The following article by Eryk Bagshaw appeared in the Sydney Morning Herald on 4 March, 2018.

‘Open to abuse’: Experts slam AFL’s tax-free ‘rort’
The AFL and NRL are earning hundreds of millions of dollars in revenue and not paying a cent in tax while calling on taxpayers to stump up billions to build new stadiums.

Concessions have led to operating surpluses increasing: in the AFL by 63 per cent to $330 million over the decade to 2016; in the NRL they have doubled to reach $133 million over the same period.

Experts have labelled the tax-free concessions of the country’s two richest leagues and their clubs “a rort that is open to abuse” and have called on them to follow the National Football League in the US and give up their tax-free status.

Chief economist at the Australia Institute Richard Denniss said it was time for both the NRL and AFL to cough up and help pay for infrastructure.

“I think the fact these sports pay no corporate tax and then turn around and ask the taxpayer to fund the stage on which their performance is played out is absurd and obscene,” he said.

The concerns come as a petition signed by more than 100,000 people puts pressure on the NSW government to abandon a multi-billion dollar plan to replace stadiums that already exist and invest the money in schools and hospitals.

Victorian taxpayers are also expected to fork out millions of dollars in election commitments to upgrade sporting facilities at Etihad Stadium and other venues, despite fans being frustrated by years of ticket price hikes going into administrators coffers.

The leagues and clubs are tax exempt under an 81-year-old provision that was designed to allow volunteer, community organisations to pay no tax in exchange for providing local facilities and encouraging sport participation.

The revenues of both codes have grown astronomically since 1936 through multi-billion-dollar TV deals and lucrative gambling and alcohol advertising.

Executive pay for the sports adminstrators is also up by 40 per cent over the past decade. AFL CEO Gillon McLachlan earned $1.7 million in 2016, although his predecessor Andrew Demetriou made as much as $3.8 million in 2013.

The AFL recorded a loss of $17 million last year, but prior to that recorded a net profit, after distributions, of between $2 million and $26 million every year apart from 2011 since 2007.

The NRL made a $45 million profit in 2013 and $21 million in 2014, but made a $10 million loss between 2015 and 2016.

After employee salaries (staff and players pay income tax) and operating costs, the surpluses are distributed tax-free to clubs, helping them build suburban property and entertainment empires at the same time as funding community infrastructure.

AFL clubs including Hawthorn and the West Coast Eagles, like NRL clubs Parramatta Eels and Sydney Roosters, have turned multi-million dollar profits in the past two financial years, while up to half of the clubs in both codes struggle to break even.

Club profits, after tax on poker-machine proceeds, are supposed to be reinvested in facilities for members and the community, but there is no oversight of where the money is spent, according to a former member of the federal government’s tax concession working group, Ann O’Connell.

“There is no accountability here, none,” Professor O’Connell said. “If they were large charities they would at least have to make public audited accounts.”

The University of Melbourne tax expert said sport had no place in the not-for-profit space.

“It seems to me the way the they operate is that it is all about profit and generating surpluses through gambling and media rights, not just the encouragement of sport,” she said.

Professor O’Connell said loose rules allowing clubs to recruit temporary members when they signed into the clubs and not pay tax on their spending “was an obvious rort that was open to abuse”.

AFL spokesman Patrick Keane said the sports income and assets “were solely for the purpose of encouraging and supporting the game of Australian Rules football,” but declined to comment on the AFL’s push for taxpayer funding of infrastructure.

The NRL did not reply to multiple requests for comment.

In the US, a bill before the Senate has proposed removing the tax-exempt status for all sports leagues.

US President Donald Trump, arguably the biggest advocate of corporate tax cuts in the world, attacked the NFL in November over its former tax-free status.

The league voluntarily relinquished the status in 2015 following outrage over the $30 million pay packet of its commissioner Roger Goodell.

Dr Denniss said there would be more money for children’s sporting fields if there was less money spent on new stadiums and more money collected on corporate tax.

“I think the stadium debate has opened many citizens’ eyes to the scale of the issue,” he said.

Daniel Gonano, an accountant and advocate for a separation between professional and amateur sport said clearer tax boundaries needed to set between the two divisions.

“Professional club sport, supported by multi-million dollar television contracts, is a commercial activity that should not have the advantages that result from being classified as part of the not-for-profit sector,” he said.

Despite mounting public pressure, the NSW government has yet to receive a business case for the stadium redevelopment from Infrastructure NSW.

It is understood Sport Minister Stuart Ayres is not backing down from the project.

The Victorian government did not respond to requests for comment.

I think the fact these sports pay no corporate tax and then turn around and ask the taxpayer to fund the stage on which their performance is played out is absurd and obscene.
Richard Denniss

There is no accountability here, none.
Professor Ann O’Connell

Doesn’t Gillon McLachlan talk about AFL football as an “industry”. That immediately disqualifies it as a community organisation or any other tax free status. Time to hold the AFL accountable under proper governance standards.

‘Open to abuse’: Experts slam AFL’s tax-free ‘rort’