Warriors let off paying $5.5m in tax

The Warriors have been saved from having to pay out $5.5 million in taxes thanks to the latest Australian Federal Budget.

Because the club’s players and staff have been based in Australia for longer than the 183-day threshold they became liable to pay tax in that country at the highest rate.

Legally players and staff would then have been able to claim that money back from the Warriors, which would have not only had a huge impact on the club’s finances, but also get them into salary cap problems.

The Warriors took the issue up with the NRL, who then took the fight all the way up to Australian Prime Minister Scott Morrison and in this week’s Federal Budget, the Australian government allowed Warriors players and staff to continue to only pay tax in New Zealand.

This change will also financially help the Wellington Phoenix, but the New Zealand Breakers aren’t impacted as their time in Australia is just under the 183-day limit.

Warriors chairman Rob Croot said the Australian government announcement was a huge relief.

‘‘The dollars are a huge part of it, but it’s also the complexity that goes with it,’’ Croot said.

The top tax rate in New Zealand is 39 per cent. In Australia, for income over A$180,000 it’s $51,667 plus 45 cents for each dollar over $180,000.

‘‘New Zealanders and Australians can spend up to six months in each country, while maintaining their tax residency in their home country,’’ Croot explained.

‘‘If they step over that 183 days, then the other country can claim the tax residency.

‘‘You don’t pay double tax, whatever you pay in your home country is taken off the extra you need to pay in Australia, then you pay that extra to the Australian tax office.’’

Although, this income tax rule impacts people, not the Warriors, Croot said their understanding was that the club could be liable to compensate players and staff, which would have been around $5.5m.

‘‘All of our employment agreements and contracts are based in New Zealand and subject to New Zealand law,’’ he said. ‘‘When we established them with staff and players, we never envisaged a situation where we’d ask them to relocate to Australia for an entire season.

‘‘So that would mean they’d have a rightful conversation with us to say if they’re now going to be taxed in Australia at a higher rate, plus having to pay superannuation, we would have to gross up their earnings, so their net take home pay was the same as if they were continually based in New Zealand.

‘‘That argument is likely to be supported through New Zealand employment law.’’

If the Warriors had to pay players more money so that their take home pay was the same, it would have taken the club over the salary cap limit. The Warriors had been looking to resolve this issue ever since they relocated to Australia and after initially being told by the Australian Taxation Office that they wouldn’t bend the rules, they asked the NRL to help out.

Meanwhile, it was reported yesterday that the Warriors had given up any hope of being back in New Zealand in time to play the Dragons at Mt Smart Stadium on July 2.

While the team may stay in Australia beyond that date, meetings with the NRL are still ongoing and no decision will be reached until late next week.

As Stuff reported last month, one option being looked at is continuing to be based on the Central Coast, but making hit-and-run missions to Auckland to play games, as this reduces the risk of being stuck in New Zealand if the trans-tasman travel bubble temporarily closes.

‘‘There is the desire around coming home for a couple of games, we have to try to do everything we can to have a game back home,’’ Croot said.

‘‘If that is a fly in, fly out option, we’ll do everything we can to do that.’’