Paid to Play: What your income means for a ‘special professional’ at tax time
This is an article about tax. But before we get to the tax part, let’s talk about your career, because if you’re reading this, you could well be on your way to a promising sporting career.
Perhaps this is you, either now, or in the near future:
Your career as a national sports star is on the rise. You’ve recently signed with your dream team and started playing in the big league. Great things are ahead.
And so are changes to your taxes!
Amid all the excitement, the due date for your tax return is fast approaching and you can’t quite comprehend what the ATO calls the ‘income averaging concession’ for ‘special professionals’.
This is an issue facing many individuals new to the professional sporting world. Fortunately, it’s a topic that SRJ Walker Wayland is particularly experienced in. Many of our clients are sports professionals who’ve come to us to better understand their tax obligations, concessions and exemptions.
So, do you qualify as a ‘special professional’?
If you compete in sporting competitions on a professional level, the ATO will classify you as a special professional. A sporting competition is regarded as involving:
- Exercising of physical prowess, strength or stamina
- Riding or exercising skills in relation to animals
- Driving, piloting or crewing motor vehicles, boats, aircrafts and other forms of transport
These descriptions apply to the majority of special professionals. However, it’s worth noting a special professional is not limited to those participating in sporting professions. Other examples include:
- Authors of literature
- Creators of dramatic, musical or artistic work
- Inventors
- Performing artists
- Production associates
What are the advantages of being a special professional?
Special professionals have access to a concessional tax treatment known as ‘income averaging’. This concession is available to those who satisfy the following conditions:
- You are an individual who is an Australian resident at any time during the income year
- You are a special professional (as discussed above)
- You satisfy the first-year requirements (discussed below) in either the current income year or an earlier income year
The first year you are eligible for income averaging is the first year in which your taxable professional income earned as a resident special professional is greater than $2,500.
What does this mean come tax time?
Your taxable professional income is calculated by subtracting allowable deductions and donations from your assessable professional income.
Assessable professional income is income earned which directly relates to your sporting profession.
This can include income from:
- Rewards and prizes
- Endorsements, advertisements, interviews, commentating and similar services.
Income averaging refers to the method of calculating your taxable professional income over a period of four years, once the above conditions have been met.
The following table outlines the averaging calculation for the period.
| Professional Income Year | Average Taxable Professional Income Calculation |
| Year 1 | Taxable professional income is nil |
| Year 2 | 1/3 of taxable professional income earned in professional year 1 |
| Year 3 | 1/4 of the sum of taxable professional income earned in professional years 1 and 2 |
| Year 4 | 1/4 of the sum of taxable professional income earned in professional years 1, 2 and 3 |
For subsequent professional income years, the average taxable professional income is based on the average earned for the previous four years.
If during a particular year, your taxable professional income is calculated as a negative, this year is treated as ‘nil’ for the purposes of averaging.
What else do I need to know to become a sporting and tax return hero?
It doesn’t end here! Over the coming weeks SRJ Walker Wayland will publish a series of articles aimed at people like you. Stay tuned for our next blog, which will arm you with information on those all-important eligible deductions for sportspersons.
