For his historic victory, Joseph will be rewarded with a prize money of S$1m.
The Multi-Million Dollar Award Programme (MAP), administered by the Singapore National Olympic Council, provides a cash payout to athletes who win medals at the Olympic, Asian, Commonwealth and South East Asian Games.
The largest gold medal award is S$1m, payable to the athlete who claims an individual gold medal at the Olympic Games. Under the MAP, it is mandatory for all athletes to plough back 20% of their awards for the Olympic Games to their National Sports Association, for future training and development. All awards are taxable.
|Picture credit: Joseph Schooling's Facebook|
Under s 14(1)(a) of the Income Tax Act,
“For the purpose of ascertaining the income of any person for any period from any source chargeable with tax under this Act…, there shall be deducted all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of the income…”Since the plough back of 20% of Joseph’s prize money to the Singapore Swimming Association is mandatory, the 20% plough back fulfils the conditions of “wholly and exclusively incurred” and “in the production of the income”. It follows that Joseph is entitled to a tax deduction on the mandatory plough back of $200,000 and he should only be taxed on the net prize money of $800,000.
For the year of assessment 2017 (income earned in 2016), the marginal tax rate applicable to taxable income over and above $320,000 is 22%. Hence, Joseph’s tax liability on his net prize money of $800,000 would work out to $150,150 (before tax reliefs).