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Taxation of income for an individual’s fame or image – Income splitting to be denied

Taxation of income for an individual’s fame or image

Richard Wilkins discusses the taxation of income for an individual’s fame or image consultation paper.

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In the lead up to the Christmas break, Treasury released a number of consultation papers and amongst these was ‘Taxation of income for an individual’s fame or image’. First announced in the 2018-19 budget, the aim is to ensure that, from 1 July 2019, all income relating to the commercial exploitation of a person’s fame or image is included in that person’s assessable income.

The proposed approach is somewhat similar to the personal services income (PSI) regime which, amongst other purposes, also aims to prevent individuals alienating income to another party.

Background

Although fame and image rights are not recognised under Australian intellectual property law, other legislation may provide an avenue to take action against entities that use an individual’s fame or image without authorisation. This arguably creates a proprietary interest in the fame or image rights, which can be licensed to another entity. That other entity could then be taxed on the income derived from the exploitation of that fame or image.

When an individual is on or near the highest marginal tax rate, alienating income to a family trust or related company can provide significant tax savings.

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