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Edited version of private ruling
Authorisation Number: 1011765631511
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Am I in business
Question 1
Are your receipts from betting and gambling assessable?
Answer
No.
Question 2
Can you claim deductions for expenses relating to your betting and gambling activities?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commences on:
1 July 2008
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You bet on horse and greyhound racing on overseas betting exchanges and local and overseas totalisators.
You study form guides and racing media opinions in order to make your decisions.
You do not have a business plan.
You have no employees.
You do not have an office.
You have no association with horse or greyhound racing apart from betting.
You enjoy watching and betting on racing.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Summary
The amounts you receive from your gambling activities are not assessable. Conversely, any expenses you incur which relate to your gambling activities are not deductible. This is because you are not considered to be carrying on a business of betting or gambling.
Detailed reasons for decision
Profits from gambling wins are not assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) unless you carry on a business of betting or gambling.
Taxation Ruling IT 2655 discusses the Commissioner's opinion regarding carrying on a business of gambling.
Ultimately each case will depend on its own facts.
No decided Australian court case has found that the winnings of a mere punter are assessable (or that the losses are deductible).
Mere punting may constitute a business, however the element of chance as a predominant ingredient will generally preclude such a finding.
The Court in Brajkovich v. FC of T 89 ATC 5227; (1989) 20 ATR 1570 identified the principal criteria for determining whether or not a person is in the business of gambling:
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. Is the gambling activity principally for profit or principally for pleasure?
5. Whether the form of betting chosen is likely to reward skill and judgement or depends purely on chance
6. Whether the gambling activity is of a kind ordinarily thought of as a hobby or pastime
In Babka v. FC of T 89 ATC 4963; (1989) 20 ATR 1251 (Babka's case) it was held:
A taxpayer who did no more than bet could never be regarded as carrying on a business, regardless of the frequency, scale or system-based nature of the betting. A pastime does not turn into a business merely because a person devotes considerable time to it and has retired from a previous full time profession.
In Babka's case, the taxpayer's activities were not so considerable, systematic and organised that they could be said to exceed those of a keen follower of the turf and that the element of chance as a dominant ingredient will usually preclude such a finding.
We have determined in your circumstances that you are not carrying on a business of gambling. We have based our decision on the indicators in IT 2655.
The winnings you receive in relation to this activity are not assessable under section 6-5 of the ITAA 1997. By using your techniques to choose which horses and events to bet on, you may reduce the odds on your gambling activities, however, your overall gains are dependant on chance rather than skill.
We acknowledge that you intend to keep results and relevant records using a standard software package and you will invest significant time and money into your activities. However these factors do not amount to carrying on a business.
As in Babka's case your activities can not be said to exceed that of a keen follower of sports.
As your receipts are not assessable income, no deduction is allowable for any expenditure incurred in relation to your betting and gambling.