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Australian Lawyers and Consultants

Australian Tax Planning for Visiting International Entertainers

April 1997 (Last reviewed February 1998)

BACKGROUND

In the case of entertainers or sports people visiting Australia, different Australian tax treatment can apply to different members of the visiting entourage and with respect to different types of income derived during the visit.

The general position under most of Australia's double taxation agreements (DTAs) is that the income earned by the visitor will be taxed at source. However, there are tax planning issues when contracts are being negotiated with the promoters.

In the case of entertainers or sports people visiting Australia, different Australian tax treatment can apply to different members of the visiting entourage and with respect to different types of income derived during the visit.

The general position under most of Australia's double taxation agreements (DTAs) is that the income earned by the visitor will be taxed at source. However, there are tax planning issues when contracts are being negotiated with the promoters.

The Entertainers article of the DTA provides that income derived "from his personal activities...may be taxed" in Australia. Such a person is required to lodge an Australian tax return and will be assessed at the applicable rate of tax for non-residents. If the income earned in respect of the personal activities of the sports person is paid to another person (including a company), that income may still be taxed in Australia if it can be said to be in respect of "his personal activities".

For members of the entourage (eg. a manager) different considerations apply. Such persons do not fall within the Entertainers article. However, the "Dependent Personal Services" article must be considered. The effect of that article is that remuneration derived by such a person from the exercise of his or her employment in Australia may be taxed in Australia.There are a number of issues that could be resolved that reduces the impact of Australian taxes on non-resident visitors.

Where income is derived by a visiting entertainer from other activities, such as promotional appearances, consideration must be given to whether the income is derived from "his personal activities" and therefore whether or not it will be governed by the Entertainers article or whether it falls within the Independent Personal Services or Dependent Personal Services articles.

Income derived from the sale of merchandise may be dealt with under the Business Profits article if the business has a permanent establishment in Australia (a fixed place of business through which the business is wholly or partly carried on). There are alternative arguments that should be considered. The Entertainers article of the DTA provides that income derived "from his personal activities...may be taxed" in Australia. Such a person is required to lodge an Australian tax return and will be assessed at the applicable rate of tax for non-residents. If the income earned in respect of the personal activities of the sports person is paid to another person (including a company), that income may still be taxed in Australia if it can be said to be in respect of "his personal activities".

For members of the entourage (eg. a manager) different considerations apply. Such persons do not fall within the Entertainers article. However, the "Dependent Personal Services" article must be considered. The effect of that article is that remuneration derived by such a person from the exercise of his or her employment in Australia may be taxed in Australia.There are a number of issues that could be resolved that reduces the impact of Australian taxes on non-resident visitors.

Where income is derived by a visiting entertainer from other activities, such as promotional appearances, consideration must be given to whether the income is derived from "his personal activities" and therefore whether or not it will be governed by the Entertainers article or whether it falls within the Independent Personal Services or Dependent Personal Services articles.

Income derived from the sale of merchandise may be dealt with under the Business Profits article if the business has a permanent establishment in Australia (a fixed place of business through which the business is wholly or partly carried on). There are alternative arguments that should be considered.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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