Usually, you pay income tax during the year as you earn the income – this system is called pay as you go (PAYG).
If you are an employee, your employer works out how much income tax to take out of your salary or wages and sends it to us – this is called PAYG withholding. Your employer must issue you with a payment summary within 14 days after the end of the financial year (30 June) and report this information to us.
If you earn income that has not had tax withheld by the payer – for example, if your income is from business activities or you receive rent, dividend or interest income – we may ask you to make payments during the year directly to us. These payments are called PAYG instalments.
At the end of the financial year, most people need to lodge a tax return to tell us:
- how much income they received
- the amount of tax they paid
- any deductions that relate to their assessable income.
After you lodge your tax return, we issue you with a notice of assessment. This tells you whether you will receive a tax refund or have to pay us. When you receive your notice of assessment, you should make sure that everything on it is correct.
There are a number of ways to lodge your tax return. They include:
- online, using myTax
- completing a paper tax return
- using a registered tax agent to prepare and lodge a tax return on your behalf.
Note: If you are preparing and lodging your own tax return, you have until 31 October to lodge. If you are using a registered tax agent, contact them before 31 October to qualify for their lodgment program.
Income from activities as a special professional
A special professional is an author of a literary, dramatic, musical or artistic work, an inventor, a performing artist, a production associate or an active sportsperson.
If you are a special professional, you must show your taxable professional income in your tax return at 'Other income'. Your taxable professional income is your professional income minus any deductions attributable to that income. Special professionals are subject to averaging, a concessional tax treatment, if they meet certain conditions.
You do not need to work out your average income or tax payable with income averaging – we will work it out from the amount of taxable professional income you show on your tax return.
Income you need to show on your tax return
You will need to show all the assessable income you derived during the income year on your tax return. These amounts may include:
- additional services agreement payments
- allowances – for example, travel allowance or education allowance
- bonuses – such as match payments
- capital gains from selling assets like shares, property or goodwill
- cash payments for work you do
- contract payments
- employment termination payments
- income for services you provide – for example, private sponsorship or endorsement contracts
- income from overseas – for example, interest, royalties, dividends or rent
- income from running a business – for example, commercial activities surrounding your public fame, celebrity or image outside of the terms of your playing contract
- income-protection insurance payments received due to injury
- inducement or retention payments
- investment income from rent, bank interest or dividends
- non-cash benefits
- payments from sponsors topping up playing contracts
- players' retirement fund payments
- prizes and awards – for example, 'player of the match' awards
- public appearances, product promotions and endorsement payments
- personal services income
- representative player payments
- salary or wages
- sign-on fees
- sponsorship payments – for example, from boot sponsorship
- third-party payments, and benefits from third-party agreements.
You may also need to include in your tax return as income any amounts you receive from someone else other than your club – for example, prize money for the purpose of rewarding you as a player.
Employment termination payments
Employment termination payments are treated as income for tax purposes and need to be included on your tax return. Some employment termination payments may be subject to a tax offset.
There may be circumstances where you or someone associated with you, such as your spouse or children, may receive a non-cash benefit – instead of cash payments – because of your sporting activities or your profile.
A benefit could be:
- the use of something – such as a car, house or equipment
- ownership of something – such as items of clothing or a mobile phone
- enjoyment of a privilege or facility – such as staying at a holiday house.
The market value of these non-cash benefits may need to be shown on your tax return as income if they are not subject to fringe benefits tax (FBT) in the hands of your employer. A benefit received in respect of employment may be subject to FBT.
Where non-cash benefits are received as part of your employment contract, these may be classed as fringe benefits. The values of fringe benefits are generally subject to FBT, which is a tax paid by employers.
For example, under the terms of your playing contract, your club, an associate of your club, or someone acting in an arrangement with your club may:
- give you a car for private use
- offer you a low-cost loan
- provide free private health insurance
- provide home cleaning services
- provide you with tickets to entertainment events
- provide you loyalty program memberships
- provide you with a living-away-from-home allowance or benefit.
Certain fringe benefits may need to be reported on your tax return. Your payment summary should show the reportable fringe benefits amount.
The reportable fringe benefits amount is not counted as part of your total income, and you do not pay income tax on it – however, it is used to work out your entitlement to or liability for some government benefits and obligations, including:
- Medicare levy surcharge
- deductions for personal super contributions
- super co-contributions
- certain tax offsets
- compulsory Higher Education Loan Program (HELP) and Financial Supplement repayments
- child support obligations
- certain income-tested government benefits.
Personal services income
While many footballers undertake their football activities as employees, some undertake these activities as a business operating as a sole trader or through a company, partnership or trust. The income received when those activities are undertaken other than as an employee will be classified as personal services income (PSI).
PSI is income that is mainly a reward for an individual’s personal efforts or skills.
If you receive any of this income, it needs to be reported as PSI on your tax return. If you are affected by the PSI rules, there are certain deductions you cannot claim.