Inside the huge PNG salary edge you don’t know about... and INSANE team it could create

The huge difference in NRL salaries pre and post-tax could offer PNG an extraordinary advantage as they build their inaugural roster – in a way that has largely escaped notice.

Watch every game of every round of the NRL Premiership LIVE with no ad-breaks during play on FOX LEAGUE, available on Kayo Sports | New to Kayo? Join now and get your first month for just $1.

Jarome Luai just made headlines as the Chiefs’ inaugural marquee signing and will reportedly get roughly the same salary he’s on at Wests Tigers: $1.2 million per season, which will all go into his pocket thanks to PNG’s special tax-free status.

Per the Australian Taxation Office’s tax calculator, that’s an extra $506,138 per year for Luai’s bank account, rather than government coffers. In Australia, in real terms, Luai takes home ‘only’ $700,000 per year.

Giving players tax-free money, assuming that they would still get nearly the same gross contract figure as with an Australian club, has been hailed as PNG’s major edge in luring talent.

But as the Chiefs move to complete their roster, there exists a unique opportunity to still give every recruit a significant pay rise while at the same time copping a far lower hit against their salary cap.

That would be achieved by splitting the difference between a taxed and an untaxed salary. If every player got the same dollar-for-dollar amount as on their Australian contract, the Chiefs’ salary cap would simply fill up in the same way as a regular club.

But if Luai, for example, was signed for $900,000 per season in PNG, he would still pocket $200,000 more than he would on a $1.2 million deal at an Australian club, due to paying no tax. The Chiefs could retain an extra $300,000 in salary cap space by paying $900,000 rather than $1.2 million, with Luai still elevated – in real, net income terms – to the status of the NRL’s highest-earning player. If Luai was to earn a net salary of $1.2 million in Australia, his club would need to cop a salary cap hit well above $2 million.

That extra $300,000 in cap space, incidentally, would almost entirely pay for the reported salary of Alex Johnston, rugby league’s all-time leading tryscorer and likely Chiefs recruit.

Everyone wins from the $500,000 discrepancy on the marquee salary, relative to an Australian club.

If you apply that method across an entire roster … the potential results are scary.

READ MORE

‘Complete and utter rort’: Ex-Wests Tigers boss unloads on PNG... and cops stinging Luai clause comeback

‘He could’ve got more’: Jarome Luai contract twist revealed as PNG Chiefs detail ‘shock’ signing

‘Ridiculous money’: Bombshell $2m reality hits rivals as Luai signs with PNG in major coup

Below is an entirely hypothetical starting line-up; it is not based on off-contract players, or suggesting who PNG may actually sign, but rather assembled to demonstrate the Chiefs’ potential signing power. It does not take the absolute best or highest-paid player in every single position – but isn’t far off.

The salary figures are primarily taken from CODE Sports’ most recent NRL Rich 100 list, and the net income after tax is alongside. Luai and Johnston are included per their actual PNG terms. The net salaries after tax are calculated via the ATO calculator, with minimal rounding.

The final total takes in the net salaries. The current NRL salary cap is $11.8 million and in 2028, when PNG enters the competition, is expected to be about $12.5 million.

1. Dylan Edwards $850,000 - $500,000

2. Xavier Coates $6o0,000 - $360,000

3. Bradman Best $725,000 - $430,000

4. Stephen Crichton $850,000 - $500,000

5. Alex Johnston $325,000 (reported PNG salary)

6. Jarome Luai $1.2 million (reported PNG salary)

7. Nathan Cleary $1.3m - $750,000

8. Lindsay Collins $725,000 - $430,000

9. Mitch Kenny $500,000 - $310,000

10. Moses Leota $675,000 - $405,000

11. Liam Martin $770,000 - $460,000

12. Hudson Young $650,000 - $390,000

13. Isaah Yeo $850,000 - $500,000

TOTAL: $6,560,000

Cleary would fit into the Luai category of being an exceptional signing; for a revised figure, we will include his gross income of $1.3 million. We will also add an extra $100,000 per player (x10), which goes straight into their pocket.

REVISED TOTAL: $8,110,000

Against the current salary cap of $11.8 million, that represents 69 per cent of cap space; a normal amount to spend on a starting 13.

The additional $100,000 per player may be a modest working figure, but added earnings could be significantly boosted by tax-free third-party agreements, and Chiefs players will also be provided with luxury housing at an island resort, at the club’s expense.

Former Melbourne Storm and Wests Tigers centre Justin Olam reportedly made more than $300,000 per year from TPAs with PNG-based companies at the height of his career. Those companies will have access to much bigger names with the arrival of the Chiefs, and stars are set to cash in.

And who would not want to play in that team. It is an Origin-standard line-up playing on a weekly basis, somewhat reminiscent of the mighty Brisbane Broncos teams of the 1990s.

From that starting 13 figure, there is $3,690,000 remaining for the other 17 players in the top 30; working with the current salary cap figure of $11.8 million, given that we are working with current salaries.

That splits to about $217,000 per player, against a current NRL minimum wage of $160,000. Again, that is tax-free money – and PNG may have yet another advantage, in terms of the number of players on low wages.

The ultimate goal for PNG is to build a team primarily made up of local players. That won’t be feasible for some time, but the process will be turbocharged by the introduction of an NRL-calibre pathway for a nation of wonderful raw talent and the club will want a healthy number of local players in the inaugural squad.

Initially, most local players may be minimum-wage prospects; which is no bad thing. The median monthly income in PNG, where more than 80 per cent of the population lives rurally and outside of the formal economy, is about 600 kina — $193.

A LEADING AGENT’S VIEW

Foxsports.com.au asked NRL 360 host, rugby league great and current player agent Braith Anasta about some of the strategic factors at play with the PNG roster build.

He said that Luai’s dollar-for-dollar contract would likely be the outlier, with the club able to target other top stars within the salary sweet spot presented by the absence of tax.

“Jarome is their first one, but if you’ve got a guy on $1 million of $1.2 million (at another club), you offer them $700,000, $800,000, $900,000; $300,000 less than what the clubs are going to pay them back here, and you’re getting that much more anyway (in PNG),” Anasta said.

“You don’t need to pay dollar for dollar. That’s more a Jarome situation, because he was the first one. He’s equivalent to $2.2 million (on a regular salary cap).

“You’ve just got to look at what the equivalent is. You can get any top-end players, if they’re on $700,000-$800,000 (at PNG), it’s equivalent to $1.3 million-$1.4 million (elsewhere). You’re not paying dollar-for-dollar, you manage that accordingly, and at the end of the day that player would be getting more money than they would for any other club.”

Anasta – whose client, Willie Peters, will be PNG’s inaugural head coach – said that the Chiefs had the opportunity to build a strong roster for a variety of reasons.

Our above hypothetical team is stacked with former Panthers teammates of Luai’s, some of whom may actually be available due to the champion club’s ongoing salary cap pressures and their own desire for a fresh challenge after a glorious era under Ivan Cleary.

“They’ll be competitive because players want to go there,” Anasta said.

“And Jarome’s the perfect person to buy first because he’s got good relationships with players that have been successful, at a club that probably can’t afford to pay them the money they would deserve. That’s the luxury they’ve got with him.

“I’ve been hearing since day one, because I signed Willie there as coach, that there’s players that have been ringing them to go there, who are quality players. That was before Jarome even signed. So Jarome’s just going to give it a kick now, and they’ll have a good roster.

“You’ve only got to look at the interview of Isaah Yeo to realise that they’ve accepted they (Penrith) are not going to be able to keep everyone, and each one of them now are looking for the best interests of them and their families. Because they’ve done the hard work, they’ve won the premierships, and they’re at a point now where there’s a lot of them off-contract on November 1 and they’re rightly accepting (the reality).

“And not only that. There’s a challenge there with Papua New Guinea that’s very rare and unique, that you won’t see anywhere else. They’re a country, you’re playing for a country that idolises rugby league. You going there and know you’re going to have support, you know there’s going to be third-part deals, you know there’s going to be passionate people and you know you’re going to create history.

“It’s a pretty crazy scenario, in terms of the potential, but it’s exciting as well. Players are attracted to that.”

A key point, which has gained steam since the Luai signing: is all of this fair?

Primarily, Anasta says yes, given that existing clubs were told upfront and each accepted a $4 million sweetener from the NRL. The only issue is the length of time that PNG will get tax-free status, which is currently for at least a decade.

“It’s not really an unfair advantage, because everyone knew about it. An unfair advantage is if you don’t know about it and it just pops up,” Anasta said.

“Every club, every player, every journo knew about it. The clubs took $4 million each because they didn’t think they were going to be a threat and they benefited themselves. Now all of a sudden Jarome signs there and other players are interested, it’s unfair.

“No – it’s only unfair now because the reality is kicking in. It’s only unfair because it’s a threat. It wasn’t unfair last year.

“I think there’s got to be more of a time limit, I think 10 years is unfair. After five years, that would be enough. Who knows if they change that or not.”

Ultimately, a stacked roster won’t necessarily fast-track an NRL premiership to PNG, nor will having an entire nation from which to draw talent. The New Zealand Warriors are still awaiting a first title three decades later. Peters is a rookie NRL coach, despite raging success in the UK Super League, and will have to navigate unprecedented logistical issues; how effectively can the club manage, for instance, the risk of imported players contracting debilitating cases of malaria? And what about homesickness?

Ultimately, getting the football and business operations right, while nailing a productive long-term pathways system that eventually delivers a majority representation of local players will be the deciding factors.

“It’s not a given, it’s not a guarantee. Everyone’s gotten excited over Jarome, but that doesn’t mean they’re going to be successful,” Anasta said.

“I think they will have more success than others who are new franchises but that’s still not a given. There’s still a lot of challenges there.”

Click here to read article