Written by Principal, Jennifer Tutty.
Are you in the business of looking after talent?
Whether you are working with influencers, models, musicians, writers, actors, sports stars, celebrities or other types of talent, there’s been a heap of movement in Australia over the past few years when it comes to repping talent.
From the boom of influencer marketing, stricter social media advertising laws, the taxing of gifts, payment of super to talent and to the delicateness of managing talent’s various IP assets online – being a talent agent has certainly got more complicated from a legal perspective.
In this article we aim to get every Australian talent agent across the hot legal issues in 2023, and to explain what it looks like to run a proactive and legally compliant talent agency despite all the complexities.
But before we get started…
In this blog, we will refer to:
– “agencies”, an “agency” or an “agent” as any type of talent agency including model agencies, influencer agencies, music agents, actor agents and sports agents;
– ‘talent’ as any type of talent including models, musicians, influencers, sports people and actors; and
– “clients” as people who hire talent to work on projects (i.e. brands, businesses venues, media companies and more).
1. Paying Super to Talent
Most agencies are aware that if a client hires talent as an employee, the client will need to pay the talent superannuation at the statutory rate (which is currently sitting at 11%).
But what about if a client hires talent as a contractor? This is where there is a lot of confusion in the industry.
Do Talent get Super when Working As a Contractor?
At law in Australia, businesses must make super contributions to their contractors if they pay them:
– Under a verbal or written contract that is wholly or principally for their labour – that is, more than half the dollar value of the contract is for their labour;
– For their personal labour and skills – which may include physical labour, mental effort or artistic effort – and not to achieve a result; and
– To perform the contract work personally – that is, they must not delegate.
A lot of talent will therefore be entitled to super when hired by clients as contractors.
Businesses also have to pay super for contractors regardless of whether the above test is met for the following occupations:
– Sportspersons, artists or entertainers paid to perform, present or participate in any music, play, dance, entertainment, sport, display or promotional activity, or similar activity.
– Persons paid to provide services to support those who perform, play sport or promote these activities.
– Persons paid to perform services related to the making of a film, tape, disc, television or radio broadcast.
As you can imagine, the above occupation list will catch a lot of talent including influencers, musicians, entertainers, models, actors and sportspersons.
What If Talent Is Contracting Via a Company?
An individual contracting through a company will not be deemed an employee for superannuation purposes. So clients will not be required to pay super to talent contracting via a company.
Who Has to Pay Super to The Talent?
It is usually the client’s legal responsibility to make super payments to the talent’s super fund in relation to projects.
However, if an agency is deemed a ‘intermediary’ under the ATO’s Superannuation Guarantee Ruling SGR 2005/2, and the agency has a contractual entitlement to collect super from a business on behalf of the talent, the agency may legally collect the Talent’s super along with the Talent’s fee and then in due course, pay into the Talent’s super fund.
*NB – We must note that at the date of writing the ruling above is ‘under review’, so things might change and we will keep you posted.
How Do Great Talent Agents Consider Super When Looking After Talent?
Great talent agents:
– Firstly, know the law when it comes to super and talent.
– Want the talent they represent to be saving for their retirement like any other worker in Australia.
– Inform clients they need to pay talent super where legally required.
– Push for super to be ‘on top’ of talent fees.
– List the super amount in talent contracts.
– May provide an additional service (where legally entitled to) where they collect super from clients on behalf of talent.
You can check out more about employment law, super and tax matters for talent on our blog entitled “Hiring an influencer. What agencies and brands need to know about employment law, super and tax”.
2. Understanding The Tax Implications Of Exchanging Gifts Or Free Products For Services
Influencer marketing and the exchanging of social media posts for gifts and free products has boomed over the past few years. Despite its popularity, there is still a lot of unknowns surrounding these sorts of transactions, especially for talent and their agents.
What Key Issues Arise When Talent Get Paid With Gifts Or Free Products?
As the person responsible for sourcing, negotiating and locking in talent agreements with clients, great talent agencies know the answers to the following key issues:
– Whether talent are required to declare non-cash payments (such as gifts and free products) as income in their tax return.
– Whether influencers need to pay tax on non-cash payments such as gifts and free products.
– Whether it is actually worth providing services on a particular campaign for gifts or free products.
Bartering Transactions And The ATO
The ATO tends to take the view that:
– When a talent engages in sponsorships (i.e. social media promotional activities) for a business; and
– is paid in non-cash payments (i.e. in gifts or free products),
this is likely to be considered a ‘bartering transaction’.
The ATO also makes it clear that ‘business transactions involving bartering or trade exchanges are subject to the same income tax and GST treatment as normal cash or credit transactions’.
Therefore, if a talent has received non-cash payments via a bartering transaction, then the talent needs to discuss with their accountant whether they should declare the value of the non-cash payments as part of their taxable income for the year.
Failing to comply with tax laws and tax reporting requirements, can result in massive tax debts, financial penalties and even criminal charges for talent.
How Are Great Talent Agents Helping Talent Navigate Bartering Transactions?
Great talent agents:
– Should be advising talent that accepting unsolicited gifts and free goods and then posting about them online may have significant legal and tax consequences.
– Are making sure their talent have a skilled accountant to help work out whether to declare the value of gifts or free products as taxable income.
– Are helping talent to consider and prepare (in consultation with their legal and accounting team), a ‘gift policy’. The ‘gift policy’ can outline when and how the influencer will accept (or reject) gifts and free products, and when they will post (or not) about gifts and free products online.
You can learn more about bartering transactions at our blog entitled “Do I Have To Pay Income Tax On Gifts and Other Free Products? A Guide For Influencers”.
3. Complying with Key Advertising Laws: The TGA Code and AANA Code
In Australia, there are 2 relatively new key advertising codes that agencies, talents and clients need to be across, the TGA Code and the AANA Code. There are serious consequences for agencies, talent and clients who fail to comply.
What is the TGA Code?
In January 2022, the Therapeutic Goods (Therapeutic Goods Advertising Code) Instrument 2021, Schedule 1 (TGA Code) came into force. Its purpose is to establish requirements for advertisements (directed to the public) of therapeutic goods, to protect the public from false or misleading advertising and the risk this can pose to public health. You can find a copy of the TGA Code here.
Are Talent Agencies Covered By The TGA Code?
Talent and clients promoting and advertising therapeutic goods will be covered by the TGA Code. But what about talent agencies who are working behind the scenes as opposed to directly promoting such goods to the public? Well, this comes down to whether talent agencies are ‘advertisers’ under the TGA Code.
An “advertiser” is defined in the TGA Code as any person (or entity) who:
(a) Advertises, by any means, therapeutic goods; or
(b) Causes the advertising, by any means, of therapeutic goods.
This means that a talent agency, who engages or facilitates any talent (i.e. an influencer) to promote therapeutic goods, may also be captured by this definition, as they have “caused the advertising” of the goods.
What Happens if You Don’t Comply with the Code?
The promotion of therapeutic goods is taken very seriously. If you breach the TGA Code, the TGA can:
– Direct you to take down the advertisement; and/or
– Bring criminal and civil legal claims against you.
There are also significant fines and penalties that can apply.
What is the AANA Code?
In February 2021, the Australian Association of National Advertisers’ (AANA) new Code of Ethics (the Code) came into force. Its purpose is to ensure that any advertisements or marketing communications are legal, honest and truthful. You can find a copy of the Code here.
Are Talent Agents Covered By The AANA Code?
Talent and clients will be covered by the AANA Code in connection with advertising materials relating to them and their products over which they have a reasonable level of control (i.e. social media advertising).
However, as the AANA Code applies to advertising which is undertaken by, or on behalf of an advertiser or marketer, talent agencies who are creating and sharing advertising and marketing materials on behalf of talent have obligations over materials over which they have a reasonable level of control. So, it’s possible that talent agencies may be covered by the AANA Code in relation to certain campaigns their talent work on, if the agency is actively involved in creating and/or sharing advertising materials.
What Happens if An Advertiser Breaches the Code?
Advertisers’ compliance with advertising laws and codes (including the AANA Code) in Australia is self-regulated.
The AANA develops and updates advertising codes and its sister organisation Ad Standards (website here) receives and adjudicates advertising complaints from members of the public.
If a complaint is raised to Ad Standards, the panel may report it to the relevant government agency or industry body. This includes the Australian Competition and Consumer Commission (ACCC), which enforces the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth).
The ACCC has the power to order infringement notices (i.e. fines) where an advertiser breaches the Australian Consumer Law. Alternatively, and for more serious breaches, the ACCC may choose to issuing court proceedings against the infringer and seek further remedies including injunctions, financial penalties, compensation orders and disqualifications of the advertiser’s directors.
How Do Great Talent Agents Consider The TGA Code And AANA Code When Dealing With Talent?
Great talent agents:
– Have read and generally understand the TGA Code and the AANA Code.
– Have a lawyer working in the space to call on with questions about the codes.
– Want to help talent understand and comply with the codes.
– If involved in creating campaigns, raise issues of non-compliance with the codes.
– Suggest talent or client seeks a pre-publication legal clearance on more high stakes advertising campaigns.
Read more about the AANA Code here at our blog entitled “#Ad: The New Rules of Social Media Advertising That Influencers Need to Know”
You can check out more about the TGA Code on our blog entitled “What is the TGA Code and What Does it Mean for Brands and Social Media Influencers?”
4. Removing Unfair Contract Terms From Certain Contracts (They’re Now Unlawful)
As of 9 November 2023, the unfair contract terms regime will change in Australia. This change will apply to all standard form consumer contracts and small business contracts entered into or renewed/varied from 10 November 2023.
Do The Changes Effect Talent Agencies And Talent Agreements?
Where an agency uses a standard form contract and either party meet the following criteria, you will need to have your contracts reviewed to ensure they do not include any unlawful ‘unfair contract terms’:
– Contracting party employs less than 100 people; or
– Contracting party has a turnover of less than $10 million for the last financial year.
Agency representation agreements (between agencies and talent) (Agency Agreements) may be deemed a ‘standard form contract’ if they are presented to talent on a take it or leave it basis, where agencies insist on leaving in ‘unfair terms’ or the talent does not have a meaningful ability to negotiate terms.
In addition, where talent presents standard form services contract to clients for campaign, these sorts of contracts may also be deemed standard form contracts.
What Action Should Talent Agencies Be Taking Right Now?
Although not all Agency Agreements will necessarily fall under the regime, as best practice and to demonstrate agencies operate with ethically and fairly, talent agencies should be getting their lawyer to review their Agency Agreements to ensure that they do not include any ‘unfair contract terms’.
Examples of ‘unfair contract terms’ that are typically found in Agency Agreements in our experience here at Studio Legal include:
– Automatic renewal clauses;
– One sided right to extend contract;
– One sided indemnity clauses; and
– One sided termination clauses.
Agencies should also be ensuring that each of their talent’s client facing talent agreements are reviewed and updated to ensure that the talent complies with the upcoming changes to unfair contract terms.
What Can Agents Do To Improve Talent Contracts Provided By Clients?
It’s common for clients to provide talent with their standard form talent agreement. These can be rife with unfair contract terms.
Being across the law of unfair contract terms, will enable agencies to strike out unreasonable terms from these contracts. Agencies now have better leverage to negotiate better contracts for talent and can reduce the risk of talent being taken advantage of by bigger businesses who have traditionally had a lot of bargaining power.
How Do Great Talent Agents Manage Changes To Unfair Contract Terms?
Great talent agents:
– Know that unfair contract terms in certain standard form contracts will be unlawful come 9 November 2023.
– Are updating their talent agency agreements to remove all unfair contract terms, even if they might not fall into the definition of a standard form contract.
– Ask clients to remove unfair contract terms from talent agreements when negotiating opportunities for their talent (resulting in better deals for talent).
– Speak up to clients who insist on keeping unfair contract terms in talent agreements.
You can learn more about bartering transactions at our blog entitled “Unfair Contract Terms Reform is coming. Will your business be ready?” here.
5. Knowing How to Protect and Commercialise Talent IP
When working as a talent agent, it’s important to have a great grasp on how intellectual property laws apply to your clients.
Talent IP Assets
Talent can create and own a myriad of IP assets from trade marks (i.e. brands, logos and slogans), copyrights (i.e. photos, sound recordings, artworks videos, written material and more) to designs, patents, confidential information and more.
When negotiating talent agreements with clients, agencies should be mindful about the extent of IP rights being given from the talent to the client. For example, agencies should encourage talent to retain ownership of IP assets created and grant clients a licence to use the IP assets for a certain purpose. Agencies should also be aware that if the clients wants to ‘buy-out’ and own all of the IP Assets throughout the world and in perpetuity, then the fees payable to the talent should be a lot higher.
IP Assets Owned By Others
It’s also helpful for agencies to educate talent on how to respect the IP rights of other people. For example, if talent wants to use music or images from a third party, they will generally need to get their written permission (rather than just crediting them on the post).
What Do Great Talent Agencies Do To Protect And Maximise The Value Of Their Clients’ IP?
Great talent agencies:
– Are across the different types of IP such as trade marks, copyright, designs, patents and confidential information.
– Understand generally how copyright law works in Australia.
– Prompt talent to protect and register their IP assets (for example by registering their trade marks).
– Know the difference between licensing and assigning IP rights from talent to clients.
– Understand how IP assets can be licensed in parts and for certain purposes to maximise fees back to the talent.
– Encourage talent to respect the IP of other people.
6. Reducing Agency Liability Through Effective Contracting, Insurance And The Right Advisors
What Is An Agent At Law?
An agent is a person who has been legally authorised to act on behalf of another person (i.e. known as the principal). In Australia, a duly appointed agent has the capacity to create legal relations between the principal and a third party.
Agents can be appointed for many different purposes and when dealing with talent, it may be to procure, negotiate and sign contracts for work opportunities.
Why Is An Agency Agreement So Important?
Where an agency is acting as an agent for talent, it’s super important to ensure they have a carefully drafted agency agreement with the talent (Agency Agreement).
The Agency Agreement will set out the legal relationship between the agency and the talent and will provide written authority to allow the agency to do certain things on behalf of the talent (for example, negotiate deals, sign deals and use and authorise the use of their IP).
If an agency acts in accordance with the scope of their authority in the Agency Agreement, the agency should generally not be held liable for the actions of the Talent.
What Should Agencies Know About Talent Agreements With Businesses?
It’s VERY important to make sure agencies only sign talent agreements on behalf of the Talent as the Talent’s duly authorised agent and not as a contracting party.
If an agency signed as a contracting party and supplied the services of the Talent to a business, the agency will be on the hook to the business if the Talent breaches the obligations in the contract. This is NOT a legal risk an agency needs to or should take.
It is important to get the right insurance to protect your business including public liability and professional indemnity insurance. Make sure speak to an insurance broker to help you get the right coverage.
Every talent agency needs a good accountant and lawyer specializing in working with talent and talent agencies.
Here are the key things every great talent agency should be doing in 2023.
- Make sure businesses hiring their talent pay their talent super when legally required.
- Be across and monitor talent compliance with the TGA Code and the AANA Code.
- Delete unfair contract terms from their talent agency agreement and client facing talent contracts.
- Help talent understand that they may have to pay tax on free gifts and products.
- Help talent to develop a gift policy which can be used to assess whether talent should exchange services for gifts or free products.
- Help talent better commericalise their IP assets through retaining ownership, limited usage licences and additional fees for ‘buying out’ IP assets.
- Only sign client facing talent contracts on behalf of the talent as the talent’s authorised agent (and never as a formal contracting party).
- Make sure they have an A class advisory team who specializes in talent and agency land (made up of an accountant, lawyer and insurance broker).
If you are an agency working with talent, and wish to discuss, workshop or seek legal support on any of the above hot issues, please contact us through our online form or via email at firstname.lastname@example.org.
Written by Principal, Jennifer Tutty.
Published 23 October 2023.
The information in this article is of a general nature. It does not constitute formal legal advice and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.