Turning gambling silver into tax gold?

Abstract

This paper is on the topic of gambling winnings and how silver (coin/money) can sometimes, if the correct set of circumstances exist, be turned into tax gold (tax payable to the Australian Tax Office). This is a topical issue due to some recent publicity in Australia about the so called Punters’ Club and their reported annual profit of $50 million gained from some $2 billion worth of bets placed annually and how the Australian Tax Office (ATO) is looking to tax the 19 identified members of this ‘club’ on their respective share of these winnings. These club members are of course choosing to ‘gamble’ against the ATO that they should not be taxed. The paper looks at the various approaches taken by Australian courts over the last century to the issue of whether gambling wins are assessable and highlights that of critical importance to the resolution of this issue is whether the gambling activities are carried on in the form of a business activity in a systematic and organised manner and whether the gambling activities involve a significant element of skill as opposed to mere random outcomes. The paper also considers the approaches to gambling cases taken in other similar tax law jurisdictions to Australia, such as the United Kingdom, Canada and New Zealand, in order to reveal common threads applicable to judgments across these different jurisdictions. Based on the principles of case law identified, the paper also considers the likely ‘chances’ of the Punters’ Club’s success in its arguments against the ATO.