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Edited version of your written advice

Authorisation Number: 1051295122801

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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.

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Date of advice: 17 October 2017

Ruling

Subject: Am I in business? - gambling

Question 1

Will receipts from your personal gambling activities be assessable income in the 2018 income year?

Answer

No

This ruling applies for the following periods:

Income year ending 30 June 2018

The scheme commences on:

1 July 2017

Relevant facts and circumstances

You and your associate plan to begin placing bets in your personal capacity with bookmakers who are located outside of Australia in the 2018 income year.

You have previously operated as a bookmaker. It is your intention to resume this activity. You will apply for a gambling license.

Your associate is involved with a number of gambling related businesses and is interested in payment technologies and apps related to the racing industry.

You intend to place bets on specific animals in Foreign Country A (broking agency) and other international book makers, including betting on Foreign Country B races.

You intend to place a high volume of bets and to bet large sums in order to access more favourable odds offered by bookmakers.

You will place a variety of types of bets, and the bets may be pooled.

You and your associate both have a passion for gambling and gamble frequently, placing bets with professional bookmakers. You place bets separately, but often combine your funds and place bets together to access better odds offered for placing higher value bets. You often bet amounts over $100,000.

You do not have a business plan in relation to your personal betting activity but you will employ a stop loss limit.

You will utilise a laptop computer and betting software in the form of an historical database which keeps a record of all runs, finishing positions and times to conduct the activity.

The software does not analyse the data for you, but you will use the information to analyse the outcomes of past and current bets to identify trends, calculate the amount of potential winnings and to assess the risk of losing.

Your strategy will be to place bets on runners and combinations which offer higher odds than you have estimated.

You intend to spend approximately ten hours per week on the activity, but this may increase if you believe substantial wins are possible.

You intend to fund the activity with your own money and with a private loan. Interest will be payable on the loan. The loan will be sourced within Australia.

You will not form a betting syndicate but you may approach others to participate in the overseas betting activities, in order to increase the pool of funds available to bet.

You will not charge other participants a fee, or take a percentage of their share of the win in return for facilitating the bet.

You will share the proceeds of a winning bet with other participants in accordance with the percentage of their contribution to the sum which is wagered.

Your personal betting activities will not be connected to your respective business pursuits and there will be no support, exchange of information or any other dependency from your business activities that could influence the betting activity, odds or outcome of your wagers.

Neither yourself or your associate own, breed or train horses.

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 Section 995-1

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that 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.

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.

You are allowed to claim deductions 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 income and losses are not deductible, unless you are carrying on a business of betting or gambling; or conducting a business from which gambling is seen to be an integral component.

It has been accepted that a mere punter may be carrying on a business; however the intrusion of chance into the activity as a predominant ingredient will generally preclude such a finding.

Taxation Ruling IT 2655 Income tax: betting and gambling – whether taxpayer carrying on a business of betting or gambling (IT 2655) discusses the Commissioner's opinion on whether betting and gambling can be considered to be carrying on a business.

The ruling notes that ultimately, each case will depend upon its own facts, however the criteria identified in Brajkovich v. FC of T 89 ATC 5227;(1989) 20 ATR 1570 (Brajkovich) and the factors considered in the cases of Evans v. Federal Commissioner of Taxation (1989) 20 ATR 922;89 ATC 4540 (Evans) and Babka v. Federal Commissioner of Taxation (1989) 89 ALR 373;20 ATR 1251;(1989) 89 ALR 373;89 ATC 4963 (Babka) should be taken into account.

The matters to be considered are:

Application to your circumstances

In your case, your personal betting activities will involve placing large bets to access better odds. You will place bets separately, and with your associate. You may approach others to pool funds but you will not form a syndicate. The scale of your activity is not the only factor which must be considered in determining whether in whether you are conducting a business of gambling.

The fact that the races you will place bets on take place overseas does not, of itself, change the character of your activity from merely placing bets in your personal capacity to conducting a business of gambling.

We do not consider that your personal betting activities will be conducted in a sufficiently systematic and businesslike manner to support the carrying on of a business of gambling for the following reasons:

Accordingly, your winnings will not be assessable income and you will not be entitled to claim deductions or losses for costs or outgoings incurred in relation to your personal betting.

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