Australia: Prize money derived by foreign resident horse trainer from a non-treaty country
Australia: Prize money derived by foreign resident horse trainer from a non-treaty country
The Australian Tax office dealt in an Interpretative Decision (ITA ID 2012/30) with the following question: is prize money derived by a visiting horse trainer resident in a non treaty country assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
The facts may in short be summarized as follows:
- the taxpayer was a foreign resident horse trainer, resident in a non treaty country;
- he entered into a contract overseas with a horse owner to train a horse which was located in the taxpayer's country of residence. The terms of this contract specified that the taxpayer would be paid a monthly fee by the owner and in addition is entitled to any allocation of prize money to a trainer under the relevant racing rules.
- the horse that the taxpayer trained arrived in Australia in a late September 2010 shipment for the Victorian Spring racing carnival; upon arrival in Australia, the horse underwent three weeks of post arrival quarantine at the Werribee International Horse Centre (WIHC) at Werribee Racecourse.
- the horse was maintained the whole time, other than race days, at the WIHC, which was fully equipped with stables, a racetrack for training and veterinary facilities. in accordance with the Rules of Victoria Racing, the horse was taken care of by the taxpayer's head lad and other staff of the taxpayer. The taxpayer kept in daily contact with the head lad by telephone and email.
- The taxpayer arrived in Australia in early October 2010.
The horse trained by the taxpayer finished a place during the Victorian Spring racing carnival and the organizor paid 10% of the total prize money directly to the taxpayer's nominated account. The taxpayer departed Australia in early November 2010, and the horse departed Australia in a late November 2010 shipment.
For determining whether the payment was taxable in Australia, it has to be determined whether the payment is from an Australian “source”. Since this term is not defined in Australian tax law, its meaning is derived from common law.
Based on the place where the activities took place, the place of the contract and the place of payment the ITA concluded that the payment had a source in Australia and was hence taxable in Australia. The background and reasoning of the ATO will be further analyzed in a following issue of the Global Sports Law and Tax Reports.
