‘Playing safe’ with Image Rights: The ‘safe harbour’ under Practical Compliance Guideline 2017/D11

Last year we published an article explaining how high-profile individuals can licence their “Image Rights” to a separate controlled entity and achieve important commercial goals and tax efficiency (Image Rights Structure): click here for more.

The Australian Taxation Office has recently released Draft Practical Compliance Guideline 2017/D11 (Guideline). In the Guideline, the ATO considers Image Rights Structures set up by professional sportspeople.

When finalised by the ATO, the Guideline will impact:

  • professional sportspeople who have set up an Image Rights Structure
  • professional sportspeople who are planning to set up an Image Rights Structure and are in negotiations with their club or league and
  • Individuals other than sportspeople who have valuable Image Rights.

This article explains some of the key issues in the Guidelines.

I heard about this in the news. Why?

Rarely is tax exciting enough to make the news. However, the Guidelines received extensive media coverage. We think there are two reasons for this. First, Australians love sport and are interested in anything to do with sportspeople, on or off the field. Second, it is an important development for the sports industry and Image Rights in Australia.

The Guideline is important because it will assist sportspeople and their advisors manage their personal tax risk and provide clarity about Image Rights Structures. The Guideline does this by nominating a ‘safe harbour’ approach and percentage for working out the payment for a sportsperson’s Image Rights. The ‘safe harbour’ is 10% of the total payment made to the player for personal services, image rights and anything else.

This is best illustrated with an example:

Alex, a professional footballer, and his club have reached an agreement under which the club will pay Alex $300,000 per year for:

  • Alex’s playing services and
  • the Club having a right to use Alex’s Image Rights.

Alex has had an Image Rights Structure in place for some time.

Under the ‘safe harbour’, $30,000 (ie 10% of $300,000) could be attributed to the payment made by the Club for the use of Alex’s Image Rights. This payment would be made by the club to the entity that owns the Image Rights under the Image Rights Structure.

Importantly, the Guideline will only apply where the sportsperson has an Image Rights Structure in place and if the payment is made to the entity which owns the Image Rights. The Guideline does not apply to arrangements that a sportsperson may have with third parties (eg corporate sponsors or media organisations) for the use of their Image Rights.

Why 10%?

10% is the ‘safe harbour’ amount for the purposes of the Guideline. If a sportsperson uses this amount, they will have ‘safe harbour’ protection (discussed below). It is not mandatory or a cap on how much a sportsperson can be paid for the use of their Image Rights.

Obviously, some sportspeople are more famous or marketable than others, so their Image Rights will have a higher commercial value.  Image Rights for certain individuals may be valued at a level greater than 10% of total payments. However, such valuation will not have the automatic ‘safe harbour’ protections provided by the Guidelines and must have evidence which supports the higher value placed on those Image Rights.

How safe is the ‘safe harbour’?

If a sportsperson uses the 10% ‘safe harbour’ in the Guideline, the ATO will accept that as a ‘reasonable’ amount to be paid for their Image Rights and will not require them to provide any detailed evidence to support it.

However, even if the 10% ‘safe harbour’ is used, this does not guarantee immunity from any ATO scrutiny or attention. The ATO may still look at the Image Rights arrangement as a whole to see if it is legally effective, has been properly documented and has operated in a business-like manner (see our previous article for more information).

We expect the ATO to also be concerned if the facts show that a sportsperson has restructured or rearranged their current contractual arrangements to bring an Image Rights Structure into it or to come within the safe harbour.

As mentioned above, a valuation greater than the 10% ‘safe harbour’ may be applied to Image Rights. In this case, the sportsperson and their associated entity must have evidence which supports the higher value placed on their image rights. This could include:

  • a formal valuation
  • evidence of industry practice and standards
  • objective indicators of the sportspersons fame or marketability and/or
  • evidence of the value that has been placed on the sportsperson’s Image Rights by third parties (eg for appearances, advertising or general promotional work).

This evidence should be put together before the arrangement is made, not when the ATO asks for it.

Also, as mentioned in our previous article, in some cases it may be appropriate to obtain additional assurance by requesting a Private Binding Ruling from the ATO.

Is the Guideline only for sportspeople?

Image Rights are not exclusive to sportspeople. Other high profile individuals – such as performers, entertainers, artists, media presenters and social media stars – will have commercially valuable Image Rights and can (and very often do) set up Image Rights Structures.

However, for reasons that are not clear, the Guideline is specific and only applies to sportspersons. This means that individuals with Image Rights Structures that are not sportspeople will not have the ‘safe harbour’ protections that the Guideline provides.

However, the Guideline is nonetheless an important reference point for anyone with an Image Rights Structure, particularly in what it says about showing evidence of the commercial value of Image Rights.

Our experience

Hall & Wilcox has specialist expertise in Sports and Entertainment and Tax law. We have experience establishing and advising on Image Rights Structures. This includes preparing the necessary documentation, advising on tax issues and obtaining private binding rulings.

We invite you to contact any member of our team for a discussion about how we can assist you or your clients.


For further information please contact:





To subscribe to our latest news & thinking or to manage your preferences click here.

Subscribe