With careful planning, high profile individuals (such as sportspeople and entertainers with valuable ‘Image Rights’) can structure their arrangements in ways that achieve important commercial goals like asset protection, and are also tax efficient.
‘Image Rights’ are an individual’s right to exploit their name, image and other identifiable characteristics (such as their likeness, name or signature) on merchandise or in the media.
Under Australian law, an individual does not have a proprietary interest in their name, image or likeness, and therefore cannot assign these rights to a third party. However, the Australian Taxation Office (ATO) has accepted that an individual can grant a licence to a third party for the use and exploitation of his/her Image Rights1.
A common practice is for a person who has valuable Image Rights (Image Rights Individual) to set up a private company or a trust (Private Entity) and to grant a licence over their Image Rights to the Private Entity.
In turn, a third party that wishes to use the Image Rights (including, in the case of a sportsperson, the club or team they play for) will enter into an arrangement for the use of the Image Rights with the Private Entity. The fees paid by the third party for the use of the Image Rights are paid to the Private Entity and not to the Image Rights Individual directly.
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