You have chosen your licensed online casino site and have signed up for an account. You have also studied the terms and conditions of the game. And the best payment method has already been decided. But, you stopped to think, what if I win a large sum of money? What will I do then? Is it taxable?
This might not have come across the mind of most players, but if you do, we hope this article can shed light on your doubts and questions.
Most countries do not tax gambling winnings. But there are some exceptions, like in the U.S., wherein even casual gamblers are taxed for their winnings though they are not in the business of gambling.
According to the Internal Revenue Service, all gambling winnings are fully taxable and must be declared by the player. This includes but is not limited to, horse racing, lotteries, raffles, and casinos. Winnings in the form of cash prizes and fair market value of cars or trips are also included.
On the other hand, in case of gambling losses, taxpayers are allowed to claim a tax deduction. But only if they have kept a record of their winnings and losses.
In a different country, like France, they have imposed a 12 per cent tax on any casino winnings above EUR1500. Taxpayers must declare their total winnings in their Personal income tax return and can deduct losses up to the level of their winnings.
DOES AUSTRALIA TAX ONLINE CASINO WINNINGS?
The answer is no. In Australia, the winnings from your gambling in an online casino are not taxed. Gambling is a form of entertainment people do to pass the time. And being a gambler is not considered as a profession. Hence, it is not levied tax.
It is also emphasized that winnings from online casino Australia real money are not fruits of hard work but gained from good luck. Rationalizing the idea, the money you win from online casinos is not an income. Gambling in online casinos makes people lose more than earn big from it.
However, as an exception to the rule, online casino players who are professional gamblers can be subjected to tax if that person’s gambling activities engage in business and are conducted in a business-like manner. All of their proceeds are treated as their regular earned income and are taxed at standard tax rates.
The player must be proven to have a business connection in the gambling industry before they can be imposed with tax and meet the ATO definition of “professional gambler”.
If casual players are not levied a tax for playing online casinos, who is paying the tax?
The taxation in gambling is passed on to the casino operators rather than the players. The amount the operators pay differs depending on the region where they are operating and what games they offer.
This is the reason why an online casino player must look very well into the legitimacy of the online casino site they are playing at if it is registered and licensed to operate. You do not want unregistered and scam sites to just take advantage of the money you spent on them, but they are not paying back what they owe to the government. It will be as if you are giving them free money to put in their pockets.
HOW MUCH TAX IS IMPOSED ON ONLINE CASINO OPERATORS?
Though this might not interest you as a player, you must still know and be aware of how much our well-loved online casino Australia real money is paying on taxes and which agency regulates them.
Depending on the state and territory bodies, gambling is regulated by ACT Gambling and Racing Commission in Australian Capital Territory, Office for Liquor, Gaming, and Racing in New South Wales, Racing Commission | Department of Industry, Tourism and Trade in Northern Territory, Office of Liquor and Gaming Regulation in Queensland, Independent Gambling Authority in South Australia, Department of Treasury and Finance in Tasmania, Victorian Commission for Gambling and Liquor Regulation in Victoria, and Department of Racing, Gaming and Liquor in Western Australia.
The tax imposed, for example, in Victoria for the wagering and betting tax, applies at a rate of 10% of net wagering revenue over the tax-free threshold of $1,000,000. But as stated, different locations have different amounts of fees involved. In most cases, the Betting tax is calculated at 15% on taxable betting revenue that exceeds the threshold.
BETTING TAX EXPLAINED AND HOW IT WORKS
Betting tax, in its simplest sense, is the tax imposed on betting operators’ transactions with customers. In Western Australia, it applies to a person who placed a bet in WA or an online casino operator whose principal place of business is WA.
In this case, wherein the imposition of taxes depends on the location of the bettor or the operator, the latter is responsible for determining where the bets have been placed in Australia by determining where the placing of bets took place.
Therefore, it is a must that before accepting bets from a player, casino operators must take the necessary steps to ensure the location of the bettor. It could look like an added load of responsibility on the part of the part operator, but with the aid of technology, this could be done in just a few steps. In unavoidable cases wherein the current location of the bettor where he placed the bet is undetermined, the customer’s residential address may be used as their location.
Concerning the betting tax, records from at least five years must be retained in Australia.
TAXES IMPOSED PER GAME AND MACHINES
As previously stated and emphasized, the tax paid by operators also differs depending on the games they offer. In the state of New South Wales, between 16.41-38.91 per cent of gross revenue is levied on electronic gaming machines. While in the state of Victoria, the tax is 31.57-51.57 per cent of gross gaming venues.
In the case of lottery-style games, 73.48% of gross revenue is levied, and 55% of gross revenue is for instant scratch-its in Queensland. Additionally, an operator must obtain a lottery operations license for a current application fee of $20,070, with a further quarterly license fee being charged.
CONFLICTS WITH TAXES
During the second quarter of 2022, Tabscorp, Australia’s largest gambling business, teamed up with anti-industry groups to lobby for higher taxes on online betting operators.
Their point of argument is that inequitable tax rates unfairly penalize domestic businesses. It is important to note that not all online casino Australia real money sites users are based in Australia. Some of these sites are foreign. When the state of Victoria introduced the POCT or Point of Consumption Tax in 2019, they feared that these foreign-owned gaming sites were not paying Australian Taxes.
An article released online states that “Currently, the POCT stands at 10% in New South Wales and Victoria, 15% in the Australian Capital Territory, Tasmania, Western Australia, and South Australia. Meanwhile, land-based operations vary: The totalisator tax is set at 19.11%, while poker machines (Pokies) are taxed at 65%.”
Understandably, this could be an issue for online gaming operators, especially those not based in Australian territory.
CONCLUSION
Australian players of all sorts of gambling games are considered luckier than any other player in most countries in the world. It is because gambling taxes are imposed on a corporate level instead of an individual one. They are fortunate because the Australian government has a different perspective when it comes to the money people earn while playing online gambling games.
We can safely say that they must care about the financial welfare of their constituents. This other side of the gambling perspective allows Australian players to enjoy what they have won fully.
In some countries where taxpayers can request a tax deduction for their losses, we can positively assume that this will not be the case in Australia. You might argue that only the winnings are expressly exempted from tax. However, as much as betting and gambling winnings are not taxable, it is just right that your losses will not be an allowable deduction in your taxes as well.
On the side of casino operators, we understand that you only mean business. But, hoping to gain profit, we anticipate that every casino operator is doing their part as business owners.
Suffice it to say, though not taxed, Australian players must be vigilant while dealing with online casino sites. As a bettor, you must only patronize those online sites, like Royal Reels, that are actively and rightfully doing their part as online casino operators. Treat this as your consolation to your country for giving you this kind of privilege that other countries do not have.
In this online gambling industry, may both the players and casino operators win.