However, through using licensing structures, they can “take advantage of different, and often concessional, tax treatment”.
Under the changes, an individual would no longer be allowed to alienate this income and it would be taxed at their marginal tax rate. The measures have an “unquantifiable gain to revenue”.
Fame and image
Chartered Accountants tax leader Michael Croker recommended deferring the start date of the tax by at least 12 months, in order to facilitate further research and development into the policy.
His main concerns with the policy included an over-reliance on income tax as opposed to fundamental tax reform, increasing the complexity of the taxation system when enforcement of existing laws could suffice and the need for greater clarity between the business services and personal service divide.
In his submission to Treasury, Mr Croker said the proposal was “another attempt to patch-up an ailing tax system”.
He said the tax system struggled to deal with the “differentiation between payment for performance of employment and personal services” and business services like “product endorsement, character merchandising, promotional services”.
Mr Croker said high-profile individuals had personal income streams and income from “carrying on a business of using their fame and image”. He thought the proposed policy would add further complexity to an area of taxation that was already difficult to understand.
W Sport and Media’s Mr Winter said the measure would have a detrimental impact on Australia’s international sporting codes, as sportspeople would be encouraged to play overseas and move their residency offshore, reducing local revenue collection.
Clients of W Sports and Media include Australian tennis stars Lleyton Hewitt and Alex De Minaur, as well as media figures such as ex-AFL player and radio personality Ryan Fitzgerald.
Mr Croker echoed this sentiment in his submission, saying some of those impacted were highly mobile and could “easily” locate themselves outside Australia in order to avoid the tax.
“It is unclear whether Treasury factored this particular behavioural response into its thinking,” he said.
PwC tax leader Pete Calleja said the changes were welcomed as long as Australia remained competitive.
“We believe it is important any new law is not only fair and equitable but consistent with international standards, as we do not want Australia to be an outlier in terms of additional complexity or excessively higher taxation.”
“We need to guard against Australia becoming uncompetitive and therefore not attracting people in a broad range of industries who may generate significant taxable economic activity in Australia,” Mr Calleja said.