Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Income of non-resident sports persons, clubs and associations
Outline of Chapter
3.1 Schedule 3 to this Bill amends the Income Tax Assessment Act 1936 (ITAA 1936) to remove exemptions, from income tax, currently available to certain sportspersons and sporting clubs or associations. The amendments ensure that the income of all non-resident sportspersons and sporting clubs or associations, earned in Australia, is taxed consistently.
Background to legislation
3.2 An exemption, from income tax, is currently available under subparagraph 23(c)(i) to non-resident sportspersons if:
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- they represent the controlling body of their out-door athletic sport or game; and
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- they participate in an out-door athletic sport or game.
3.3 An exemption, from income tax, is also available under subparagraph 23(c)(ii) to non-resident sporting clubs or associations if they:
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- are from a Commonwealth country;
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- represent the controlling body of the sport; and
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- the team representing the non-resident club or association plays cricket, football or other similar matches.
3.4 The application of subparagraph 23(c)(i) gives rise to inconsistent tax treatment (for some visiting sportspersons) because the exemption is limited to out-door athletic sport or game'. The practical effect of this provision is that an exemption from income tax is currently available to a non-resident sportsperson competing in an out-door athletic event such as a 100m sprint but not to a non-resident sportsperson competing in an in-door event such as a 100m swimming race.
3.5 Similar problems occur with the application of subparagraph 23(c)(ii). Again, inconsistencies arise because the exemption is limited to non-resident sporting clubs and associations from a Commonwealth country' and is only available where the team plays a match similar to cricket, football or other similar matches'. The practical effect of this provision is that an income tax exemption is currently available to a non-resident sporting club or association from a Commonwealth country with a team that plays, for example, a cricket match, but not to a non-resident club or association from a non-Commonwealth country even if their team plays the same match.
3.6 A further inconsistency could also arise where, for example, a Commonwealth country sends a cricket team and a cycling team to Australia. The cricket club would be exempt from income tax whereas the cycling association would not be exempt.
3.7 The amendments are designed to remove these inconsistencies and to ensure that all non-resident sportspersons and their clubs or associations are taxed on the same basis.
3.8 An exemption from income tax may still be available to any affected bodies through subparagraph 23(g)(iii) which provides an exemption from income tax for a society, association or club that is established for the encouragement or promotion of a game or sport generally. There is no limitation on the sport having to be played out-doors, or the association having to come from a Commonwealth country, or the sport being akin to cricket or football.
Explanation of amendments
3.9 The repeal of subparagraphs 23(c)(i) and (ii) removes the tax free income status currently enjoyed by certain non-resident sportspersons and sporting clubs or associations. This measure ensures that the income of all non-resident sportspersons and sporting clubs or associations, earned in Australia, is taxed consistently. [Items 1 and 2]
3.10 A consequence of the repeal is that the current income tax exemption for visiting members of the press reporting the activities of persons covered by subparagraphs 23(c)(i) and (ii) is also removed. This is because the exemption contained in subparagraph 23(c)(v) refers to subparagraphs 23(c)(i) and (ii).
Application
3.11 The amendments will apply to income derived after 30 June 2000. [Item 3]