The Courts decision was that the taxpayers’ appeals were allowed. The fees were deductible. Now the ATO has release a Decision Impact Statement .

The tax office had argued that the footballers were employees and that the fees paid for the negotiation of the playing contracts were incurred only to obtain new employment contracts and had no connection with the course of the taxpayers earning income from their non-playing businesses.
However The High Court unanimously held in both cases that the fees were deductible as being incurred by the taxpayers in the course of gaining or producing assessable income from carrying on a business of commercially exploiting their sporting prowess and associated celebrity.

The Tax Office will now amend Taxation Ruling TR 2000/5 to clarify that it does not apply to employees whose employment activities form part of the carrying on of a business. That is, it accepts the fees are deductible, but only for those whose activities extend beyond mere employment and can be regarded as carrying on a business.

On 22 August 2008, the Full Federal Court handed down a decision in Riddell v. Federal Commissioner of Taxation; Spriggs v. Federal Commissioner of Taxation.

The Full Court’s decision held that management fees paid by two professional footballers to management companies for services performed in negotiating their playing contracts were not deductible under subsection 8-1(1) of the Income Tax Assessment Act 1997.

Now the two professional footballers have been granted special leave by the High Court to appeal the Full Federal Court decision.

In the meantime the ATO will continue to apply the view as set out in Taxation Ruling TR 2000/5 Income tax and fringe benefits tax: costs incurred in preparing and administering employment agreements and deny deductions..