Money Management 101 for Amateur Athletes

To start, be aware that the government has the right to audit your tax returns going back 6 years. If the government realizes that you have not declared certain amounts received, they are entitled to claim the tax on these sums plus interest, for the last 6 years! Here is some basic information that will help you avoid unpleasant surprises.

Grants and scholarships

The grants that you receive as an athlete – for example, from Fondation de l’athlète d’excellence du Québec, Fondation Nordiques, Fondation Sport-Études and from Investors Group – are taxable, i.e. you need to add them to your gross income.

The Quebec government does not collect tax on scholarships.

At the federal level, if a grant received for sports is recognized as a « scholarship », it remains taxable, except for the first $500 of your total scholarship. However, if you are a full-time student (you will receive the T2202A slip), the scholarships will be tax-free at the federal level.

Sponsorships

I am underage and I do not have a job, but I get money from sponsors. Do I have to file a tax return?

According to Revenu Quebec, if your boxing expenses (those for which you have receipts) do not exceed your sponsorship income, you do not need to file a tax return.

Let’s take for example Emily, 14, who has decided to take part in a training camp in Ireland. Her ticket costs $800. She talks about it with her dentist, who offers to sponsor her for half the price of the ticket. Emily does not have to file a tax return (because she does not make any profit), but she does have to give a receipt to her very kind dentist…

As for the competition costs incurred by parents, they are not tax deductible.

What document should I provide to my sponsors?

Whether you are a minor or an adult, you are required to issue a receipt that clearly explains the nature of the sponsorship you receive and the services (or the visibility) provided in exchange. To be valid, your receipt must include:

the name and mailing address of the sponsor
the name and mailing address of the athlete
the amount given in sponsorship
the services provided in exchange for the amount of money
(the details of the services and the period covered)

You must keep all supporting documents (for 6 years, as with your tax return) including your boxing-related expenses (equipment, physical preparation, massage therapy, hotel, transportation, etc.) as well as a copy of the receipts sent to your sponsors.

Are the sponsored goods (equipment, cooked meals, car, etc.) taxable?

No. So, it’s to your advantage to approach companies by asking them to provide you with goods or services rather than money. Once your « sports needs » have been fulfilled, nothing prevents you from seeking a sponsorship for something that is not related to your sport. You need a new mattress? Why not approach a manufacturer? Think about the things you would have to pay for, and approach the companies that provide them. Be creative! 😉

I have extra of money, hooray! What should I do with all (#sarcasm) this money?

Making your sporting career a priority also means being reasonable with your money to be ready for anything to come up at the last minute. Boxers who are lucky enough to travel with provincial or national team know it: opportunities to compete often come up at the last minute, or they are expensive … or both.

Last year, for example, members of the national team could not participate in the Continental Championships that took place in Honduras. Why? Because they only had two weeks to come up with $3000 for the pre-competition training camp and the Continental Championships. Whatever we may think about this, it’s the reality of boxing in Canada. So if you really want to excel, managing your money well is a sacrifice that you will need to make.

The wise thing to do is to keep your scholarships, tax credit and sponsorship money in a separate account, and to use it strictly for the expenses related to the practice of your sport.

Don’t pull a Mike Tyson

In Olympic boxing and in professional boxing, we can count on one hand the Quebec boxers who got rich thanks to the sport (maybe two hands, but I’m skeptical). That being said, if you’re successful, smart with your money and a bit thrifty, there are ways to put some money aside during your career.

Ever heard of TFSA?

No, I’m not pretending to be a financial advisor and, no, this is not an ad for Desjardins or National Bank. (As a side note, if you’re interested in personal finance, I highly recommend The Wealthy Barber Returnsfrom Ontarian David Chilton. It’s the perfect mix of dad jokes and great money management tips.

If your gross income – including sponsorships, scholarships and salary – is less than $20,000¹, the simplest and most beneficial way to invest your money is to grow it tax-free by depositing it in a TFSA or Tax-Free Savings Account. (The name isn’t very original, I grant you that).

From the age of 18, each person is allowed to contribute up to $5,500 to a TFSA. Withdrawing money from the TFSA costs nothing, but be careful! Whether or not you withdraw from this account, the maximum you can deposit this year remains $5,500. It is therefore important to differentiate between the funds you would like to invest over the long haul and the money you will need for your competition fees for the current year.

Did I lose you? Just remember that the TFSA exists. Then, when you have some money to put aside, I suggest you talk to a financial advisor. 🙂

A trust for athletes: a win-win option for National Team athletes²

LThe Amateur Athlete Trust can be helpful to national team athletes who earn income from their performances – it is not asigned to professional athletes. It is beneficial for national team athletes as soon as they start (or should start) paying taxes.

Essentially, the trust allows the tax to be deferred, so that you pay less tax in the end. This is a special account in which amateur athletes can deposit all performance-related income that would normally be taxable: sponsorships, cash prizes, appearances and speeches, certain scholarships, etc. As long as the money stays in the trust, and up to 8 years after retirement from the sport, no tax has to be paid on those amounts.

As with an RRSP, you only pay tax when you withdraw the money. But, unlike an RRSP, the trust has no investment limit. In addition, it allows you to accumulate your expenses related to the competition throughout your career; at the time of the withdrawal(s), you will be able to deduct them from the amounts withdrawn³, and thus further reduce the tax due.

I am far from being an expert in money management and I’m certainly not trying to make you an expert either. I can only hope that, if you manage to make a few dollars with boxing, you will be able to make the most of it!

In my next article, I promise, I’ll talk about boxing! 🙂

You might also like: Searching for Sponsors: What should you put in your sponsorship application?

¹ It is also likely that the TFSA will remain the best investment choice even with income over $20,000, especially if you believe that at retirement your salary will be higher than your current salary.

² Blue Bridge, whose spokesperson is skier Alexandre Bilodeau, is a company that offers athlete trust services.

³ The principle is the same as it is for self-employed workers who deduct their work-related expenses.