Former tax office auditor Chris Seage writes:

The Daily Telegraph‘s front
page story yesterday outlined an Australian Taxation Office blitz into the
financial affairs of NRL player managers The ATO audit net may be extended to catch
players as well. It’s good to see that
ATO auditors still scan the newspapers for good audit leads! DPP Damien Bugg could learn a lot
here.

ATO audits of players and player managers are nothing new. When
Super League erupted over ten years ago as Rupert Murdoch fought with
Kerry Packer for control of the game, inflated salaries were the norm
as the bidding war for players spiralled out of control. I recall the
ATO had every rugby league contract from both Super League and the
Australian Rugby League, forensically scouring every one of them for
something undeclared. And guess what they found? Nothing!

Data matching between player contracts and tax returns showed players and
managers were very honest and overall the task was a waste of time. It seems the players and their managers were
not as stupid as the public perception of them as they duly disclosed the
predetermined levels of income and fringe benefits outlined in their
contracts.

What the ATO have to do is look outside the square and in
particular for a third party transaction usually closely connected to
the club – either involving a sponsor or well known benefactor. Have
you ever wondered how some clubs seem to keep all their good players?
We had a great dob-in from someone in the know which showed how players
and managers can side-step the salary cap and the income tax act.

A leading NRL player had been given a block of
land by a wealthy benefactor of the club he played with. He also received free building materials from
a club sponsor to build the house he was putting on the land. On top of this, his wife was on the payroll of
another club sponsor pulling in around $600 per week and was provided with a
nice sporty car to drive (not bad seeing this was ten years ago). Upon examination it was revealed that the wife
never actually went to work at the sponsor’s office as the arrangement was a
rort.

The ATO calls this type of creative
accounting ”padding the payroll”. There
are other examples of how rugby league clubs get around the salary cap, such as a
sponsor setting up a subsidiary company and appointing nominee directors who
appear to be at arms-length from the sponsor and the club.

The subsidiary pays a player or spouse for an
employment-related activity which never happens. The company sends their “employees” on
business trips to Fiji and
Bali while the subsidiary claims a tax
deduction for wages and conference expenses.
The player benefits and the club keeps the player on their playing
register – all under the salary cap!

Peter Fray

Fetch your first 12 weeks for $12

Here at Crikey, we saw a mighty surge in subscribers throughout 2020. Your support has been nothing short of amazing — we couldn’t have got through this year like no other without you, our readers.

If you haven’t joined us yet, fetch your first 12 weeks for $12 and start 2021 with the journalism you need to navigate whatever lies ahead.

Peter Fray
Editor-in-chief of Crikey

JOIN NOW