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Medals golden for Aussies

Nation will tax any bonuses that go to foreign winners

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SYDNEY, Australia — Marion Jones has just won the 100 meters at the Sydney Olympics. As she takes her victory lap, a gray-suited man brandishing a pocket calculator chases her down and hands her a tax bill.

Sure, that's unlikely to happen. But it epitomizes a problem facing foreign athletes at next month's Olympics.

The Australian tax office says competitors who earn cash bonuses from their national Olympic committees and sports federations for winning medals will owe taxes in Australia, even if they receive the money after returning home.

And since Australian tax rates for such earnings range from 29 percent to 48.5 percent, athletes making up to $100,000 per gold medal could face huge tax bills.

"If the performance takes place in Australia and income is derived from that performance — regardless of where the contract is entered or where the bonus is paid — taxes are due," said Peter Rowe, the Olympics project director for the Australian Taxation Office in Canberra.

Athletes would not be taxed on the medals themselves but on any money they directly earned as a result of their visit to Australia for the Games.

With the Olympics opened to professionals for years now, athletes from many countries are eligible for bonuses. But officials say this is the first time foreign athletes face tax bills for Olympic-related income.

Policies vary from country to country, but bonuses for medals often are officially labeled reimbursements for training expenses and sacrifices.

The U.S. Olympic Committee, for example, reimburses $15,000 for a gold medal, $10,000 for silver and $7,500 for bronze. It is considered income, and athletes are expected to report it to the IRS along with relevant expense exemptions. Several U.S. federations offer separate packages, including $50,000 for a gold medal from U.S. Swimming.

Russia offers $100,000 for gold medals, USOC spokesman Mike Moran said. He cannot imagine athletes paying taxes in Sydney.

"It escapes me why the Australian government would attempt to place such a burden on the Olympic athletes," Moran said. "There's never been an issue like this before at the Olympics. It would be tragic."

Steve Bull, who handles governmental relations for the USOC, said the IRS considered taxing foreign athletes at the 1996 Atlanta Games, but the idea was shot down on Capitol Hill and quietly dropped.

The International Olympic Committee said it had questions about the Australian tax plan but was not ready to take a position.

"We have discussed it," IOC spokesman Franklin Servan-Schreiber said. "If a Russian athlete receives a bonus once he returns home, how can they enforce this? How can the Australians claim any kind of tax on this?"

Australian tax laws and their impact on foreign athletes have been the subject of debate for decades.

Ian Taylor, a tax partner in international executive services for KPMG in Melbourne, said he has argued on behalf of clients that a pre-World War II law exempts athletes in "outdoor sports" from taxes when they perform for a national team.

But Taylor said Wednesday that the Taxation Office has inconsistently applied that law and seems serious about trying to collect taxes from visiting Olympians.

He also said the "outdoor sports" loophole would soon be closed by a bill expected to be approved before the Sydney Games.

Rowe stressed his stand was based on existing Australian tax law and international tax agreements.

Rowe said the tax office will expect athletes to voluntarily report their earnings and to seek help in determining their tax liability. He said some athletes' agents already have approached the office for more information about how to report those earnings.

"The purpose of our exercise here is not to necessarily go out and raise large amounts of revenue," Rowe said. "We just want to make sure people that have an obligation can meet that obligation as easily as possible."

Rowe said athletes who don't volunteer such information might face problems at home. The Australian Tax Office would contact tax authorities in those countries, such as the IRS, to point out the lack of payments.

"Australia is a party to a number of double-tax agreements, and contained in those agreements is the right to exchange information with our colleagues around the world," he said. "We would contact colleagues in other revenue-collection agencies around the world and work with them."

In the case of American athletes performing in Australia, Rowe said they are covered by a tax agreement between the countries. It covers any instance in which an athlete or entertainer derives income of more than $10,000 in the other country.

The taxes on athletes are similar to those imposed on musicians, actors and other entertainers who earn money by performing in Australia, even if their stop on the continent lasts no more than a day.

Rowe said his agency will establish temporary offices in the Olympic athletes' village, and at the main press and broadcast centers, since some visiting journalists also may owe taxes.

Sydney Olympic organizers said Wednesday the tax office in the athletes' village was being set up to help the national Olympic committees with tax questions and not to try to come after athletes for taxes.

"They're not there to pounce on athletes," Sydney 2000 spokesman Milton Cockburn said. "But this is really not an issue for us. It is an issue between the athletes" and their national Olympic committees.