Case: Commissioner of Taxation v Stone [2005] HCA 21 ; (2005) 222 CLR 289
Outcome: cited
This proceeding was heard on the same day and immediately before Spriggs v Federal Commissioner of Taxation (VID 314 of 2007). To avoid unnecessary repetition in these reasons for decision, I incorporate and adopt in these reasons paras [32] to [41] of the reasons for decision in Spriggs. Those paragraphs set out the relevant legislation, the relevant principles and some general considerations concerning sport and professional sport examined by the High Court in Commissioner of Taxation v Stone [2005] HCA 21 ; (2005) 222 CLR 289 at [11] to [15]. 15 Riddell played rugby league as a child. When he was approximately 15 or 16 years of age, he was first represented by a player agent. That relationship ended towards the end of 1997 when Riddell was approached by Darryl Mather ("Mather") of International Sports Management Pty Ltd ("ISM"). 16 On 29 May 1998, Riddell entered into a management agreement with ISM ("the ISM Agreement"). It provided: "RECITALS: 1. [Riddell] competes professionally in the sport of (sic) 2. [Riddell] desires to engage [ISM] to manage his affairs as hereinafter set out. The Parties Agree as follows: 1. [ISM] agrees to provide the following services to [Riddell]: a) Advise [Riddell] in respect of his sporting career. b) Negotiate playing contracts on behalf of [Riddell]. c) Negotiate product endorsements and sponsorship so far as is reasonably possible. d) Access and arrange legal, financial, superannuation, taxation, insurance and other appropriate advices and services at the request and cost of [Riddell]. ... 2. [ISM] will keep [Riddell] informed in relation to any dealings or negotiations undertaken on [Riddell's] behalf. 3. The term of this Agreement shall be for five (5) years and shall continue thereafter until terminated in writing by either party, provided that no less than three months notice shall be given. 4. ISM shall be entitled to charge [Riddell] fees in respect of its services as follows: a) Twenty per cent (20%) of all gross monies or other considerations paid to [Riddell] for sponsorship, media contracts, endorsement for goods and services, advertising or any form of promotional work and any subsequent income earned from the above monies. The said payments shall continue for a period of three years after termination of the contract in respect of any of the arrangements set out above which commence during the period of the agency. b) In respect of sporting events in which [Riddell] participates: (i) Eight per cent (8%) of all contract monies paid to [Riddell] including bonuses/ incentives negotiated by [ISM]. (ii) Match payments shall not be included for the purpose of this clause. c) The amount payable to [ISM] shall be paid within 14 days of receipt of monies by [Riddell]. ... 10. Outside Australia, [ISM] may assign its rights and obligations hereunder to any company with which it is affiliated, including ProServ USA, ProServ UK, ProServ Europe, ProServ Italy and ProServ Japan. 11. During the first twenty four (24) months of the Period of Service [ISM] agrees to provide [Riddell] with a scholarship period. During this time, [ISM] agrees to waiver (sic) any remuneration which would otherwise be due and payable during this portion of the Period of Service as outlined in Clause 4b). This is in no way prejudices the remuneration which may become subsequently due and payable during the remainder of the Period of Service." 42 As with Spriggs , the Commissioner did not contend that it was not possible for a professional sportsperson to be carrying on a business of exploiting his or her sporting talent. It is worth restating what the High Court said in Stone (at 307): "The conclusion that the taxpayer was engaged in a business during the 1998-1999 year proceeds from an acceptance of the proposition that, showing that both before and during that year, the taxpayer was paid to endorse a company or its products as an athlete demonstrated that she has turned her athletic talent to account for money." 43 Riddell's position is not distinguishable. In the 2005 income year, Riddell was carrying on a business for the purpose of gaining or producing his assessable income. He turned his rugby league talent to account for money both before and during the 2005 income year: see [30] [31] above. For the reasons outlined above, the management fee was incurred by Riddell in carrying on that business. 44 The Commissioner contended that because "business" " includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee" (s 995-1 of the 1997 Act ), an outgoing incurred in the course of employment, or to obtain an employment, is not an outgoing incurred "in carrying on a business". Accordingly, the Commissioner contended that the management fee was not deductible because: (1) Riddell was an employee of Parramatta; and (2) the management fee was incurred in the course of his employment with Parramatta or to obtain employment with Parramatta.