Hi all,

I thought all gambling winnings were tax exempt here in Australia (especially after the Oct 2000 clarification). However, talking with an accountant today he informs me that if I make most of my income from this gambling then I would be taxed.

Anyone have any experience or comments.

Bill,

My wife is an accountant but does not specialise in taxation and I also studying accounting and some tax law at University. It is my understanding that ALL gambling winnings (regardless of whether they are racing, casino, lotteries, etc) are tax free. The government taxes the gambling provider (TAB, Casino, etc) on turnover and on profit so it gets more than it's share in that way!

The courts tend to take a dim view of Tax Department trying to tax one person on income derived from a given enterprise but not allowing others doing the same thing to claim losses so I doubt that they would try as it might open the floodgates to all losing punters claiming their losses!

As I said I'm not an expert but I have never heard of a punter being taxed. Of course if you offer a tipping service or sell tips, programs, books, etc then that is a different matter.

Hmmm - I could be wrong! You got me interested so I had a look at the ATO Legal site to see if there was any information on this and is at least one case where people have been found to be carrying on a gambling "business" and therefore been liable for tax!

There is a ruling from 1991 which makes interesting reading for those interested:
http://law.ato.gov.au/pdf/it2655.pdf

Basically this concerned three cases that went before Federal Court - in all three cases the taxpayer won and was found not to be carrying on a business. Some interesting points from the judges decisions as to why the people were not carrying on a business:

In the first case the fact that person did not have an office, did not keep records, did not use a computer and did not subscribe to tipping service, bet on exotic bets and bet with the TAB rather than bookmaker was "inconsistant with the money-making, systematic and business like character essential to carrying on a business.

The second case the punter used judgement and instinct rather than following a fixed betting system. The judge in this case commented that "the intrusion of chance into the activity as a predominant ingredient ... suggests that it will be a rare case where a court will conclude the activity is a business.

The third case stated gambling as conducted by the public would seldom be a business even where large gains or losses are involved. It did mention that if person was involved in other racing activities (eg. training, breeding or horse ownership) then the gambling was more likely to be a part of that business.


Based on that ruling you would be fairly confident that gambling is not a business. But there was a later case (number CDS10095) which found that gambling was a business for a particular taxpayer. The reasons for this were:
1. Taxpayer had no other identifiable source of money except his racing activities.
2. Taxpayer spent most of his time at various racetracks
3. Taxpayer had inside information from trainers and owners
4. Taxpayer owned a greyhound
5. Taxpayer placed bets for some trainers adding to his inside knowledge
6. His activities were more considerable, systematic and organised than a mere punter.

So it seems gambling can be assessed as a business but only in limited circumstances so if you are successful make sure you dont own a racehorse/greyhound, don't rely on inside information, don't spend all your time at the track and keep some other source of income as well!

Hope this is helpful to you.

Very interesting scenario here.

I agree the government has already had their take from the Tote, so how can they further justify taxing a winning punter.

If I went on "Who wants to be a millionaire" and won the million dollars, and that was my only source of income - could they then tax me?

I think not.

The burden of proof is on the Government and unless they could track every cash wager, they then would be hard pressed to prove anything.
As you say becareful, I would love to be able to claim internet expenses, pay TV subscription, fuel expenses, computer depreciation etc. and any LOSSES.

It's just not going to happen.

Bill
Your accountant is right. If you derive most of your income from gambling over a lengthy period of time the tax office will deem you to be in the business of gambling for a living. In other words a professional.They will ask you to pay tax on your earnings. You may well be successful in contesting the issue in court but that will not stop them from trying.I imagine the only ways they would be interested in the first place is if you declared your winnings to them voluntarily or if you used the gambling argument in an audit situation.
I did hear of a rort many years ago where a punter asked to be assessed as a professional and then submitted losing figures for three consecutive years. The story goes that the tax office knocked him back and he suddenly began winning and lived tax free from then on.Not sure about that one though.

Legion,

Based on the judges comments in that tax ruling I would say you are pretty safe as long as you dont derive your whole income from gambling or other gambling related items. So as long as you work part-time in a job, run your own non-racing business or earn a decent investment income (shares, property, etc) it would be very doubtful that tax office would have any case against you. Most likely situation that would get you in trouble is if you went from earning a normal income one year and the next year declare no income at all on the tax return - that is almost guaranteed to get you an audit! So just work part-time until you have sufficient money in investments to get by on and then sit back and enjoy life!

Of course if you are a professional punter and are worried about the tax problem you could always just move to a nice pacific island and bet via the internet then you can tell the tax department to go *#@% itself! :grin:

becareful is referring to "substantially self employed" legislation. Basically, until you are deriving more than 90% of your income from gambling, there's not even an issue. When you do get there though, don't forget to contribute to superannuation! :smile:

Placegetter

Hi All,

Thanks very much for all the comments. I think the most important piece of information is the view of the High court judges who determined that no matter what, horseracing is still a game of chance.

If the High court has made this determination then it would be a very brave person (organisation) to try and determine otherwise.

All very interestin though.

Guys
I was just answering Bills post. I am not in any danger of being assessed for my gambling winnings.If only I were. I WISH.
My punting is purely a hobby and if I win more than a few grand a season I have had a good year. Its the challenge of finishing ahead in what all and sundry will tell you "Its a mugs game" that appeals to me.

legion,

You have brought up a very important point here.

How many people on the forum get looks of horror and comments like "a mugs game" or "you can never win at racing" when telling people about your hobby or interest?

I think everyone knows someone who never won anything in their lives and caused financial hardship to friends and family. In fact I know many people who went to their graves without one red cent chasing the perfect system!

:sad:

It is sad that this is the perception of the general public, who fail to realise that given discipline and a profit at level stakes, you CAN make regular money from horseracing.
When I explain to people what I do, I get varied reactions from "well give us a tip then" to "you'll learn"

It frustrates me beyond belief, that the general public don't quite get how it works and that it's not a get rich quick scheme, similarly it's not a bankrupting proposition provided you spend the time effort and use discipline and caution.

Just my thoughts.

EI,

I agree totally! For the most part I have stopped telling people what I am doing (or trying to do) with my betting - I just got sick of the negative comments. Even my wife gave me a hard time for quite a few months even though I wasn't losing money - I just wasn't making as much as I could of if I had been doing "paid work". About 2 months ago I had a really good week and went out and bought her a piece of original artwork for an anniversary present with about half the weeks winnings and since then she has been a lot happier with the time I am spending on it! :smile:

I think it is like anything in life - if you are willing to put in the work and study how the betting game works and really put some time into it then you can make it pay. If you want to earn money from it then you need to treat it like a business (hope the taxman's not listening!) and put in the time and effort. If you want to just have fun then that's OK too - just don't expect to get rich!

EI ,

Couldn't agree more about being told by the "whole world" that punting is "a mug's game".......

I have only ever had 1 part time job in my life , and that was while i was still at school which i finished in 1997.

Instead of going out and having a good time with mates , i saved all my money earned working after school until i was 18 and started betting , KNOWING i could make a working income from it , "it's a waste of time" , "what's the point" , "why don't ya just throw your money away while your at it" were many of the comments thrown my way , but i persisted and always told them it could be and will be done.

Well if some of them could see me now , 5 years later and i am making quite a good income without actually "working" although that is pretty much what i do , i have a desk with all my racing documents and papers and such and i usually spend at least 5 hours a day "working" on certain elements which i usually do mostly manually (ocassionally on the computer , downloading form and such).

So if your prepared to treat it as a business and put in the "hard yards" you have a very good chance of generating a part time or even full time income on the sport of kings.

Testarossa, I know what you mean....

Except it was me with blackjack (about 2 years now).

Now I'm making a VERY comfortable living, have large BRs that I controbute to different forms of gambling, very flexible hours (hey if I want a holiday, I'll damn well have one).

It's when you become successful they all get envious. I have the car, the apartment, the money etc, all at the age of 20. Life's sweet if you're prepared to put in the hard work.

just realised the date of this post....

You all have me very envious, I'm still searching, although just recently seem to be getting it together. But paying tax after 18% or so has already been creamed off the pool is beyond belief!!

I think you will find , that if you where declared as a full time professional punter , the tax paid through the TAB could be lagally declared as a tax deduction just like businesses do when declaring bank fees & Govt taxes, dont forget to declare TAB losses if a loosing year.

Bhagwan,

I don't think that would be correct - you can only claim deductions for expenses YOU have paid - therefore the tax paid by TAB would not be a deduction. Of course you could claim for losses and all other expenses (form guides, internet access, race course admissions, travel expenses, etc). Of course there is not much danger of any TAB punters being declared professionals - the mere fact they use the TAB would be evidence they are not professional :grin: