What payments do Australian Olympic athletes receive?
Under the Adidas medal incentive funding program, Australian medal winners will receive a cash bonus, providing they remain in their sport after the Games:
- gold medal winners will receive a $20,000 bonus,
- silver medallists get $13,400 and
- bronze medallists receive $10,000.
In other countries, medal incentives go well beyond cash: South Koreans can get military exemptions, Germans a free lifetime supply of beer and Belarussians unlimited sausages.
Athletes would also have received funding provided by the Australian Olympic Committee (AOC) and the Australian Institute of Sport (AIS).
For tax purposes, it doesn’t matter whether the athlete is an ‘‘amateur’’ or a ‘‘professional’’ sportsperson. What is crucial is whether the person is carrying on a business as a sportsperson. In that case, rewards of the business (including prize money and sponsorships) are generally assessable income.
Prize money, including money received under a medal incentive scheme, and grants received by an Olympic athlete were held to be assessable income by the High Court in FC of T v Stone 2005 ATC 4234. That case concerned an Olympic javelin thrower who, despite working full-time as a police constable, was found also to be carrying on a business as a professional athlete. Of course, once an athlete is found to be carrying on a business, he or she is then entitled to claim deductions for expenses incurred in gaining that income.
The ATO has issued a ruling specifically dealing with the Adidas medal incentive funding program for those athletes who are not carrying on a business as a sportsperson. In this case, the medal incentive payments are not assessable income (Class Ruling CR 2015/68). On the down side, this also means that athletes cannot claim a deduction for expenses incurred in earning the incentive payment.
The tax consequences of a lifetime of beer and sausages are beyond the scope of this paper!
What about the actual medals?
Surprisingly, a “gold” medal isn’t actually worth all that much.
The medals in Rio weigh approximately 500g and so, based on their components, they are valued at:
- $600 for a gold medal, which consists of just 1% of actual gold, 92.5% silver and 6.16% copper
- $325 for a silver medal, which is made of sterling silver (being 92.5% silver and 7.5% copper)
- $3 for a bronze medal which is 97% copper and 2.5% zinc and 0.5% tin.
An award in medal form is not assessable income of the athlete as it is given and received on purely personal grounds, recognising and recording a particular achievement of the person (Taxation Ruling TR 1999/17).
However, the medals can fetch more than the simple value of their metals when sold. A gold medal can sell on the private market for anywhere between $10,000 up to more than $1 million. Could the athlete be subject to capital gains tax (CGT) on the sale of a medal?
A medal constitutes a “collectable” for CGT purposes. If the value of acquisition of the medal exceeds $500, then the sale of the medal is subject to CGT. If the acquisition costs are less than $500, then no CGT applies. It would be difficult to argue that an athlete paid anything to acquire the medal and so the “market value substitution rule” comes into play. This means the athlete is taken to have paid the market value of the medal at the time it is acquired. If a medal’s market value at the time it is given to an athlete on the dais exceeds $500, then the athlete might be subject to tax if they later on-sell their hard-earned award.