For Those Budding Sports Persons

by Shawn O’Grady
3 Minute(s) to read

For Those Budding Sports Persons

Sporting income

Sportspersons are required to pay tax on their self-employed income in their own tax returns.  This will include the likes of Performance Enhancement Grants (PEGs), endorsement receipts, appearance money, sponsorships and prize money etc. 

Claiming expenses

Generally you can claim a tax deduction for expenses that have a connection to your sports-related income.  In order to claim a deduction, you must incur the expense yourself.  Amounts that are reimbursed to you cannot be claimed as a tax deduction.

Typical expenses that would be claimed include: travel costs, equipment, vehicle running costs, insurance, depreciation, home office claims, telephone/mobile costs, stationery, accounting fees, ACC levies, gym fees, nutritionist fees and any other business related expenditure.

Note that if there is any private element to the expenditure, the expense will need to be apportioned.

We recommend that you track your sports related income and expenses as you go.  Using an Excel spreadsheet can be quite an easy way of keeping up to date records of income and expenses.

Tax returns

If you receive PEGs, you will need to file a tax return each year (if you are not already filing a return for some other reason). The PEGs will need to be included in your tax return and will be offset with the expenses related to your PEGs.  The payer of the PEGs is required to deduct tax at 20%.  This will also be taken into account in your tax return.

If your net position relating to your sporting income is a loss (i.e. your expenses exceed your PEGs), the loss can be offset against any other income you may have, for example, salary and wages.

Depending on your level of untaxed earnings you may also be liable for provisional tax.  This is essentially an advance payment of your next year's tax liability.

So what about prize money?

If you receive prize money at a sporting event/competition, the first $500 of prize money is tax free.  This is because you are deemed to have incurred at least $500 of expenses in preparing for the competition.

Anything over $500 is taxable income and should have tax deducted at 20% by the payer.

Note you can track your expenses related to the competition separately and claim a deduction for the actual costs (rather than the deemed $500).  This would be the recommended option where your expenses exceed $500 per competition event.

The $500 threshold applies for each separate event you enter at a competition.

 

HAVE WE GOT YOU THINKING?

 

Give us a call on (04) 563 6965 or email: dennis@taxman.co.nz or shawn@taxman.co.nz

Keep an eye out for October’s article!

 

TAX DATES TO REMEMBER

  • 20th October. 2015 - monthly employers PAYE payment…
  • 28th October.  2015 - Bi monthly GST Return for Aug/Sep 2015…
  • 28th October.  2015 - Six monthly GST Return for Apr/Sep 2015…
  • 28th October.  2015 - 1st Installment Provisional tax, for those taxpayers who file six monthly GST Returns…..

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