Hoops

Tax Ruling on Supporter of Wollongong Hawks

Just a question. If he managed to make a profit from the investment would the Tax man then come knocking? Or would this ruling make the profits Tax free?

that's right anon, if sponsorship is done right with the proper acknowledgement etc, then it is a legit expense.

If they purchase a nominal set of shares (eg 10 off @ $2 each), then they jump on board as a director and any "excess" left over at the end of the year, can be paid to them as a director's fee, or else divided up amongst all shareholders. Then, when they want to leave, the company, or others can buy the shares back at a set nominal rate of $2. Everyone is happy and there's no capital gains issues.

It's dangerous to invest in something like this by buying shares, particularly if the money is being used for day to day expenses, which I assume the $350K was used for. It's a different story if the Hawks went capital raising for a new stadium or the like.

Rat10, I would have thought those losses were more capital in nature as well.

He injected his money into the Hawks in the form of a share purchase, so one would expect that the capital loss as a result of share sales be brought forward (it can be advanced for up to 3 years I believe) The only other way would have been to inject it as a loan with a nominal interest rate.

It could be assumed that the share value of an NBL team would be pretty static. Seems to me the smart way would be to have 100 $2 shares and if he wanted to invest in the team, buy a set amount of shares from other directors and get on the board.

Sporting teams never give a massive return and the likelihood of a loss is great, so prepare to lose some money. I think that the best way to invest in a NBL club is to inject the money in as sponsorship. Any sponsorship investment is tax deductible as an operating expense and any return from that investment (ie excess to operating expenses) would be achieved either as a Directors fee, or as a dividend from shares.