Tax Planning Strategy 162 | Endorsement Income

Most forms of income earned by professional sportspeople is personal services income (PSI) and is assessed to the sportsperson individually. This includes salary, competition winnings, prizes, and appearance fees. This income cannot be split with family members or taxed at company rates. 

In contrast, all endorsement income is genuine business income generated by the goodwill of the sportsperson’s name and image. This income is generated by the goodwill asset, rather than by the direct personal exertion of the athlete. As such, this goodwill asset can be assigned to another entity by deed so that the income is redirected to that entity.

The advantages of having the endorsement income contracted through a separate entity include:

• The limited liability of the entity protects the individual’s personal assets from any contract or business disputes. 
• Ability to split income with family members through a trust or have the income taxed at 27.5% in a company.
• Prestige of having a separate management company.