Taxation of income for an individual’s fame or image

The Government has released a consultation paper with respect to the implementation of the 2018/19 Federal Budget announcement relating to the direct taxation of an individual’s fame or image at their marginal tax rates.

The proposed reform aims to ensure that all remuneration (including both cash and non-cash benefits) provided for the commercial exploitation of a person’s fame or image will be included in their assessable income.

These reforms reflect the Government’s concern that high-profile individuals (including sportspersons, actors and other celebrities) have been ‘taking advantage’ of lower tax rates by licencing their fame or image to another (generally related) entity for the purpose of tax-effective income splitting.

Following the Federal Budget announcement, the ATO withdrew its draft Practical Compliance Guideline PCG 2017/D11 (the ‘draft PCG’).

The draft PCG had set out a 10% safe harbour for apportioning lump sum payments for the provision of a professional sportsperson’s services and the use and exploitation of their ‘public fame’ or ‘image’ under licence.

In withdrawing the draft PCG, the ATO advised that for the period up to 1 July 2019, it will not seek to apply compliance resources to review an arrangement complying with the terms of the draft PCG if it was entered into prior to 24 August 2018 (i.e., being the date the draft PCG was withdrawn).