SPORTS PEOPLE

  

 

PROFESSIONAL OR AMATEUR

      You could be a professional for tax purposes even if you are considered an amateur under the regulations of your sporting code because the definitions are different. 

In general terms the following distinction is given:

A professional sportsperson is a person who participates in a sport principally for payment (financial reward), as opposed to

  An amateur sportsperson who participates in a sport for pleasure or health reasons rather than financial gain (i.e. prizemoney isnít their main reason for competing)

An amateur who occasionally wins prize money of up to $500 per event does not need to include the prize in their tax return.   However this does not apply to professional sportspeople who must declare all the income they receive. 

Where prize money is over $500, withholding tax must be deducted from the portion exceeding the threshold.   You will need a stateme3nt of your earnings and must declare the amount in your tax return, even if you consider yourself an amateur.   Inland Revenue Department will then review your situation to determine whether you are a professional or an amateur for tax purposes.   If you were competing weekly and winning over $500 in prize money every week or so, this could indicate your intention was to compete for financial gain, making you a professional for tax purposes.   If you are an amateur, your prize money will be non taxable and any withholding tax which has been deducted will be refunded when you file your annual tax return. 

If you are a professional for tax purposes, all payments and prizes must be decared as income in your tax return.   These include:

Appearance money

Match fees

 Win bonuses

Endorsements

Contract payments

Sponsorships

Grants

 Prize money

Prizes other than money

Speaking engagements

Book sales

Testimonials/ benefit matches

Payments will be liable for income tax and ACC Levies and possibly GST if you are operating in a self employed basis. 

Genuine and justifiable expenses incurred in playing your sport may be reimbursed without any tax consequences, regardless of whether you are a professional or amateur for tax purposes.   You need to be able to produce receipts. 

 

SELF EMPLOYED OR AN EMPLOYEE

If you are  a self employed professional for tax purposes, you will be liable for ACC Levies and possibly GST, and you will be able to claim expenses incurred which have not been reimbursed to calculate your taxable income.   You will be self employed if:

You control your involvement in the sport e.g. you decide the tournaments or events you enter, or a sporting body to which you are contracted to tells you what events to participate in.

You provide the main equipment needed for the sport

You share the financial risk- you may receive some prizemoney or none at all

 You have the ability to enter into contracts with more than one sporting body at a time.

If you are an employee you canít claim expense deductions in calculating taxable income.   You will generally be an employee in the following situations:

You are under regulations that say how your relationship with the organization shall run

 You are prevented from playing for anyone else or another code at the same time as your primary sporting activity

There are restrictions placed on you about being involved in especially high risk activities over and above your primary sport

You are paid at a set rate (hourly, weekly, monthly etc.)

 

RESIDENT OR NON RESIDENT

If you receive payments for playing overseas, or if youíre normally based overseas but playing in New Zealand, you will need to make sure youíre correctly classified as either a resident or non resident for tax purposes.   Your obligations are different in each case. 

You are a New Zealand tax resident if:

You are away from New Zealand in the service of the New Zealand Government

You are in New Zealand for more than 183 days in any 12 month period

You have an enduring relationship with New Zealand.   This includes social and economic ties, business or employment here, and your intentions

Residents have to file an income tax return in New Zealand. 

Non residents only pay tax on income received from a New Zealand source.   You are non resident only if:

You are away from New Zealand for more than 325 days in any 12 month period, and

 You do not have an enduring relationship with New Zealand

Payments to non resident sportspeople or their agents have withholding tax deducted at 20%.   This is a final tax, which means you do not have to file a New Zealand tax return unless you wish to claim expenses and pay New Zealand income tax on your net profit.

 

 

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