2000/5 to clarify that it does not apply to employees whose employment activities form part of the carrying on of a business. That is, it accepts the fees are deductible, but only for those whose activities extend beyond mere employment and can be regarded as carrying on a business.