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Edited version of your private ruling
Authorisation Number: 1012562030091
Ruling
Subject: Am I in Business? - Gambling
Question
Are you carrying on a business for tax purposes?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You gamble.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Income Tax Assessment Act 1997 Section 6-10.
Income Tax Assessment Act 1997 Section 8-1.
Income Tax Assessment Act 1997 Paragraph 118-37(1)(c).
Under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year.
Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business.
Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income but are included in assessable income by another provision, are called statutory income and are also included in assessable income.
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
Betting and gambling wins are not assessable under section 6-5 of the ITAA 1997 and losses are not deductible under section 8-1 of the ITAA 1997, unless you are carrying on a business of betting or gambling.
Taxation Ruling IT 2655 discusses the Commissioner's opinion on whether betting and gambling can be considered to be carrying on a business. This ruling states at paragraph 7:
Ultimately each case will depend on its own facts. There is no Australian case in which the winnings of a mere punter have been held to be assessable (or the losses deductible). As Hill J stated in Babka v FC of T 89 ATC 4963; (1989) 20 ATR 1251, although mere punting may constitute a business, the intrusion of chance into the activity as a predominant ingredient will generally preclude such a finding. If a taxpayer is involved in other business activities in the racing industry, it will be more likely that betting activities are of a business nature.
The court in Brajkovich v. FC of T 89 ATC 5227;(1989) 20 ATR 1570 (Brajkovichs case), identified the following criteria for determining whether or not a person is in the business of gambling. These criteria are:
1. Whether the betting is conducted in a systematic, organised and businesslike way
2. The scale of the gambling activities
3. Whether betting is related to or part of other activities of a businesslike character
4. Whether the gambling activity is principally for profit or principally for pleasure?
5. Whether the form of betting chosen is likely to reward skill and judgement or depends purely
6. Whether the gambling activity is of a kind ordinarily thought of as a hobby or pastime
We have determined that you are not carrying on a business of gambling based on the application of the above indicators to your personal situation.
As you are not carrying on a business of betting or gambling, the winnings you receive in relation to this activity are not assessable under section 6-5 of the ITAA 1997 and the expenses related to the activity are not deductible under section 8-1 of the ITAA 1997.
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