Edited version of private ruling

Authorisation Number: 1011778287512

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Ruling

Subject: GST and interlinked jackpot

Question 1

Where a gaming venue operator (you) pays out prizes as a result of a gaming system (GS), and is subsequently reimbursed by the operator of the GS (Operator) out of the prize pool, is this reimbursement a taxable supply for Goods and services tax (GST) purposes?

Answer

No

Question 2

Does the reimbursement form part of the Global GST amount as defined in section 126-10 of the GST Act?

Answer

No

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 are a non profit organisation.

· You are registered for goods and services tax (GST).

· You are in the business of, amongst other things, providing gambling events to members and their guests. Those gambling events include use of installed gaming machines.

· You have entered into an arrangement (Agreement) the Operator for your gaming machines to be connected to the Operator's GS as part of the Gaming Systems.

· The Operator holds an interclub ed prize licence under the State Act. The objective of the GS is to allow players to play for a larger prize pool through the pooling of prize pool funds from participating clubs.

· The term 'ed gaming system' is defined in the State Act to mean a system in which 2 or more specially approved gaming machines are linked electronically to contribute a percentage of the money wagered on the gaming machines to a separate prize pool, and includes any communications network, infrastructure and equipment that is subsidiary to, or used in connection with, the system.

· Under the Agreement, the Operator agrees to:

o connect the relevant gaming machines in your premises

o administer the GS

o promote the GS to persons visiting your premises, and

o pay prize money to the winning players.

· Under the Agreement, you must pay all costs associated with the operation, servicing and maintenance of the Operator's s Equipment.

· Under the Agreement, the Operator makes a standing offer to players to pay prizes won by players in the GS playing the participating machine while it is connected to the Gaming Systems, any intra-venue prize game in which the participating machine may from time to time participate) belong to you. The Operator has no interest in or right to that money.

· Under the Agreement, the Operator appoints you and you agree to act as the Operator's agent solely for the purpose of making payments to players in respect of Prizes won by the players on participating machines.

· Under the Agreement, you must pay fee to the Operator. The fees are calculated and accrued daily.

· Schedule to the Agreement provides that the fee comprises of two components:

o Component 1

A fixed daily fee per participating machine

o Component 2.

An amount equal to X% of the total Turnover of each participating machine

· Schedule to the Agreement provides for the prize payment process.

Under the process;

o you are responsible for verifying the prizes, on behalf of the Operator, in accordance with the Rules. Once verification is confirmed, you issue the player a copy of the State wide Prize Payment Form to complete and sign. You are required to submit the completed Form to the Operator in accordance with the Rules.

o The Operator will verify the integrity of the prize System at the time the win, the entitlement to the prize and the amount of the prize. The Operator then transmits the amount of the prize in accordance with the Agreement.

o You must:

1. hold the amount of the Prize on trust and in a separate bank account pending payment to the winner of the prize and not mix that amount with your other funds, and

2. pay the amount of the Prize to the winner as the Operator's agent.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-10
A New Tax System (Goods and Services Tax) Act 1999 section 126-10

Reasons for decision

Question 1

Summary

The reimbursement of a 'monetary prize' by the operator of GS from the 'Monetary Prize Pool' to you is not a taxable supply under the GST Act as there was no a supply made by you.

Detailed reasoning

Section 9-5 of the GST Act) provides the requirements of a taxable supply. It states:

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, or *required to be registered.

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

Note that the asterisk denotes a defined term in the GST Act.

Supply is defined under section 9-10 of the GST Act as any form of supply whatsoever, and includes any of the following:

· a supply of goods

· a supply of services

· a provision of advice or information

· a grant, assignment or surrender of real property

· a creation, grant, transfer, assignment or surrender of any right

· a financial supply

· an entry into or release from, an obligation to do anything, or refrain from an act, or to tolerate an act or situation

· any combination of any of the above.

We need to consider whether you are making supply when you give prize money to a prize winner and you are subsequently reimbursed the payment of the prize money by the Operator.

Goods and Services Tax Ruling GSTR 2002/3 provides the Australian Taxation Office view on whether you are making a supply in giving the monetary prize.

Paragraph 20 of GSTR 2002/3 provides that 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.

From the information that you have provided, you are making a payment of prize money to the winner of the Prize on behalf of the Operator as agreed under the Agreement. The Operator reimburses the payment of money that you make to the winners. This means in accordance with paragraph 20 of GSTR 2002/3 you are not making any supplies/acquistion in relation to the monetary prizes. You are simply paying the money to the winners of the Prize under the Agreement and the Operator is reimbursing the payment that you made to the winner. You are not making any supply to the Operator in return for the reimbursed amount. The reimbursement you receive from the Operator is not consideration for any supply. The reimbursement is made to extinguish an amount owed by the Operator to you when you made a payment for their behalf. This is not considered to be a supply made by you to the Operator. Since there is no supply, there is no taxable supply made when you are reimbursed.

Question 2

Summary

The reimbursement does not form part of the Global GST amount as defined in section 126-10 of the GST Act as you are not liable to make the payment as you are not liable to make the payment.

Detailed reasoning

Section 126-5 of the GST Act provides that if you are liable for the GST on a gaming supply, your net amount for the period is

global GST amount + other GST - the input tax credits.

The calculation of the 'Global GST amount is explained in section 126-10 of the GST Act. It states:

Your global GST amount for a tax period is as follows:

[Total amount wagered - Total monetary prizes]X 1/11

where:

total amounts wagered is the sum of the *consideration for all of your *gambling supplies that are attributable to that tax period.

total monetary prizes is the sum of:

(a) the *monetary prizes you are liable to pay, during the tax period, on the outcome of gambling events (whether or not any of those gambling events, or the *gambling supplies to which the monetary prizes relate, take place during the tax period); and

(b) any amounts of *money you are liable to pay, during the tax period, under agreements between you and *recipients of your gambling supplies, to repay to them a proportion of their losses relating to those supplies (whether or not the supplies take place during the tax period)….

The term 'monetary prize' is defined in section 195-1 in the GST Act to mean any prize, or part of a prize, in the form of money.

Therefore, in order to be included in the total monetary prize, the payment that you made to your patrons must be monetary prizes on the outcome of gambling events.

The term 'gambling event' is defined in subsection 126-35(2) of the GST Act as follows:

(c) the conducting of lottery or raffle, or similar undertaking; or

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

Under the Agreement the Operator is liable to provide the monetary prize and not you. You are being reimbursed for the payment of prize money.

Accordingly, both the payment and reimbursement for the payment of prize money to your patrons do not form part of the Global GST amount as defined in section 126-10 of the GST Act.