07 Feb Can you licence your image to a company or trust?
Proposed in the 2018-2019 Budget, the Government is seeking to prevent ‘high profile individuals’ from licencing their fame or image to another entity and minimising the amount they are taxed. If the Government’s proposed measure goes ahead, income earned through ‘fame and image’ will be included in an individual’s assessable income and taxed at a rate as high as 45%.
Currently high profile individuals, such as sportspeople and actors, are able to licence their fame, image and reputation to a company or trust. Income earned through social media, sponsorship, public appearances and endorsements subsequently goes to the entity allowing individuals to minimise the amount of tax they pay. The government has estimated that subjecting ‘fame and image’ income to the higher individual marginal tax rate will have an ‘unquantifiable gain’ to revenue.
While some have welcomed the proposed changes as they primarily target the wealthiest in society, others have expressed concerns that the measure will add further complexity to the law. Targeted, not at specific occupations, but rather at an individual’s fame more generally the measure has potentially far-reaching consequences. With the rise of #instafamous influencers, ‘ordinary’ individuals who earn large amounts of money through promoting their personal image on social media platforms may fall foul of the proposal. Furthermore, industry experts have raised concerns that individuals may move their income offshore to avoid the tax increase.
How do we compare internationally?
Concern surrounding the taxation of fame and image is not unique to Australia. In South Africa, images rights are considered personal rights and consequently cannot be separated from the individual and sold to another entity. As a result, income garnered through an individual’s fame or image is taxed in the hands of the individual. The UK has similarly identified concerns surrounding a person’s fame and image. In 2017, the UK Committee of Public Accounts recommended that the Government take ‘urgent action’ to address image rights taxation, finding that image rights licencing structures represented the most significant tax threat for footballers and analogous professions.
How will this affect you?
- The government’s proposed measure will effect taxpayers from the 2019-20 financial year.
- Taxpayers affected by the proposal will be required to reorganise their affairs, including renegotiating contracts and payment arrangements.
- The proposal does not affect income derived from the use or exploitation of recognised intellectual property rights, including copyright and patent.
- Proposed changes by the Government will subject income earned through an individual’s ‘fame and image’ to the individual tax margin.
- The measure will effect income earned through advertising, sponsorship, endorsement, public appearances and social media.
- Operative from 1 July 2019, taxpayers effected by the measure will be required to reorganise their affairs.
If you require assistance structuring your sponsorship activities, or would like advice regarding your legal obligations with respect to product endorsements, please feel free to contact marshalls+dent+ wilmoth.
This article was written by Commercial and Media lawyer, Marco Angele and clerk, Maddy Castles.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from marshalls+dent+wilmoth and other relevant experts.