Peter Jess was the man who teamed up with Nick Bideau to manage Cathy Freeman. The sprint star has now dumped them both and would appear to gain support for her decision from a recent judgment against Jess in the AAT.
Crikey scoop on Peter Jess First published March 7, 2000.
The AAT has recently handed down a decision involving a little-known Carlton footballer from the early 1990s, Steven Oliver [(2001) AATA 155, Re Oliver and the Commissioner of Taxation].
Broadly, the case involved a scheme contrived by the Carlton Football Club and the player’s manager, Peter Jess, in order to circumvent the AFL’s salary cap rules.
In an attempt to disguise the total amount it paid its players, CFC disclosed only the standard AFL player contract, which recorded the amount it purported to pay a player. CFC separately entered into another contract with players (which was not disclosed to the AFL) which recorded the amount which in fact would be (and was) paid. These amounts were greater than the amounts disclosed in the AFL player contract. During the time that he was representing football players Mr Jess was the Director of a company called Secureinvest Pty Ltd. That corporation was the trustee of a trust called the Secureinvest Unit Trust No. 1 Trust.
The monies paid to Oliver which were in excess of the amounts disclosed to the AFL were paid by CFC to Secureinvest of which the player’s agent Peter Jess was a Director. Secureinvest in turn paid the monies to Oliver. Those monies were treated by CFC and by Jess as fringe benefits, and not attracting income tax.
The reason this case was of interest to the tax office was that it resulted in Oliver understating his assessable income for the years in question. The AAT found in favour of the Commissioner and in addition to the Commissioner’s increased assessment on Oliver, the AAT imposed penalties of almost $22,000 for underpayment of tax.
There are several issues that arise in this case. First, surely the AFL must consider a system for regulating the activities of player managers. It was noted in the case that Carlton was one of many AFL clubs who had flagrantly breached the AFL’s salary cap rules in years gone by. The fact that a player manager would willingly collude with a club to frustrate the AFL’s salary cap policy should be reason enough for the AFL to prohibit players from dealing with that player manager. The AAT decision noted that:
“Mr Jess said that he had discussions from time to time with CFC concerning salary cap matters. He said the club sought advice from him specifically “for the purpose of disguising payments from the football payments commissioner”. He said his responsibility was to achieve “the maximum that I could for my player” but that he “didn’t care about the salary cap. That was the club’s problem; they had to deal with it”. During the time that he was representing football players Mr Jess was the Director of a company called Secureinvest Pty Ltd. That corporation was the trustee of a trust called the Secureinvest Unit Trust No. 1 Trust (“the Trust”). It is a unit trust comprising 120 units, the majority of which were held by Mr Jess. One Unit was issued to Mr Oliver and was held on trust for him by Mr Jess for so long as he played football with Carlton. CFC paid monies into the trust being the monies that were not disclosed to the football payments commissioner
During the proceedings the suggestion was put to Mr Jess that the arrangements that he had entered into with CFC amounted to a “sham”. I have no doubt that the arrangements which did exist between Jess and CFC not only amounted to a “sham” but were a deliberate and contrived intent to avoid the scrutiny of the AFL.”
Surely it is interests of the AFL that managers representing the players are of the highest ethical standards.
Secondly, the decision highlights the fact that many players are completely dependent on the advice of their managers:
“Mr Oliver gave evidence in these proceedings. I found him to be honest and candid. He did not attempt to evade any questions or embellish his answers. He was 19 years of age when he first contracted with the CFC. He put his trust in the officials of CFC & Jess & relied on them to advise him and manage his affairs. Unfortunately, although in hindsight, his trust was misplaced. For reasons which will follow, the advice was erroneous and has caused him detriment. In addition to the income tax payable by these reasons, he will incur penalties by force of the legislation
Mr Oliver said he first became aware that he was to receive his player payments from Secureinvest after he approached CFC for payments and was referred to Mr Jess. He said he was told by CFC that all payments would be paid through Mr Jess who would be “looking after my affairs”. Mr Oliver said he received a cheque within about two weeks of that inquiry from Secureinvest who he had not heard of at that time and queried the identity of this corporation. Mr Oliver said he rang Mr Jess and was told “it wasn’t for me to worry about, that it was legal and above board and that this was how it was going to be paid”. Thereafter he said he received payments throughout the 1994 playing season and some payments in early 1995.”
In this case, Oliver’s misplaced trust in the integrity of the arrangement has cost him almost $22,000. Steve Oliver also relied on Jess for tax and accounting advice. The AAT completely rubbished Jess’s interpretation of the meaning of a “fringe benefit” and cast serious doubts about the veracity of his accounting for payments made to Oliver:
“It was also suggested by Mr Jess that the payments made to Mr Oliver were a fringe benefit because they were paid by reason of him being a beneficiary of the trust. The fact is however that the trust was no more than a contrivance to avoid salary cap obligations of CFC. It was the vehicle recommended to Carlton by Jess to permit it to pay players sums of money which were in breach of salary cap obligations
Whilst most of the hearing was focussed on the $70,000 payable to Secureinvest, the sum of $30,000 was payable to Mr Oliver directly. It was a sum agreed and payable, before Mr Oliver was introduced to Jess. Despite Jess asserting in the 1993 & 1994 Notices of Objection (T6.1 & 6.2) that this sum was a fringe benefit, I am satisfied it was not. It was salary and wages according to ordinary concepts. It is ridiculous to suggest otherwise, yet the issue that troubles me most, in the context of assessment of taxation liability, is whether this, or any part of this sum, was ever paid
Whilst Mr Jess was giving evidence it emerged, on the calculations made by counsel for the applicant, that the summary of receipts and payments made by Secureinvest as prepared by Mr Jess purported to record a total sum of $57,500 paid to Mr Oliver in the 1994 and 1995 Income Years. (Transcript page 24 and 47). On closer analysis, I am unable to arrive at that sum. It appears from the sheets prepared by Mr Jess (Exhibit 5 & Exhibit 6) that the total amounts paid to Mr Oliver by Secureinvest were $10,000 in the 1994 year (refer earlier) and $44,500 in the 1995 year (being two payments of $5,000, one payment of $5,500, one payment of $9,000, and two payments each of $10,000). This would suggest that $54,500 was paid of the sum of $70,000 to Mr Oliver but I am not confident of this. As I have recorded above I have reservations as to the accuracy of the sheets completed by Mr Jess. I certainly would have grave doubts whether the balance, being $15,500, could be claimed properly as a deduction for work undertaken by Mr Jess on behalf of Mr Oliver. This is because the 1994 terms with CFC were negotiated directly with Mr Oliver and before a point in time that Mr Jess was known to Mr Oliver. The only other work as I understand Mr Jess completed on behalf of Mr Oliver was the completion of his 1993, 1994 and 1995 income tax Returns. It is inconceivable that Mr Jess could claim (and be entitled to retain) the sum of $15,500 on account of fees and charges. In his proof of evidence, Mr Jess stated that “$63,000 was distributed. to Oliver “. Perhaps Mr Oliver may now seek to have Mr Jess properly account to him for these monies. As I have indicated above – in any event – the amount paid by CFC is the amount over which income tax should be levied, not the amount paid by Secureinvest to Oliver. The respondent concedes that $7,000 is a proper deduction being 10% of the total sum of $70,000. That sum of $7,000 is 10% of the total payment, which appears to be the standard fee payable to player agents. I would be prepared to allow that as a proper deduction, subject to the reservations I have – and referred to earlier – as to the year of income in which that sum can be claimed.”
One would suggest that AFL players giving up 10% of their salary to their managers should be entitled to a better level of service than what appeared to be the case with Steve Oliver.