It's Nice Work If You Can Get It
Sydney Morning Herald
Thursday January 17, 2002
Pat Rafter and company have a lot more to gain than just a suntan by basing themselves in Bermuda or Florida, writes Jacquelin Magnay.
It is a truism of the sport that all tennis players are really accountants or, if not, they have highly paid number crunchers to organise their finances, tell them how to spend it and where to live.
It sounds good, doesn't it? One million dollars to win the Australian Open. Even Lleyton Hewitt picked up $14,980 for losing his first-round match. A nice day's work for some.
There is, of course, the issue of Australia's poor exchange rate with the US dollar and British pound but that's another story.
Most of the established players on the circuit still consider going to Melbourne in January a lucrative exercise grand slam ambitions aside because of a pretty simple decision they made at some point to move house.
Many leading players don't actually live in the country they represent. Instead, the attractiveness of sun, a familiar language and no or reduced income tax laws have seen most players set up home in Bermuda, Monaco and Florida.
Given that the players are global citizens, flitting from country to country, it may be morally questionable but certainly economically sensible to relocate to a place that levies next to nothing on all of their millions in prizemoney and sponsorship dollars.
If residency, rather than citizenship was a requirement for Davis Cup selection, Monaco, which levies no income tax at all, would be the perennial victor. No fewer than seven of the 32 men's seeds at the Australian Open live in the tiny European principality. Another European city of choice is Geneva, Switzerland, where most French players choose to base themselves because of that canton's favourable tax status.
Pat Rafter, Australia's home-grown boy from Queensland, actually lives in Bermuda another English-speaking place which has no income tax.
Rafter has bought a two-bedroom flat in Bermuda, which is two hours' flying time from New York, to domicile in his quiet time and work out how to spend his annual income of about $9.65million.
One of Rafter's brothers mentioned on radio this week that the player was spending time off happily ``visiting" his family. Any other inference that Rafter was at ``home" in Australia may attract the interest of the Australian Tax Office, which looks at things such as bank accounts, family ties and fixed places of abode in determining residential taxation status.
Fellow Australians Mark Philippoussis, Rennae Stubbs and Nicole Pratt live in Florida, which has substantially lower taxation rates than Australia.
However, Hewitt has not yet followed the trend to the detriment of his bank account. The 20-year-old's Australian residency cost him $130,000 in extra tax on his US Open earnings of $1.6million than if his abode was Florida. A Bermuda or Monaco base would have saved him far more.
Of course, the taxation furore which erupted over Steffi Graf's career earnings of around $100million has been a lesson for all tennis advisors.
Graf's father, Peter, was sentenced to three years and nine months for trying to evade 12million German marks ($10.5million) in taxes.
During the case, prosecutors claimed Steffi Graf had failed to pay tax on 42million marks earned between 1989 and 1993 after shifting monies in a trail that went to the Netherlands, the West Indies and then the tax haven of Liechtenstein.
The ATO says it doesn't single out sportspeople for specific attention and that the general rules of residency and tax apply to professional tennis players. But the taxman is not dumb and the realities of the Australian taxation system will hit the players, even before they cash their cheques this week and next.
For the ATO has already instructed Tennis Australia to withhold appropriate levels of tax before the prizemoney payments are made. The real amount given to the men's and women's winners will be more like $550,000. Hewitt's three-hour run-around will net him about $8000. At least some social obligations will have been paid.
Where the top players reside:
Pat Rafter (Australia) Bermuda
Lleyton Hewitt (Australia) Adelaide
Tommy Haas (Germany) Florida
Marat Safin (Russia) Monaco
Mark Philippoussis (Australia) Florida
Thomas Enqvist (Sweden) Monaco
Goran Ivanisevic (Croatia) Monaco
Venus Williams (US) Florida
Martina Hingis (Switzerland) Florida
Top tax rates:
Australia 48.5 per cent on $60,000+
United States 39.6 per cent on $288,350+ (Florida has no state income tax)
Bermuda nil
Monaco ni
© 2002 Sydney Morning Herald