Professional athletes and the sports management businesses that represent them operate in one of the most technically complex areas of Australian tax law. The interaction of Personal Services Income rules, image rights licensing structures, withholding obligations on sports payments, and multi-year endorsement deals requires bookkeeping that is technically precise — and deeply aware of the boundary between bookkeeping and tax advice. This guide covers what the bookkeeper must understand and correctly record; the tax strategy questions it surfaces belong with the athlete's tax adviser.
Image Rights Structures: Commercial Substance Required
Professional athletes' image rights — the right to use their name, likeness, signature, and persona commercially — can in principle be separated from their sporting services and licensed independently. The structure involves the athlete assigning image rights to a company they control, which then licences those rights to clubs, sponsors, and broadcasters for a fee.
The ATO has issued guidance (Tax Ruling TR 2022/3 and related guidance notes) indicating that image rights structures will be respected if they have genuine commercial substance — meaning the club or sponsor is genuinely paying for a distinct, valuable intellectual property right, not merely for the athlete's willingness to wear a jersey or show up to training. The indicia of genuine commercial substance include: the athlete has built a brand identity independently of the club, the licence is for specifically defined uses (advertising, merchandise, digital content), and the fee is comparable to what a commercial party would pay to an arm's-length celebrity.
For the bookkeeper of the image rights company, the income is:
- Commercial licence fees from clubs and sponsors: assessable income
- Merchandise royalties: assessable income
- Appearance fees specifically related to the licenced image: assessable income
These must be distinguished from the athlete's personal services income (match fees, training fees paid by the club under the employment contract). If the ATO challenges the structure and concludes the image rights income is personal services income, it will be attributed directly to the individual — making the company structure produce no tax benefit and additional compliance cost.
Personal Services Income: The 80% Rule
Under Division 84 of ITAA 1997, if an individual (or their company or trust) earns more than 80% of their personal services income from a single client in a year, the PSI rules apply. Under PSI, all income attributed to the individual's labour is treated as their personal income regardless of whether it flows through a corporate structure. Deductions are limited to those available to employees — the typical company deductions (superannuation contributions to associates, rent of premises, etc.) are not available.
For a professional athlete who earns 90% of their income from a single club (as most contracted athletes do), the PSI rules almost certainly apply to the club income. This means the income is attributed directly to the athlete under s.86-15 ITAA 1997, and the interposed company or trust provides no income-splitting or deferral benefit for that portion.
The bookkeeper must correctly identify which income streams are PSI (services performed personally for a single client) and which are genuinely non-PSI (royalties from pre-existing intellectual property, income from sources other than sports performance). Mixing these up in the company accounts understates the PSI attribution and creates tax risk.
Endorsement Income: Accrual Across Financial Years
Endorsement agreements — a sponsor paying the athlete to wear the sponsor's brand, appear in advertising, or participate in promotional events — are taxable income for the athlete (or the athlete's image rights entity). The GST treatment: the supply of endorsement services is a taxable supply, and the athlete or their entity must charge GST on endorsement fees if registered.
Multi-year endorsement deals require accrual accounting. A $600,000 two-year endorsement deal signed on 1 January 2026 spans three financial years:
- FY2026 (Jan–Jun 2026): $150,000
- FY2027 (Jul 2026–Jun 2027): $300,000
- FY2028 (Jul–Dec 2027): $150,000
If the full $600,000 is paid upfront, the unearned portion at each balance date is deferred revenue (a contract liability under AASB 15). The income recognised in each period must reflect the proportion of the endorsement term that has elapsed. Recognising the full amount in the year of receipt materially overstates income in that year and understates it in subsequent years.
PAYG Withholding: s.12-85 and Sports Payments
Under s.12-85 of the TAA 1953, a payer who makes a payment to an entertainer or sportsperson for a performance or appearance is required to withhold tax from that payment. This obligation applies even if the payee has an ABN — the withholding requirement is not negated by ABN registration. It applies to individual athletes and to companies that are paid for the athlete's services.
Practically: a club paying an athlete's company under an engagement agreement for match-day performance services may still have a withholding obligation under s.12-85. The rate of withholding is determined by the ATO (currently 20% for Australian residents without a withholding variation).
Sports managers and agents who receive payments on behalf of athletes — collecting match fees, appearance fees, or endorsement payments and then distributing to the athlete — must also consider whether they are withholding intermediaries. If so, they must register for PAYG withholding and remit to the ATO. Failure to comply creates a personal liability for the unpaid withholding.
Superannuation: Employer Obligations and Contribution Strategies
Professional sports clubs employing athletes under standard employment contracts have ordinary employer Super Guarantee obligations: 11.5% of ordinary time earnings for 2025–26 under the SGAA. For contracted athletes earning in excess of the SG maximum contribution base ($62,270 per quarter for 2025–26), the SG obligation is capped — but the club may (and many do) pay above the minimum as a contract condition.
The bookkeeper must ensure SG contributions are paid by the quarterly due date and reported correctly in the Single Touch Payroll system. Athletes who receive income through multiple entities (club income under employment, image rights through a company) need to ensure the company's SG obligation (if any) is separately assessed.
For high-income athletes approaching the concessional contributions cap ($30,000 per annum for 2025–26), the bookkeeper must track year-to-date concessional contributions (employer SG plus salary-sacrificed amounts) to avoid the concessional cap breach that creates additional tax liabilities. Flagging the approaching cap to the athlete's adviser is a legitimate bookkeeping observation — but managing the strategy is beyond the bookkeeper's scope.
End-of-Period Checklist for Athlete and Sports Manager Bookkeepers
- Review all income streams: categorise each as PSI (sports performance services, personally performed) or non-PSI (genuine IP royalties, income from multiple clients); assess whether the 80% PSI threshold is met
- Confirm image rights licence fees are based on genuine commercial arrangements and are separately documented from club employment income
- Review multi-year endorsement agreements: calculate the income attributable to the current financial year and ensure any upfront payment in excess of earned income is posted as deferred revenue
- Check PAYG withholding on sports payments received: confirm the payer has withheld correctly under s.12-85 TAA 1953; reconcile withholding credits on the income tax account
- Check PAYG withholding obligations on payments distributed to athletes if the management entity is an intermediary
- Confirm employer SG contributions are correct and within due dates; calculate any SGC shortfall if late payments occurred
- Track concessional contributions to date and flag if the athlete is approaching the $30,000 annual cap
- Confirm GST on endorsement and appearance fee invoices: confirm all invoices for taxable endorsement services include GST; check that multi-year contract invoicing aligns with the revenue accrual