Edited version of private ruling

Authorisation Number: 1011455120096

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Ruling

Subject: GST and poker tournaments

Question 1

Can your poker tournament buy-ins, add-ons and prizes (payouts) form part of your global GST amount as provided under subsection 126-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, your poker tournament buy-ins, add-ons and prizes cannot form part of your global GST amount as provided under subsection 126-10(1) of the GST Act. This is because you have not made any supplies relating to the buy-ins, add-ons and the prizes.

Relevant facts and circumstances

You are an Australian and registered for the goods and services tax (GST). You hold and conduct poker tournaments in addition to your gambling activities.

You conduct the tournaments and distribute the prizes to the winners of the tournaments. You do not accept bets from the players on the outcome of the tournaments. The players bet against each other using chips allocated to them by you. The chips allocated are not redeemable for cash. They cannot be used to play at other table games within your gambling premises.

To register to participate in the poker tournaments, a tournament player (player) is required to pay an entry fee and a buy-in amount. These two payments are made at the same time and are for different reasons and on different terms and conditions. However, a player must make both payments in order to be eligible to participate in the poker tournaments.

Some tournaments allow the players to supplement their number of chips with add-ons or re-buys within certain time limits.

The tournament prize pool (payout) usually consists of all buy-ins together with any re-buys and add-ons. You hold the buy-in, add-on and re-buy on behalf of tournament entrants and merely hold the prize money and administer the tournament for the benefit of the entrants.

Reasons for decision

Buy- ins, add ons and re-buys fees

From the information received, to register to participate in the poker tournaments that you hold, a tournament player is required to pay an entry fee and a buy-in amount. These two payments are made at the same time and must be paid at the same time to be eligible to participate in the poker tournament. However these two payments are on different terms and conditions.

On paying the buy-in a certain number of chips will be allocated to the player (as specified by you). These chips will be used by the player to gamble against the other players in the tournament. Some tournaments allow the players to supplement their number of chips with add-ons or re-buys within certain time limits. The money from the buy-ins, add-ons and re-buys forms the prize pool. The prize (pay-out) to be given to the winner of the poker tournament is taken from this prize pool.

Accordingly, we need to determine the character of your supply before we consider whether they can apply Division 126 of the GST Act to these payments.

Characterisation of supply:

Goods and Services Tax Ruling GSTR 2002/3 provides guidance on prizes. Paragraphs 26 to 27 of GSTR 2002/3 state:

26. By accepting an entry into an event, an event holder is supplying a right to participate in the event. Intending participants may be required to formally enter the event by completing an entry form and paying an entry fee.

27. The supply that is made by the event holder may include other things in addition to the right to participate, such as use of facilities, entry to functions or items of clothing.

Further a supply is not subject to GST in Australia unless it is made for consideration. A payment is for consideration where there is a sufficient nexus between the supply and the payment made. In determining whether a sufficient nexus exists between supply and consideration, we regard the true character of the transaction by looking at all of the transactions entered into and the circumstances in which the transactions are made.

Based on the information received, we consider you are only making a supply of a right to participate in a poker tournament to the player when the latter registers to participate in the poker tournament and pays the entry fee.

In regard to the buy-ins (where applicable add-ons and re-buys), you have an enforceable obligation to use this money for a specified purpose, which is to give all the money received from the buy-ins (where applicable add-ons and re-buys), as a prize to the winner of the poker tournament. In this case, we consider the money for the buy-ins (where applicable add-ons and re-buys) is not consideration for any supply made by you since you do not receive the money for your own use and instead you kept it and made it available to be given as a prize to the winner. Accordingly, there will be no GST consequence for you in regard to the buy-in, add-ons and re-buys fees you collected.

To summarise, you are making a supply of right to participate in the tournament when you conduct the poker tournament and the consideration for this right is the entry fee. You are not making any supply when you receive the buy-ins, add-ons and re-buys fees from the players.

The next step is to consider the GST status of your supply of right to participate in the tournament.

GST status of your supply of right to participate in the tournament

Under section 9-5 of the GST Act you make a taxable supply if:

· you make the supply for consideration; and

· the supply is made in the course or furtherance of an enterprise that you carry on; and

· the supply is connected with Australia; and

· you are registered and required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Accordingly, we need to ascertain whether all the requirements in section 9-5 of the GST Act are satisfied to determine whether GST is payable on your supply.

From the information given, all the requirements in section 9-5 of the GST Act are satisfied as you make the supply of right to participate in a poker tournament for consideration while carrying on your gambling enterprise in Australia. The supply of right is connected with Australia as it is done in Australia and you are registered for GST. The supply of the right is not GST-free or an input taxed supply under any provision of the GST Act.

To summarise, the supply of the right to participate in the poker tournament is a taxable supply under section 9-5 of the GST Act and you will be liable to pay GST on the entry fee you receive as consideration for that supply.

Division 126 of the GST Act

Division 126 of the GST Act provides for an alternative method for a taxpayer to work out their net GST on a gambling supply under the global accounting method. A taxpayer must be making a gambling supply in order to be eligible to use the global accounting method.

As you carry on a gambling enterprise, the next step is to consider whether you are making a gambling supply for your supply of right to participate in a poker tournament and therefore be able to include the amount in your GST global amount.

Subsection 126-35(1) of the GST Act defines a 'gambling supply' as:

A gambling supply is a *taxable supply involving:

· the supply of a ticket (however described) in a lottery, raffle or similar undertaking; or

· the acceptance of a bet (however described) relating to the outcome of a *gambling event.

*An asterisk denotes a term defined in section 195-1 of the GST Act.

A 'gambling event' is further defined in subsection 126-35(2) of the GST Act as:

A gambling event is:

· the conducting of a lottery or raffle, or similar undertaking; or

· a race, game, or sporting event, or any other event, for which there is an outcome.

Paragraphs 178 and 179 of GSTR 2002/3 provide examples of gambling events and state:

178. Examples of gambling events include:

· games offered in casinos;

· gaming machines in clubs and hotels;

· lotteries; and

· raffles.

179. In addition, any race, game or sporting event, or any other event for which there is an outcome is a gambling event under paragraph 126-35(2)(b). Common examples of these include:

· horse and greyhound racing;

· football and other sporting matches; and

· other events, the outcome of which will not be known until some time in the future, such as which participant will receive an award.

Paragraph 180 of GSTR 2002/3 further explains the concept of making a gambling supply. It also illustrates the difference between making a gambling supply and participating in the gambling event and states:

180. A gambling supply, in relation to the above examples, is the supply of a ticket for the raffle or lottery, or the acceptance of a bet. When a sporting team plays a match, it is not making a gambling supply. However, a bookmaker in accepting a bet relating to the outcome of the match, is making a gambling supply.

As noted above, a gambling supply is defined under subsection 126-35(1) of the GST Act as a taxable supply involving the supply of a ticket (however described) in a lottery, raffle or similar undertaking or the acceptance of a bet (however described) relating to the outcome of a gambling event.

We are of the view that the poker tournaments you organised are not undertakings similar to a lottery or a raffle, because the tournaments are not a lottery or a raffle or similar undertaking and as such do not satisfy the requirements of paragraph 126-35(1)(a) of the GST Act.

In order to satisfy the requirements of paragraph 126-35(1)(b) of the GST Act, you must be accepting bets in relation to the outcome of a gambling event. We accept that the poker tournaments you conducted are events for which there is an outcome and are therefore gambling events. But as you do not accept bets in relation to the outcomes of the poker tournaments, you do not satisfy the requirements of paragraph 126-35(1)(b) of the GST Act.

This is consistent with your advice that you do not accept bets from players on the outcome of a particular poker tournament. Rather, the players make and accept bets between themselves in the course of a poker tournament.

As you are not accepting the entry fee as bets on the outcome of a poker tournament, you are not making gambling supplies in relation to the poker tournaments.

Therefore, in respect of the entry fee received for the poker tournaments, you cannot include this consideration as part of your global GST amount when accounting your GST under Division 126 of the GST Act.

Tournament prizes (payouts)

Paragraphs 20 and 29 and 30 of GSTR 2002/3 state:

20. When an event holder gives prize money to a winner, it is not making a supply for GST purposes, as a supply does not include a supply of money unless the money is provided as consideration for a supply that is itself a supply of money. However, prize money, as well as prizes of goods and services, may be consideration for a supply made by the winner.

29. All participants make a supply to the event holder by participating in the event, although the event holder may give a prize only to the winner of the event. Other participants may receive nothing despite having also supplied their participation.

30. By giving a prize to the winner of the event, the event holder makes a supply that is separate from the supply of the right to participate in the event.

In this case, when you as the event holder give money as a prize to the winner of the poker tournament, you are making a supply that is separate from your supply of right to participate in the poker tournament. We consider when you, as the event holder gives money as a prize to the winner of the poker tournament, you are not making a supply for GST purposes as a supply that is money itself is not a supply under subsection 9-10(4) of the GST Act.

Hence you cannot include the monetary prize in your global GST amount under subsection 126-10(1) of the GST Act since there is no supply being made by you in relation to the prizes.

Summary:

Entry fee

You are making a supply of a right to participate in a poker tournament when you receive the entry fee as consideration from the player. The supply of this right is a taxable supply under section 9-5 of the GST Act.

You cannot include this entry fee in your global GST amounts for the purposes of subsection 126-10(1) of the GST Act as the supply of a right to participate in a poker tournament is not a gambling supply under section 126-35 of the GST Act

Buy in, add-ons, re-buys and monetary prize

You are not making a supply when you receive the buy-in, add-ons and re-buys fee, and when you offer a monetary prize to the poker tournament winner. Therefore you cannot include the buy-in, add-ons, re-buys fees and the monetary prize in your global GST amount for the purposes of Division 126 of the GST Act.

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