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Tax office and AFL team up

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A u s tra lia n

k m ilian OlfK.c'


Nat 98/51

TAX OFFICE AND AFL TEAM UP Av-s^" The Tax Office today announced the establishment of a joint working group between the A TO , the A F L and clubs to assist clubs to comply with their tax obligations, An A TO review of the industry

showed that all 16 A FL clubs had not met all their tax obligations.

“The aim o f the working group is to put in place initiatives that w ill educate, facilitate and encourage

compliance in the A F L industry. Guidelines w ill be developed to help clubs understand and meet

their obligations under tax law," Tax Commissioner Michael Carmody said.

“The joint working group w ill focus on areas that clubs had most trouble with as identified in the review. These include their group tax obligations as employers and the fringe benefits tax (FB T) treatment o f player remuneration packages.

“Contrary to media reports, no A F L clubs have been prosecuted as a result o f the review and some

only had minor discrepancies. FB T and additional taxes amounting to almost $2 million w ill be

recouped from the clubs."

The A F L project began in early 1997 to determine the level o f compliance of A FL clubs and players. The A F L industry has a turnover o f over $200 m illion per year, 400,000 members Australia-wide and gate attendances totalling six million.

“A ll taxpayers in all industries, regardless o f their standing or profile, have a responsibility to comply with the tax system. The A F L project is another example o f the A T O working with industry specific groups.”

As part o f the A T O ’s consultative approach, outcomes o f the review have been discussed with club

representatives. 1

“The Tax Office plans to work closely with the A f L and clubs in the future to assist them to comply

with their tax obligations.

“A ftirther report in relation to A F L players’ obligations under tax law is currently being prepared. Once this report is final, the Tax Office w ill be seeking to have discussions with the Players

Association/player representatives and the A F L ," M r Carmody said.


5 August 1998

Further information. Corporate Affairs and Marketing

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♦ Best and fairest presentations ♦ Club auctions

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♦ Tickets to sporting events ♦ Chairman’s lunches

Club PA Υβ Obligations

• The majority o f clubs have failed to comply with a number o f their obligations as group

employers. Generally, this is a result o f the ad hoc way in which payments have been made to

players and the inadequate attempts to deduct Tax Instalment Deductions (TID s) from the


• Subject to some exceptions, one possible solution is to have an agreed industry based 2 2 ID variation apply. Under this proposal the clubs would deduct TIDs at an average rate, ie for example 31.5 percent.

• A number o f clubs had players or staff with invalid or missing Employment Declarations.

• A ll employers must ensure that employees provide valid Employment Declarations, otherwise

. employers are required to make TIDs at the non-declaration rate o f 48.5 per cent.

Income splitting

Where a player or an official has payments directed to a spouse, termed “Hostess Allowance’’ or

something similar, and that amount represents a payment from the player’s or official’s contract entitlement, the payment would be viewed as income in the hands o f the player/official and should be assessed to the player/official.

Inadequate record maintenance

The majority o f clubs had inconsistent or poor record maintenance in respect to:

• Player contract negotiations

• Contract payment arrangements

• Salary sacrifice arrangements

·- Tax-exempt body entertainment benefit.

• Motor vehicle fringe benefits __

• Capital works, construction and maintenance projects -

• Current employment declarations

• Player promotional activities

• Poor record maintenance has been attributed to:

Uncertainty o f requirements and obligations

_ ^ Ignorance o f requirements and obligations

** Complying with player/manager requests

PPS non-compliance

Where clubs undertook building or construction activities, there was a high incidence o f non­

compliance with the requirements o f the PPS. Any taxpayer undertaking a building or construction

activity in which total project and related activities costs exceeds, or may reasonably be expected to

exceed, $10,000 are required to comply with PPS obligations.

λ ΑΤΟ AFL Project — Results Of Club Review


• 16 clubs reviewed

• A ll clubs reviewed were found to be non-compliant in some aspect

• Non-compliance o f Fringe Benefits Tax was widespread in the industry

• Inconsistent approach to application o f P A Y E provisions

• A ll clubs that undertook capital works failed to comply with Prescribed Payments System (PPS)


of Three Year Club Review

Major Issues:

Salary sacrifice

• Extensive use o f salary sacrifice arrangements by A FL clubs

• V alid salary sacrifice arrangements must be prospective, ie in place before services are performed

• In most instances, extensive use o f salary sacrifice arrangements were found to be retrospective

and merely redirection o f income

• Inadequate documentation maintained to support salary sacrifice arrangements

Provision o f benefits '

• Section 136 Fringe Benefits Tax Assessment Act 1986 broadly defines a "benefit" to include any right (including a right in relation to, and an interest in, real or personal property), privilege,

service or facility

• Where a player receives cash or has cash paid to a bank account that amount is salary and wages and not a fringe benefit

• Other examples o f items N O T fitting the definition o f a fringe benefit would be:

Amounts given as cash or cheque to the employee or their spouse

Amounts paid into a manager’s trust account

^ Amounts paid to a related entity (company or trust)

• Clubs need to maintain comprehensive records of all benefits provided to ensure that these items can be correctly classed and returned

• Examples o f fringe benefits that were found to be incorrectly treated included:

^ Car fringe benefits

'*’■ Expense payment fringe benefits, such as airline travel