Edited version of private advice

Authorisation Number: 1052202569640

Date of advice: 15 December 2023

Ruling

Subject: Assessable income - betting and gambling

Question

Are the losses you incur in your betting and gambling activities deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and conversely are the proceeds from the activity reportable under 6-5 of the ITAA 1997?

Answer

No.

Considering the relevant facts against the principles outlined in Taxation Ruling IT 2655 Income tax: betting and gambling - whether taxpayer carrying on business of betting or gambling, it is the Commissioner's view that you are not carrying on a business of betting or gambling and your activity is considered a hobby.

The factors or indicators that give the overall impression that your activity is a hobby and that you are not carrying on a business of betting or gambling is as follows:

•                     You do not have a business plan, employ any staff, or lease any premises.

•                     You do not maintain records of your betting and gambling transactions.

•                     You do not conduct your betting and gambling activities with the intent of profit.

•                     Your betting and gambling activities are not systematic or organised in a business-like manner.

•                     Your activity is not associated with any other related business activity such as horse breeding or training.

•                     You utilise a degree of skill and judgment in determining betting opportunities when you manually analyse the database. This does not negate the fact that the outcome is dependent on chance. You have no automatic or guaranteed return from the betting activities by analysing the historical data.

Consequently, your losses are not deductible under section 8-1 of ITAA 1997 and your proceeds from these activities are not considered assessable under 6-5 of ITAA 1997.

This ruling applies for the following periods:

Period Ended 30 June 20XX to Period Ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Background

You have a degree in accounting and finance.

You have held various commercial roles and are currently working full-time in a specified profession.

You and Person B are currently developing a specified platform.

You provided us with details on when you commenced your betting and gambling activities.

You undertake betting and gambling activities for pleasure and recreational purposes and not with the intent of making a profit.

You have not undertaken any training in relation to betting or gambling or collecting/analysing gambling and sporting data.

You advised that you consider yourself to be a sport and gambling enthusiast and consider your passion for gambling a hobby or recreational activity.

You do not rely on any possible winnings to meet everyday expenses.

Group database

You, Person B and Person C formed a friendship group that undertakes gambling research and compiles sporting and gambling data (the database).

You research, compile, compare and discuss gambling and sporting data and historical data.

You provided us with details when you commenced the database.

Collectively you spend a specified approximate hours per week on gambling and betting activities.

You have no written agreement between yourself, Person B and Person C.

Limited administration of the database is undertaken. Everyone would contribute to any administration required on an ad hoc basis.

The database is held on Google Sheets, Google documents and Microsoft excel to store and access data.

The database is a compilation of publicly available data and statistics of historical data from various events.

The database maintained is only for sports that you have a specific interest in and place bets on.

The collection and analysis of the data is conducted on an ad hoc basis.

You spend time with Person B and Person C discussing and comparing bets and highlights of your gambling activities. You provided examples of this.

You do not share financial resources, proceeds or losses with any friend in the group.

No individual in the group has any legal right or expectation to any win or losses from the bets placed by another individual.

All updates to the database are voluntary, and all friends within the group have access to the database.

The database is used as a tool for analysing betting opportunities.

Subject to the next relevant fact, no individual in the group has the authority to place a bet or gamble on behalf of the group or another individual. Bets are placed by everyone, in their own individual betting account.

Occasionally you will place a bet on behalf of Person B, where they do not have access to a particular betting site that offers more favourable odds. In such circumstances it is placed at Person B's request, and you are usually immediately reimbursed the amount for this. Sometimes it may be recorded, and the balance settled between you at a future date for convenience.

Individual betting activities

You provided us with details on the average number of hours per week you spend on your betting and gambling activities. You are not engaged full-time in the activity.

You have no business plan or budget for your betting and gambling activities.

Your activity is not associated with any other related business activity such as horse breeding or training.

You do not:

•                     have a management or executive authority

•                     employ any person

•                     have any service providers for software, operational resources or otherwise, or

•                     lease or utilise any space.

Your bets are placed using a combination of the analysis of the groups internal database, your personal experience and intuition.

The final decision on a particular bet is by your sole discretion and on 'gut instinct'.

You funded your gambling activities from personal savings. You have not sought any external finance or lines of credit to fund your gambling activities.

Any winnings from your bets placed are paid into your personal bank account or settled in cryptocurrency or cash on average once a month.

You do not keep accounting records of your wins or losses. You have access to records of your bets placed through bookmakers, betting outlets and agents, or the betting applications.

You do not have a business plan, budget, accounting records, security arrangements or agreements.

You do not use computer programs to place bets or assist in undertaking any gambling activities.

You do not rely on computer programs to automate the betting process or identify profitable bets.

You provided the details on where and how you place your bets.

You provided details on what sporting competitions and events you place bets on.

You may expand your betting and gambling activities to other sports in future.

You have no influence or control over the results of the sporting event that you place a bet on.

Bets are usually placed in advance of the sporting event. There is limited 'live' betting.

You place multi bets, which involve greater risks, which increases as the number of legs increase. You provided the approximate percentage of your betting and gambling activities that are multi bets.

You occasionally utilise bookmaker promotions such as where a bookmaker:

•                     pays $X for every $1 on a successful two-leg multi bet, and

•                     returns a portion of a bet made as a credit to your sportsbook account where the bet is unsuccessful. This credit cannot be withdrawn for cash and must be applied to a subsequent bet.

The number of bets made varies and you do not closely track the value of bets placed. You advised an estimate value of bets you placed during a specific sports season.

You are never in a 'no loss' position and you are never guaranteed income or to win a betting outcome.

You primarily use Australian bookmakers with a specified percentage of bets placed with Australian bookmakers.

You have no active plan to mitigate the risk of losses. You may reduce the size of your bets when you have made a significant loss.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 995-1