myIR, payments and more
If you're a professional sportsperson, you take part in a sport mainly for payment or financial reward. If you're an amateur sportsperson, you take part in a sport mainly for enjoyment or fitness reasons.
You may be a professional for tax purposes, even if your sporting code accepts you as an amateur.
How often you receive prize money is a factor in determining whether you're classified as a professional or an amateur sportsperson.
If you're competing weekly and winning over $500 in prize money every week or so, this could show you compete for financial gain.
If you're a professional sportsperson for tax purposes, you must declare all payments and prizes as income in your tax return. These include:
- appearance money
- match fees
- win bonuses
- contract payments
- appearance money
- prize money
- prizes other than money
- speaking endorsements
- book sales
- testimonials and benefit matches.
Any prizes and payments you receive will be liable for income tax and possibly goods and services tax (GST).
If you're winning prize money over $500 as a single participant in a single event, withholding tax must be deducted from the portion that exceeds $500. You must declare the total prize money (including the first $500) in your tax return.
You can claim back the amount under $500 for each event as expenditure for that event (eg, to cover your travel costs) and you won't need to provide receipts. If it's cost you more than $500 to participate in an event, you may want to claim actual and reasonable costs instead. If you do, you'll need receipts for everything you've spent.
There are special rules for expenses if you buy a larger item. For example, a racing bike worth $5,000 would have to be depreciated. Talk to your tax advisor about this.
You can be reimbursed for your actual and reasonable expenses incurred in participating in an event. There are no tax consequences for this, but you will need to keep your receipts.
Prizes under $500
If you are:
- an amateur for tax purposes and
- occasionally receive prize money of less than $500
you won't need to include the prize in your tax return, and there will normally be no tax obligations.
This applies to each separate participant in each separate event.
If you and your tennis partner win $900 in a doubles competition, the prize per person is $450 so there are no tax consequences.
If each prize you win is $500 or less, you do not need to return income and you don't need to claim expenses.
Prizes over $500
If you win prize money of more than $500 in an event:
- you must deduct withholding tax from the portion that exceeds $500
- you must declare the total prize money (including the first $500) in your tax return,
- you can claim back the amount under $500 as expenditure, and
- you don't need to provide receipts.
You can be reimbursed for actual and reasonable expenses incurred in participating in an event, without any tax consequences. You should keep your receipts.
If you've come to New Zealand to play sport, or if you live in New Zealand and play overseas, you'll need to consider whether you are a New Zealand resident for tax purposes.