In many countries, the good fortune of winning a hefty windfall from a lucky wager must come with a bittersweet tinge, as more often than not the government will have its hand out for a taste. For gamblers around much of the world, when they put their money on a lucky filly, or hit a big jackpot, it is treated as part of their regular income and taxed accordingly. This is particularly so in the USA.
In Australia, a hefty amount of each state’s tax revenue is sourced from resident gamblers’ windfalls — with a total tax take by the states of around $5 billion annually. Victoria has the highest tax dependence on gambling, at 13%, and Western Australia has the lowest, at 4%, according to a report on gambling by the Productivity Commission.
But for the ATO’s part, as gambling isn’t considered a profession for the vast majority of players, it is not viewed as usual income and therefore isn’t taxed as such. As the ATO notes: “There is no Australian case in which the winnings of a mere punter have been held to be assessable (or the losses deductible).”
Rather than assessable income, the government sees gambling winnings as a fortunate windfall, and allows players to keep the whole bag. (And if we’re to be honest with ourselves as far as classifying any winnings as “income”, let’s admit that most of the time the flow of money is out of the gambler’s pocket, not the other way around.)
So the fact is that Australians who like an occasional flutter already have one factor on their side because, by and large, gamblers never have to pay taxes on their winnings.
But what about those big state tax revenue figures?
So if Australian gamblers don’t pay taxes on their winnings, how then do state governments collect so much tax revenue from gambling? Close to 10% on average of state revenue comes from gambling, so obviously someone is coughing up.
The answer is that gambling operators, not players, shoulder the burden of tax. Depending not just on the state but also the type of gaming involved, the rate of tax and how it is calculated can vary greatly. Casinos and venues with pokies also pay licensing fees for the right to have those machines in the building, and operators also pay taxes on their profits, either based on net profits or on what is known as “player loss”.
The way the latter works is for the gambling operator (for example the TAB) to pool the money from particular bets and deduct a percentage (the player loss) before distributing the remainder as winnings. Different states deduct at different rates, but also vary according to the type of bet. For example, the Victorian place bet rate is 14.25%, while a trifecta bet is 20%. A proportion of this player loss is paid as a state tax.
New SA gambling tax
A new tax on gambling has been announced by South Australia, effective July 1, 2017. But again it is targeted at betting companies, not the wagering public. Levied at 15% of “net wagering revenue”, the new SA tax is the first that will be based on a “place of consumption”.
It will apply to bets on horse, harness and greyhound racing, and bets on sports such as AFL, cricket and soccer. It will also apply to other bets, such as those on the winner of the federal election or the Academy Awards.
# [betting], [gambling], [horse racing], [Melbourne Cup], [poker and tax], [pokies tax], [Spring Carnival]
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