ATO Community

Motorcycle Racing Sponsorship

Ask a question
Highlighted

Newbie

Views 1190

Replies 1

Hi,

I participate in national motorcycle racing and a small business has sponsored me to cover part of my racing costs inc. spare parts, protection gear etc. I've read the ATO decision ID 2005/284 which describes whats required to be met in order to sponsor someone. However we have a question on how to have the costs claimed and registered in the books. 

Most of the parts are purchased online through different suppliers domestically or internationally. There are some costs for fuel, tyre purhcase at the race track, race meeting application etc. Fuel and tyre are simple POS transactions without any tax invoice. Its just a credit card payment reciept. Race meeting applications are usually bank transfer to the organizer bank account. And parts and services are from all so many different sites and shops.

 

The question is what do I need to provide the business who is sponsoring me to make it satisfactory for ATO to accept the claim. They have been told that all the transaction must be under company name and paid by the company. However that means I won't be able to claim tyre or fuel and have to ask them for every single thing I need to purchase which makes the whole process very difficult as I have to go sit down with the company accountant to do my online purchase! or ask them to transfer meeting application fee which lot of time have very limited time window. Is that necessary or can I just make all the payments under my name and credit card and just send them receipts? 

Obviously the idea behind sponsorship is for the company to have a level of advertising on my racing gear and motorcycle and I will need to have company banners in the garage at race meetings and hand out company brochures which is what I do and thats whats explained in the ATO decision but there is no explanation on how I can claim the amount of sponsorship to make sure it is tax deducatible for the sponsoring business.

 

I'd appreciate your input.

 

1 ACCEPTED SOLUTION

Accepted Solutions

Best answer

ATO Certified

Community Support

Replies 0

Hi @Hummy63,

 

Thanks for your patience whilst we received specialist information regarding your query.

 

In order to claim the cost of the sponsorship, the sponsor will need to have sufficient evidence to show that the amounts they have spent the money on sponsorship. If the sponsorship payer and the recipient are connected only by a sponsorship business relationship and the payer not involved in motorcycle related activities then this might generally make it not overly difficult to ascertain moneys spent on sponsorship by the company, such as by the sponsor identifying payments made directly to you, and also payments made directly to your suppliers and of other related costs of your business.

 

ATO interpretive decision 2005/284 was based on its own facts and does not necessarily mean that all sponsorship related payments are necessarily deductible in full to the payer. The sponsor payments must have been incurred in gaining or producing their assessable income, and also not be of a private or of a capital nature.
For example, in some situations the sponsorship payments might have an investment nature to the payer or relate to private interests or hobbies of an associate of the payer.

 

Generally, from the payer’s perspective, whether the payer incurs cost directly or reimburses your expenses, the different forms of expenditure on sponsorship will not make a difference as to deductibility for the payer.

 

For example, if you are carrying on a business, generally payments received by you in respect of your business are taxable. One exception is where you pay money as agent for the sponsor. Any receipts received as agent from the sponsor as reimbursement of those payments made by you will not be assessable, while the sponsor payments will be potentially deductible to them. For example if you issue an invoice in the name of the sponsor then this might be an agent arrangement. (However, your expenses will not be deductible to you either.)

 

Alternatively, if the sponsor just reimburses particular expenses incurred by you, or pays a set amount of allowance to you, subject to adjustment for the precise amount of actual costs incurred, then the payments are assessable to you and are deductible to the sponsor. In some situations your deductions may be reduced to the extent that the payments made by the sponsor are in respect of a deductible expense incurred by you.
 
If you'd like to receive more specific advice based on your circumstances you could contact our early engagement team by submitting a request form or requesting a call back and someone will contact you to discuss in more detail.

 

Thanks, JodieH.

1 REPLY 1

Best answer

ATO Certified

Community Support

Replies 0

Hi @Hummy63,

 

Thanks for your patience whilst we received specialist information regarding your query.

 

In order to claim the cost of the sponsorship, the sponsor will need to have sufficient evidence to show that the amounts they have spent the money on sponsorship. If the sponsorship payer and the recipient are connected only by a sponsorship business relationship and the payer not involved in motorcycle related activities then this might generally make it not overly difficult to ascertain moneys spent on sponsorship by the company, such as by the sponsor identifying payments made directly to you, and also payments made directly to your suppliers and of other related costs of your business.

 

ATO interpretive decision 2005/284 was based on its own facts and does not necessarily mean that all sponsorship related payments are necessarily deductible in full to the payer. The sponsor payments must have been incurred in gaining or producing their assessable income, and also not be of a private or of a capital nature.
For example, in some situations the sponsorship payments might have an investment nature to the payer or relate to private interests or hobbies of an associate of the payer.

 

Generally, from the payer’s perspective, whether the payer incurs cost directly or reimburses your expenses, the different forms of expenditure on sponsorship will not make a difference as to deductibility for the payer.

 

For example, if you are carrying on a business, generally payments received by you in respect of your business are taxable. One exception is where you pay money as agent for the sponsor. Any receipts received as agent from the sponsor as reimbursement of those payments made by you will not be assessable, while the sponsor payments will be potentially deductible to them. For example if you issue an invoice in the name of the sponsor then this might be an agent arrangement. (However, your expenses will not be deductible to you either.)

 

Alternatively, if the sponsor just reimburses particular expenses incurred by you, or pays a set amount of allowance to you, subject to adjustment for the precise amount of actual costs incurred, then the payments are assessable to you and are deductible to the sponsor. In some situations your deductions may be reduced to the extent that the payments made by the sponsor are in respect of a deductible expense incurred by you.
 
If you'd like to receive more specific advice based on your circumstances you could contact our early engagement team by submitting a request form or requesting a call back and someone will contact you to discuss in more detail.

 

Thanks, JodieH.

Top Solution Authors