Remove this Banner Ad

Analysis Football Operations Soft Cap limit / Luxury Tax thread

🥰 Love BigFooty? Join now for free.

RussellEbertHandball

RussellEbertHandball

Flick pass expert
Veteran 10k Posts 30k Posts HBF's Milk Crate - 70k Posts Port Adelaide - Allir Allir Player Sponsor 2021 Port Adelaide - Kane Farrell Player Sponsor 2021 TheBrownDog Bring Back the Bars
Nov 16, 2004
85,462
142,505
SE Oz
AFL Club
Port Adelaide
Other Teams
The Mighty Blacks
I listened to AFL Coaches Association CEO Alistair Nicholson today on Whateley and he brought up that the AFL had introduced last year, that 20% of the head coaches salary can now sit outside the soft cap limit. Here are the changes announced in November. It allows for manipulation by all clubs but more so by the wealthier clubs.

Coach on a $1.2m package at a wealthy club 20% or $240k sits outside the club, and $960k inside the cap limit.
Coach on a $600k package at a poorer club 20% or $120k sits outside the club, and $480k inside the cap limit.

The staff relocation deductions/exemptions are a good move IMO, especially helping non Vic clubs get people away from Melbourne / Victoria.

www.afl.com.au

2024 Soft Cap Changes

The total Soft Cap Limit for 2024 has been increased to $7.275 million
www.afl.com.au www.afl.com.au

The AFL has today announced an increase to the Soft Cap limit for 2024 along with several other changes and new rebates, including a Senior Coach deduction.

An increase of $250,000 has been added to the Soft Cap for 2024, bringing the total Soft Cap Limit for 2024 to $7.275 million. The updated Limit also includes a $75,000 adjustment related to formerly deductible expenditure being transitioned into assessable expenditure.

A Senior Coach deduction has also been established allowing Clubs to deduct up to 20 per cent of their Senior Coaches’ salary, representing additional ‘spend capacity’ over and above the Soft Cap limit increase.

The Luxury Tax Framework has been revised with regards to the tax rates applicable on expenditure over the Soft Cap Limit of up to $1 million. Tax Rates for overages above $1 million remain consistent with the previous policy. These changes are designed to allow Clubs greater flexibility should they choose to exceed the Limit, up to a threshold that is not considered as materially impacting competitive balance.

A new underspend mechanism will be introduced from 2024, allowing Clubs to carry-forward up to $100,000 of any remaining Soft Cap capacity available under the Consolidated Soft Cap Limit into the future year. This underspend value may be rebated against assessable expenditure in excess of the Consolidated Limit and only in the following year.

AFL CEO Andrew Dillon said the changes were a result of an extensive consultation process with clubs, as well as recognising the important role senior coaches play.

“Following on-going discussions with Club Presidents, CEOs, Senior Coaches and Clubs, I am pleased to announce we have addressed a number of challenges and themes surrounding the soft cap.” Mr Dillon said.

“The changes are aimed at providing more flexibility and support as we continue to return back to a position more reflective of pre-covid times. “The establishment of the Senior Coach deduction recognises the prominent role they play as leaders and ambassadors for their Clubs and the sport. We know this was important and we worked closely with the Senior Coaches to achieve the best outcome we could for 2024.”

Clubs will also be able to support the relocation of football staff without materially impacting the Club’s Soft Cap position.

Top line summary

  • Increase of $250,000 in the AFL Soft Cap limit for 2024 – noting this is in-line with previous guidance. There will also be adjustment to the limit of an extra $75,000 related to a deduction previously applied to administrative resources now permanently being transitioned into assessable expenditure.
This will result in the AFL Soft Cap limit increasing to $7,275,000 in 2024. We can also confirm that the $200,000 Gather Round deduction will continue to apply in 2024 as well.

  • Senior Coach Deduction (20% of salary outside cap) – this recognises the prominent role Senior Coaches have as leaders and ambassadors for their Clubs and the code.
Clubs may take a deduction to the value of 20% of their normally assessable remuneration of the Senior Coach. This effectively represents additional ‘spend capacity’ over and above the Soft Cap limit increase outlined above.

  • Reduced luxury tax rates – providing more flexibility for Clubs that might want to spend above the limit and are more reflective of the pre-COVID settings.
The Luxury Tax Framework has been revised with regards to the tax rates applicable on expenditure over the Soft Cap Limit of up to $1M. Tax Rates for overages above $1M remain consistent with the previous policy. These changes are designed to allow Clubs greater flexibility should they choose to exceed the Limit, up to a threshold that is not considered as materially impacting competitive balance.
  • Underspend / overspend mechanism – this provides more flexibility and means Clubs won’t lose cap capacity if they spend under the limit in a particular season.
A new underspend mechanism will be introduced from 2023, allowing Clubs to carry-forward up to $100K of any remaining Soft Cap capacity available under the Consolidated Soft Cap Limit into the future year. This underspend value may be rebated against assessable expenditure in excess of the Consolidated Limit in the following year only.
  • Staff relocation deductions – deductions now made available for Clubs that are supporting the relocation of football staff without materially impacting the Clubs Soft Cap position.


I don't know how much the Luxury Tax rates for on expenditure over the Soft Cap Limit of up to $1M will now be, I will have to dig around, but below is the table with the rates before this announcement.

Its why clubs are reluctant to sack signed coaches before their final year starts and why it was so exorbitant for WCE to sack Adam Simpson who had a 2 year contract of about $1m a year and paying him out over 2 years would have cost a luxury tax of around $3.96m and around $3.6m if it was all in 1 year. There were media reports his payout would have been as high as $2.5m, which would have pushed the tax to $4.6m if paid out over 1 year and $5.2m over 2 years.


These tax rates were effective from July 2020 when the AFL went into panic mode about Covid, and worried it might have to go and borrow $600m, so they put it on the club's that you don't go and blow the soft cap or we will use the big stick, especially if you keep repeating the over spend.


2018 and 2019 soft cap limit was $9.70m
2020 and 2021 soft cap limit was $6.20m
2022 soft cap limit was $6.45m, a $250k was announced after this article said 2020-21-22 would stay the same
2023 soft cap limit was $6.95m, a $500k increase announced in July 2022 by the AFL
2024 soft cap limit was $7.20m, a $250k increase announced in July 2022 but was increased to $7.275m in November 2023 announcement.

The 2020 covid changes did allow for some exemptions as per paragraph from below article and tax rates tables also come from this Age article.

www.theage.com.au

Revealed: details of the AFL's new footy tax

Under the new tax, clubs that spend more than $500,000 over the cap on football spending would be slugged by a tax of 200 per cent for every dollar over that amount in the first year.
www.theage.com.au www.theage.com.au

There is also an allowance for medical, mental health and health staff – doctors, pyschiatrists and pyschologists and so forth – of $200,000 and a mandatory spend of $580,000 in medical and mental health. Thus a club can spend $780,000 paying doctors, mental health specialists and other health care professionals and effectively exceed the cap by $200,000 if it is allocated in that area.

1707197881716.png
 
Last edited:

Log in to remove this Banner Ad

Has anyone come across the new Luxury Tax rates that were reduced substantially in February 2024 from that July 2020 table I posted in the OP?? Those punitive compound tax rates were set during the panic of Covid uncertainity to put a big squeeze on clubs being irresponsible.

Also from the OP

  • Senior Coach Deduction (20% of salary outside cap) – this recognises the prominent role Senior Coaches have as leaders and ambassadors for their Clubs and the code.
I wonder if we have used this wisely. If Hinkley's package is 900K then $180k should be outside the cap. I assume we don't get access to that if we have to pay Ken out to his pay out figure, as it relates to the replacement coach's salary.


If we have to pay Ken out we should do what Hawthorn did with Clarko and pay him half during the 2024-25 AFL financial year and then pay the other half in late November 2025 and its included in the 2025-26 financial year.

Better way would be to pay him $300k in 24-25, $300k + CPI in November 2025 and then $300k + 2 x CPI in November 2026.
 
www.afl.com.au

League increases soft caps for AFL, AFLW

Changes to the soft cap policy have been announced
www.afl.com.au www.afl.com.au

By AAP
Sep 17, 2024, 5:04pm

THE AFL soft cap will increase by $700,000 by the 2027 season while the AFLW equivalent will lift by $300,000 amid a raft of changes to the policy.

[F*ckwits at AFL actually increase the cap by $900,000 over 3 years not $700,000, see bold bit below]

Clubs and coaches have long agitated to lift the soft caps after a series of cuts during the COVID-19 affected 2020 season.

The League announced the changes, which will gradually take place between 2025 and 2027, on Tuesday.

The AFL cap will increase by $400,000 to $7.675 million in 2025, then by an additional $250,000 in 2026 and 2027 respectively, to ultimately reach $8.175 million.

The AFLW cap will increase by $100,000 to $1.175 million next year with further increases of $100,000 in each of 2026 and 2027, to ultimately reach $1.375 million.

The AFL estimated in 2025 club expenditure in their football programs across AFL and AFLW would be in the range of $11-$11.5 million.

Clubs are already able to pay 20 per cent of their AFL senior coach's salary outside the soft cap, as of this year, and that will now also apply to their AFLW equivalents.

Clubs can also claim an additional $25,000 deduction from the cap for professional development in AFLW programs.

AFL and AFLW clubs who are required to travel from interstate to Victoria for the respective grand finals can claim an additional $50,000 deduction, while clubs' finals allowances have been lifted.

FULL STATEMENT ON SOFT CAP INCREASE
 
So movement of soft cap amounts summary pre and post Covid.

2018 and 2019 soft cap limit was $9.70m
2020 and 2021 soft cap limit was $6.20m
2022 soft cap limit was $6.45m, a $250k was announced after this article said 2020-21-22 would stay the same
2023 soft cap limit was $6.95m, a $500k increase announced in July 2022 by the AFL
2024* soft cap limit was $7.20m, a $250k increase announced in July 2022 but was increased to $7.275m in November 2023 announcement.
2025* soft cap limit will be $7.675m a $400k increase announced September 2024
2026* soft cap limit will be $7.925m a $250k increase announced September 2024
2027* soft cap limit will be $8.175m a $250k increase announced September 2024

* From 2024 20% of senior coaches salary can be outside the cap.
  • Senior Coach Deduction (20% of salary outside cap) – this recognises the prominent role Senior Coaches have as leaders and ambassadors for their Clubs and the code.
Clubs may take a deduction to the value of 20% of their normally assessable remuneration of the Senior Coach. This effectively represents additional ‘spend capacity’ over and above the Soft Cap limit increase outlined above.
 
Last edited:
The talk about the soft cap has cranked up the last month, driven by the senior coaches across the clubs, and talk of assistant coaches not getting paid enough and good ex players avoiding becoming assistants because they can make more money elsewhere. The clubs throw in their 2 cents worth when they get a shot.

Good example is Scott Camporeale. Left coaching just before the covid cuts and now makes more money in the construction industry + paid to do commentory work in the media, without the stress of an AFL club assistant coaching job. You can tell from his analysis in the media, that he should be working at an AFL club.

I've heard the last week on one of the footy shows that a couple people reckon the Soft Cap amount should go up by at least CPI.

CPI isn't enough if you apply it to the post covid cut amounts of $6.2mil in 2020 and 2021.

However if you apply CPI to the 2019 amount of $9.7m, then it would be enough.

Here is a chart of Soft Cap changes vs Salary Cap changes since 2015 when the Soft Cap was introduced. The Soft Cap was reduced to $6.2mil in 2020 and didn't increase in 2021 due to uncertainity of Covid effect on the economy and the game.

Highlighted in gold is the years that new TV/Media deals started, so the players always get a big increase in that first year and then an estimated CPI increase after that.

For the 2025-31 deal, the 7 Network announced to the ASX that the amount they are paying, was a 14% increase in 2025 over the 2024 fee they paid, and then a 2.6% compounded increase every year after that.

I calculated that New Corp/Foxtel paid a 14% increase on their 2024 fee paid, and then 3.6% compounded increase each year, given News Corp owned 65% of Foxtel when they signed the deal in September 2022, and that media reports said News Corp were paying for 65% of the deal and 7 paying for 35%.

In this deal, News Corp rather than Telstra purchsed the mobile rights and have onsold some rights to Telstra. News Corp did this to protect and increase their revenue primarily from Kayo as more games were put behind a paywall or an increase in delayed games.

The TV fees were cut for 2020-21-22 due to covid and the new 2 year deal the AFL negoiated in late 2020, for 2023 and 2024, was basically the old 2022 amounts 7 and News Corp paid, increased by 3% CPI for both years.

I have highlighted 2024 in green as the changes mentioned in above posts started in 2024 with 20% of the senior coaches salary exempt from the cap calculation. I have used $800k to guestimate a true cap amount as new coaches are on about $600k and older coaches $1mil+.

I have ignored ASA amounts as they are paid by the club and sponsors and some players get almost nothing as an ASA payment.

1747106464282.png

In the chart below I have applied the following % increase to Soft Cap amount:

1) if the increases starting in 2022 were the same as the Salary cap increases,
2) if the increases starting in 2021 were by CPI, using the September CPI Weighted average of eight capital cities,

3) if the Soft Cap after the 2020 drop wasn't frozen in 2021, and replicated the Salary Cap increases.


1747106865535.png

CPI increases would have left the Soft Cap increases a bit behind what the AFL has granted.

Matching the Soft Cap increases by Salary Cap increases would mean the clubs would have to find another $1.3mil in 2025 to pay coaches and other expenses above the effective cap amount when the 20% of the senior coaches salary is added to the total.

If the Soft Cap only had 1 year of reduction like the Salary Cap in 2020 and then replicated the Salary Cap increases, then the clubs in 2025 would be paying $5.7m more than they have to pay in 2025 and the AFL would have to fund $3mil - $4mil of that increase with increased distributions. No way is the AFL going to give the clubs an extra $50-$70mil a year extra.

The calculation in the chart below, is what the Soft Cap would look like if just basic CPI was applied to 2019 figure of $9.7mil compounded, ie to see what the 2025 figure should be with no decrease in real terms is:

So the Soft Cap in 2025 should be $11.887mil and not $7.835mil to have mainted its real value in 2025 of the 2019 value.

Who would pay this $4mil difference? If its 100% by the clubs then probably 14 or 15 clubs would be making losses if you take out government grants received for new facilities in their P&L's, and most would have very little cash in the bank, most would be using an overdraft.

If it was split with the AFL 50/50 then the AFL has to give the clubs an extra $36mil a year in distributions. They wouldn't like to do that which would mean cuts to head office and pet projects.

Why bother about this?? Why spend so much time on this??

Its because when you watch our club play and see our shit skills and wonder why don't we employ better kicking coaches, skills aquistions coaches and development coaches, its because we are $4mil behind where we should be compared to 2019 in the Soft Cap spending.

When you wonder why haven't we employed a better goal kicking coach like Ben Perkins - its because we are $4mil behind in the Soft Cap spending.

If you are wonder why don't we have better medical and fitness/high performance staff, its because we are $4mil behind in Soft Cap spending.

If you wonder why our SANFL coaches and assistant coaches are average and not best possible, its because we are $4mil behind in Soft Cap spending.

We can spend more than the cap, but we have to pay a tax on the overspend. We aren't prepared to do it.

You might say well all clubs are subject to this restriction and whilst this is true, as we can be seen with the Camporeale example, if good people have left the footy industry and found better paid positions in other sports in Oz or overseas, or in other parts of the private sector, then we will struggle to get the best people. So yes it impacts the whole AFL industry and if you are stuck with less than average, its then hard to get ahead.

No other major sports I'm aware of, has a league wide cap on what clubs can spend on their core product.

WCE are mad not to spend more than the cap and pay the tax. The WAFC probably pressure them to not overspend and reduce the royalty WCE pay to them, but if they take the long term view, then the quicker WCE get out of the shit the higher their royalty payment will be.

WCE have built their $60m new facility and in their 2024 accounts they had $10mil cash in the bank and $52mil in short term investments - interest bearing and shares.

What's the use of that money if they are rubbish on the field?? They can't pay a dividend to anyone.

Spend $2-$3mil over the cap for 2 or 3 years and get the best possible development coaches and medical and fitness staff, better recruiting staff to dig yourself out of your hole. We aren't in the financial position to be that ballsy and say stuff it, we will spend what is needed, not what the AFL wants to restrict us to.



1747108269449.png
 
Last edited:
RussellEbertHandball said:
Why bother about this?? Why spend so much time on this??

Its because when you watch our club play and see our shit skills and wonder why don't we employ better kicking coaches, skills aquistions coaches and development coaches, its because we are $4mil behind where we should be compared to 2019 in the Soft Cap spending.

When you wonder why haven't we employed a better goal kicking coach like Ben Perkins - its because we are $4mil behind in the Soft Cap spending.

If you are wonder why don't we have better medical and fitness/high performance staff, its because we are $4mil behind in Soft Cap spending.

If you wonder why our SANFL coaches and assistant coaches are average and not best possible, its because we are $4mil behind in Soft Cap spending.

We can spend more than the cap, but we have to pay a tax on the overspend. We aren't prepared to do it.
Click to expand...

It's always a matter of distribution. It's easier to do it with more money, but the challenge is the same.

We've made choices for not spending on "a better goal kicking coach", on "better medical and fitness/high performance staff", and on "best possible SANFL and assistant coaches". We decided to cut our losses there.

Instead, for instance, we could have spend less on the top of the pyramid and more on the base. Moneyball is precisely finding ways of spending smarter; of getting more from less. It's neither easy nor simple, but it's possible.
 
GremioPower said:
It's always a matter of distribution. It's easier to do it with more money, but the challenge is the same.

We've made choices for not spending on "a better goal kicking coach", on "better medical and fitness/high performance staff", and on "best possible SANFL and assistant coaches". We decided to cut our losses there.

Instead, for instance, we could have spend less on the top of the pyramid and more on the base. Moneyball is precisely finding ways of spending smarter; of getting more from less. It's neither easy nor simple, but it's possible.
Click to expand...
Yep I have written in here since about 2007 when I started doing stuff on salary caps, that Moneyball is all about the little guy having to be more effective and efficient than the big guys rather than about stats, to compete with and beat the big guys.

We had a thread on Moneyball starting with the release of the movie in Oz in 2011 and the last post is in December 2016 as in the last post I put up and article from the Australian Financial Review - the Oz equivalent of the Wall Street Journal or Financial Times - where Lewis wrote a new follow up book to Moneyball.

"Shortly after the books release and success he was told of where the concept of biased valuations came from. A review of Lewis's Moneyball in The New Republic by University of Chicago economist Richard Thaler and Bloomberg's Cass Sunstein gently took Lewis to task for failing to recognise the origins of the cognitive errors he described in the book. The kinds of mistakes made by the scouts and managers in Moneyball had already been thoroughly described by Amos Tversky and Danie Kahneman, who won the Nobel Prize in economics the year before Lewis' book was published. Lewis was a bit embarrassed by this and has spent the next 13 years atoning for a lack of understanding the origin of the theory with the production of his latest book."

Moneyball

If you have read the book or know of it, this is a heads up that tomorrow 10th November the movie based Michael Lewis' great book about the Oakland A's 2002 season and the way they recruited new players at the start of it, opens around Oz. Brad Pitt will be playing general manager Billy Beane...
www.bigfooty.com www.bigfooty.com
 
Last edited:
Over the next few months the AFL Commission - not the executives, although they will make a recommendation, but lets hope the clubs also get to present to the Commission - will determine how much the soft will increase by over previously announced amounts, and if the 20% of head coaches salary outside the cap will increase by, potentially up to the full 100%.


 
The increases officially confirmed last week

www.afl.com.au

AFL Soft Cap policy changes

AFL Chief Executive Andrew Dillon has announced further increases to the 2026 and 2027 Football Department Soft Cap
www.afl.com.au www.afl.com.au

  • Updated Soft Cap Limit increases for 2026 ($750,000) and 2027 ($350,000)
  • 20% of Senior Assistant or Coaching Director salary to sit outside the cap
  • Senior Coach marketing service agreements up to $100,000 to sit outside cap
  • AFL to invest $500,000 per year into AFL coach support across increased professional development grants and career transition programs.
AFL Chief Executive Andrew Dillon has today announced further increases to the 2026 and 2027 Football Department Soft Cap.

The AFL Soft Cap Limit will increase by $750,000 in 2026 (an extra $500,000 on the previously announced increase), and a further $350,000 in 2027 (an extra $100,000 on the previously announced increase).

In addition, introduced from next season, 20% of the most Senior Assistant Coach or the Coaching Director’s salary will sit outside the cap. This is in addition to the 20% of the Senior Coach’s salary that currently sits outside the cap.

From 2026, clubs will also be able to provide marketing services agreements to their Senior Coaches (funded by Club sponsors or partners) outside of the Soft Cap, up to a limit of $100,000 per year. There will also be increased capacity to provide Finals bonuses for coaches and football department staff.

The combined impact of these changes for each Club is estimated to be an additional $1.4m of spend capacity per club over 2026-27, over and above the existing planned increases.

The AFL will also invest $500,000 a year to support AFL coaches in increased professional development grants and career transition programs

From above posts
2025* soft cap limit will be $7.675m a $400k increase announced September 2024
2026* soft cap limit will be $8.425m a $500k increase announced June 2025, $250k increase announced September 2024
2027* soft cap limit will be $8.775m a $100k increase announced June 2025, $250k increase announced September 2024

  • From 2024 20% of Senior Coaches salary can be outside the cap.
  • From 2026 20% of Senior Assistant Coach or the Coaching Director’s salary can be outside the cap.
  • From 2026 $100k marketing services agreements to their Senior Coaches (funded by Club sponsors or partners) sits outside of the Soft Cap.

At the end of 2027 the Soft cap amount will still be $925k behind the 2019 figure of $9.7m. If it had kept up with CPI, it would be $11.89m in 2025 and approaching $12.5m in 2027. If it kept up with player Salary cap increases it would be about $14m in 2027.

Most clubs couldn't afford that extra $5mil (ie would be making losses) without the AFL probably paying 2/3rds or more of that extra amount.
 

Remove this Banner Ad

Finally found out what the first year of soft cap tax is after the adjustments were made in 2024. This graphic was on Midweek Tackle tonight. The reason they have a Carlton logo is because they were talking about Voss being paid out $1.5mil.

So in the OP the AFL story said - The Luxury Tax Framework has been revised with regards to the tax rates applicable on expenditure over the Soft Cap Limit of up to $1 million. Tax Rates for overages above $1 million remain consistent with the previous policy.

So over $1mil its a 200% tax.

So if a club spends $700k over the soft cap limit their tax bill is

$0-100k = $25k
$100k-250k = $125k
$250k-500k = $187.5k
$500k-700k = $200k

= $537.5k tax.


1752588079762.png


Its why I have written several times, spend the money and employ decedent assistant and development coaches to support Josh Carr. I said be prepared to pay $500k tax if need be, so that means spend almost $700k over the cap.

I looked up the 2025 AFL Record Season Guide book to see how many assistants each club has listed as employing;

Adel - lists 10 coaches inc Burgo
Bris - lists 5 inc Dew as forwards coach
Carl - lists 10
Coll - lists 4, but they have a lot more than 4.

Esse - lists 8 inc David Rath - now is innovation and strategy coach rather than just kicking and skills acquisition.
Freo - lists 10
Geel - lists 5
GC - lists 7
GWS - lists 9 inc Jason Davenport as head of development

Hawks - lists 8
Melb - lists 7
North - lists 9
Port - lists 5 Carr, Cornes, Goldsack, Hartlett and Jason Williams

Rich - lists 8
Stk - lists 7
Syd - lists 6
WCE - lists 8
WB - lists 8
 

Remove this Banner Ad

Analysis Football Operations Soft Cap limit / Luxury Tax thread

Similar threads

parano1a
Mega Thread Port Forum General AFL Thread Part 31
175 176 177 178 179
Replies
4K
Views
175K
soafraid
S
ClintEastwood
Certified Legendary Thread Sack(ed) Hinkley 15 - The End
87 88 89 90 91
Replies
2K
Views
92K
Jack_1870
Jack_1870

🥰 Love BigFooty? Join now for free.

Back
Top