The recently released Draft Taxation Determination TD 2022/D3 considers the Commissioner's preliminary views on the use of an individual's fame by related entities. It aims to stop individuals from licensing their name, image, likeness, identity, reputation and signature ('fame') to a related corporate entity or trust.

Current position

Individuals with fame (e.g., those in the sport, media and entertainment industry) typically establish an entity, which they then licence their fame to. The entity exploits the individual's fame to generate income. Such an arrangement may be beneficial from a Tax perspective.

In 2017, Draft Practical Compliance Guideline PCG 2017/D11 was released which allowed sportspeople to allocate up to 10% of their income to the use of their fame. However, the Guideline was withdrawn in August 2018.

Proposed changes

Following the finalisation of TD 2022/D3, the above practice will no longer be accepted. This results in more income being Taxed at the individual's marginal rate.

Once finalised, TD 2022/D3 is proposed to apply to financial years both before and after the date of issue, subject to the compliance approach. The Commissioner has stated resources will not be devoted to applying TD 2022/D3 to income derived before 1 July 2023 from arrangements entered into in good faith and consistent with PCG 2017/D11.

Where to now?

TD 2022/D3 is likely to be finalised and issued in the coming months.

If you are famous (or you know someone who is) please contact your Hall Chadwick advisor to discuss how the proposed changes will impact your financial situation and other structuring options.