Australia: Federal Court refuses deduction of expenses for negotiating employment contracts to professional athletes
In what turned out to be two test cases (see below) the Australian Commissioner refused the deductibility of payments to agents or management companies in relation to professional sportsmen. The cases concerned Mr. Sprigss, who was under contract in the Australian Football League and Mr. Riddell, who was a professional rugby player. Both players paid a modest fee (around 2000 Australian Dollars) to their management company in relation to the negotiations of a new employment contract. After determining that indeed this was the correct classification of the contracts the Court held that the the fee was paid for negotiation an employment contract and was not incurred in gaining or producing assessable income and not deductible from taxable income. The Court concluded by stating that they were informed by Senior Council for trhe Commissioner that these cases were test cases. The Court then questioned for which issue this was a test case. According to the Court the conclusions in these cases do not say anything about the deductibility of fees paid by professional sportsmen to managers and agents for their services which cannot be confined as fees paid for negotiating employment contracts.