Guide to Gambling Winnings Tax: Online Casinos Australia
With over 80% of Australian adults actively and financially engaged in some sort of luck-based games, Straya has the highest rate of gambling in the world. Placing bets on horses was very popular in the early 19th century, and one century later legal poker machines were introduced, much to the joy of Aussie players.
At some point, things were starting to spiral out of control so the Interactive Gambling Act was introduced in 2001. Strangely, it’s both simple and difficult to understand. And yet its crucial element is this: the wording of the law itself created a loophole that gambling companies easily exploit to their benefit, making online gambling legal in practice.
But what about taxes? Should you pay taxes on your online casino winnings if you live in Australia, and if so, on what grounds and more importantly – how much? Let’s start thoroughly, from the beginning.
What Can You Bet Online?
In a nutshell – practically everything is an open game, but that does not mean that Australia has fully embraced online gambling. In terms of gambling liberalization, Australia is somewhere between European countries, which are very liberal, and the United States of America, minus a very small number of states and territories where gambling is totally legal.
Fortunately, being Australian is pretty neat when it comes to online gambling. Not perfect, but manageable. The Interactive Gambling Act from 2001 does not prevent Aussies from playing online blackjack, poker, roulette, video poker, craps, and all table games, but operators and companies that run online casinos aren’t in a position to advertise to residents of the Land Down Under. So, if a website is truly legit, it’s bound by the law to stay below the radar. In fact, betting games that are strictly mentioned and allowed by law are related to racing and sports betting.
If you are an online gambler, you can freely engage in pari-mutuel betting on horse races, just as you can make sports bets involving teasers, futures, straight bets, and parlays.
There is only one form of online betting that is against the law in Australia, and that’s in-play betting. It is perfectly legal to do it in person or via telephone. Enter, click-to-call apps! It may sound ridiculous, but these apps seem to bypass the legal issues regarding online restrictions. The rationale is that a bettor uses his or her voice to place bets instead of online clicking, so it counts as a phone made bet and not an online bet.
Online Casinos and Poker
As pointed up in the text above, poker games can be freely offered to casino players outside of the country, including all other casino games that we enjoy so much. However, this exclusion has one condition and it has to do with government regulation. Online casinos must add other nations to the list of restricted countries IF the government decides to do so.
As expected, this proved to be of little effect to online gambling in Australia, since online casinos located outside of Australia freely welcomed Aussie citizens. It only affected domestic and local betting establishments whose businesses started to suffer, a lot.
Is online poker legal in Australia?
To use the phrase popularized by lawyers, this activity is technically not illegal if performed by a gambling company operating from the offshore territory. Casinos outside of Australia may host online poker games IF they are not advertised, or in any other way publicly offered to Australians, meaning that offshore online casinos operate in a technically grey area. On the other hand, online casinos based in Straya are not allowed to do so.
Are online casino games legal in Australia?
In essence, the answer to the question above is the same as the answer in the previous paragraph regarding online poker games. So, yes, online casinos located offshore work in a legally grey area can host online casino games for Australians, as long as they restrain themselves from advertising, or in any other way publicly offer their services.
Have any online poker or casino operators been convicted in Australia?
At the time of writing this article, the Australian government has never taken legal actions against one or more online casinos operating outside of Australia. Having said that, domestic gambling operators are an entirely different story and it seems that the authorities are getting fed up with legal violations. Not so long ago, Australia’s biggest online betting company SportsBet was found guilty of gambling advertising violation, again, and the firm was fined AU$135,000 by the New South Wales government. This year alone, the regulator had 119 prosecutions against seven operators, for the same or similar offences.
We said in the introduction that betting on races is deeply rooted in the Australian culture and those gambling games truly have a long history on the Continent. In line with the tradition, gambling establishments are allowed to enter racing and sports betting, and land-based casinos are legally permitted to accept online wagers placed on races and sports.
There is an exception, as we’ve said, and it concerns in-play betting. In-play bets are placed on games that are already in progress and it is strictly illegal to do so online in Australia. You can place in-play bets only via telephone, or in person, but this is apparently not affecting click-to-call apps, which are essentially the same as online wagers but instead of a ‘click’ on a tab the player is using his or her voice to place a bet.
Is online horse racing legal in Australia?
Yes, it is perfectly legal to place online horse racing bets, as long as you turn to one or more legit online casinos. In the end, those casinos are run by the same companies that will gladly accept your sports bets.
Betting on eSports
Esports is the best example of how complicated and easy to spin the Interactive Gambling Act is. According to the law, it is not legal to use any ‘interactive’ gambling website, rendering games like roulette, poker, and blackjack illegal. But, the same law does not apply to sports betting, and esports are technically a form of sport in the eyes of the law. Again, your bets must be placed before the kickoff, or a race start, due to the fact that live betting is strictly illegal in Australia.
Needless to say, this is a big handicap for Australian sports gamblers and the esports betting industry as a whole. One of the key aspects of a successful esports betting site is the ability to offer its customers the possibility to place wagers while the race or game is on. Fortunately, there is a way to avoid all of this nonsense. Just look for an online casino that hosts esports betting that is fully licensed in Straya, and freely place bets on Counter-Strike or League of Legends matches.
Taxing the Best Australian Betting Sites
Three years ago, the Australian government collected over six billion dollars in revenue from gambling alone, so to say it’s a big political and economic deal would be a great understatement. The tax rates imposed on betting sites and casinos are not fixed, and they vary depending both on the territory, and gambling games they are applied to. If you want to know more, check the paragraph below titled ‘What are the taxing rules like depending on region, city, or province?’.
Do I Have to Pay Taxes on My Casino Winnings?
Good news, mates, casino winnings are not taxed in Australia. There are three legal reasons why casino winners do not pay any taxes.
- Gambling is not considered a profession in Australia. In the eyes of the law, gambling is a recreational activity or a hobby.
- Gains from gambling activities are not treated as income by the Australian government. Players’ winnings are a result of good luck, not labour, or providing services, and even if a player wins big money on one occasion he or she will lose a lot of money in different gambling sessions over a longer period of time.
- Instead of players, the Aussie government, or the Australian Taxation Office (ATO) to be precise, taxes gambling operators.
There is a BUT, however. Although gambling winnings, including the lottery, are not subject to taxes, your winnings might become taxable if you are considered to be a professional gambler, or if you are placing bets in your own casino or gambling related business.
According to the ATO, a professional gambler is not a person that simply gambles a lot or a person that somehow manages to make a living on gambling activities alone. In order to be classified as a professional gambler by the ATO, you have to own betting or a gambling business AND to place a bet yourself. In that case, the ATO will treat your bet-backs or lay-offs as gambling sales, and as we know they are super-taxable.
So there you have it! If you by any chance like to gamble a lot, and you are lucky enough to win most of the time, you will pay no taxes on your winnings whatsoever. Only ‘professional gamblers’ pay gambling taxes and to be classified as one by the ATO you have to be financially and/or legally connected with the gambling industry.
Here’s a cool example of how it works. If you are a racing horse breeder and you want to place bets on horse racing, you WILL pay taxes on your winnings because you are directly connected to the gambling industry. It doesn’t matter that you do not own a said casino, nor do you handle the money and/or share the profit with the casino in question.
I know what you are thinking about right now – since there are no taxes, I don’t have to pay anything and every single dollar I win will sooner or later be in my bankroll, clean and untouched by the government and private businesses. Well, if you are playing online casino games that might not be entirely true. Here’s why.
Casino operators based in Australia are extremely rare, so there is a foreign transaction fee on your withdrawals and deposits. Visa and Mastercard are well known for their fees and Skrill on the other hand have either no foreign fees, or they are relatively small. Another thing to look out for is currency conversion. Your Australian dollars are not welcome in many online casinos and you will lose some of them during conversion. Always check out all banking options before you make a withdrawal or deposit and try to find the one with the lowest fees.
At What Point Does the Australian Revenue Agency Consider You a Professional Gambler?
Let’s say it again – to meet the ATO definition of a professional gambler, there has to be a business connection with the gambling industry. If your ‘primary profession’ or a business/company is not connected to the gambling industry in any possible way, all of your casino winnings will be tax-free.
How Much Can I Win Before Paying Taxes?
We sure are lucky to be living in the Land Down Under. In our country, gambling can not be treated as a profession, and gambling taxes are not applied on an individual level, but on a corporate level instead. Americans, for instance, aren’t so lucky and their casino winnings are fully taxed. Australia has a different approach, and all your winnings are considered to be pure luck, not something you have earned.
Therefore, no matter how much money you win at online casinos, the government will not touch your money UNLESS you are somehow directly associated with the gambling industry, as explained in the paragraphs above.
How Does Gambling Work with Income Tax?
If you are wondering how does gambling work with the income tax, you are either a high roller or a passionate gambler who makes a ton of money outside of casinos. Since there are no taxes on your casino winnings in Australia, one might think that the ATO is not concerned with online casinos at all, but that’s an entirely wrong premise.
The ATO has insight into all gambling records and they are more than willing and capable to compare them with your annual tax returns. So, if a person spent AU$100,000 on gambling in the space of one year, and the same person declared that he or she earned CA$50,000 in that same year, you can bet all you have that ATO WILL act on this matter! In fact, the ATO will demand that a person in question pay taxes for an additional CA$50,000.
Are Lottery Winnings Treated Differently?
Effectively, no, they are not. All lottery wins are tax-free because a person will pay the tax in a form of GST as soon as he or she pays for the winning lottery ticket. In a sense, one could say that it’s not that Australians got the better deal than the rest of the world, it’s the rest of the world who got screwed by paying double taxes – one for the lottery ticket, and the other on lottery winnings.
Is Taxation Different for Online and Offline Gambling?
When it comes to taxation, the Australian government treats online casinos exactly the same as land-based casinos. Casino winnings are tax-free both in real and virtual casinos. More precisely, all taxes are paid by casino operators, not lucky players.
What are the taxing rules like depending on region, city, or province?
New South Wales
Electronic gambling machines (EGM) in hotels are taxed 0-50% of quarterly player loss, depending on quarterly player loss. In clubs, it’s 0-28.05% of quarterly player loss, depending on quarterly player loss (the rate peaks at 28.05% for $250,000-$450,000, then falls to 18.05% before rising to a maximum of 26.55% above $5 million). In casinos, 16.41-38.91% of gross revenue, depending on gross revenue, plus 2% Responsible Gambling Levy on gross gaming revenue. For Keno, it is 8.91%-14.91% of player loss, depending on player loss. Table games in casinos are taxed at a rate of 16.41-38.91% of gross revenue, depending on gross revenue.
EGM’s in hotels are taxed 8.33-62.53% of monthly average player loss (per machine), depending on by monthly average player loss, times by the average number of machines. In clubs, it is 0-54.20% of monthly average player loss (per machine), depending on monthly average player loss, times by the average number of machines. In casinos, the tax rate on EGM’s 31.57-51.57% of gross gaming revenue, depending on gross revenue, plus a 1% Community Benefit Levy. Keno is taxed 24.24% of player loss, and casino table games 21.25-41.25% of gross revenue, depending on gross revenue, plus 1% Community Benefit Levy.
EMG’s in hotels are taxed 35% of the monthly taxable metered win (amount bet minus payout), plus Health Services Levy of 0-20% of a monthly taxable metered win, depending on the monthly metered win. EGM’s in clubs are taxed 0-35.00% of a monthly taxable metered win, depending on the monthly metered win. In casinos, it is 30% of monthly gross revenue (Gold Coast and Brisbane casinos), 20% of gross revenue (Townsville and Cairns casinos). Keno is taxed 29.40% of monthly gross revenue, excluding casino commissions (Jupiters Casino), 20% of monthly gross revenue (Gold Coast and Brisbane casinos), 10% of gross revenue (Townsville and Cairns casinos). Table games in casinos are taxed 20% of monthly gross revenue (Gold Coast and Brisbane casinos), 10% of gross revenue (Townsville and Cairns casinos).
EMG’s in casinos are taxed 12.42% flat rate on gross gaming revenue, plus 2% Burswood Park Levy on gross revenue. Keno tax rate is 9.37% of player loss (domestic), 1.75% of player loss (international business). Casino table games are taxed 9.37% (domestic), 12.92% (fully automated table games).
EGM’s in hotels are taxed 0-65% of annual net gambling revenue, depending on annual net gambling revenue. In casinos, it is up to 41% of net gambling revenue. Keno is taxed 41% of net gambling revenue. Table games in casinos are taxed 3.41% of net gambling revenue (table games), 10.91% of net gambling revenue (fully automated table games.
EGM’s in hotels are taxed 25.88% of gross profit, plus 4% Community Support Levy. EGM’s in casinos are taxed 25.88% on gross profit. Keno is taxed 5.88% of gross profit. Casino table games are taxed 0.88% of annual gross profit.
EGM’s in hotels are taxed 12.91-42.91% of monthly gross profits. EMG’s in Casinos are taxed 11% of the gross profit (Lasseters Casino), 15% of the gross profit (Skycity Darwin Casino), plus a 10% Community Benefit Levy. Keno is taxed 10% of gross profit, reduced by the GST amount. Table games at casinos are taxed by the GST rate only.
Australian Capital Territory
EGM’s in hotels are taxed 25.9% of gross monthly revenue, plus 0.6% Problem Gambling Assistance Fund Levy. EMG’s in casinos are taxed 10.9% of gross revenue. Keno is taxed 2.53% of turnover.
What Happens If I Gamble in a Different Country?
Listen to the stewardess in the image. Different countries have different gambling laws and rules, and all you have to do is respect those laws. If you decide to gamble in a foreign country/territory where gambling is legal, and you do so in a legit casino or gambling operator, the Australian government is totally okay with it and you will pay no taxes IF the gambling industry isn’t directly connected to your business. As mentioned before, your gambling winnings, scored in Straya or abroad, are not considered income in Australia.
Taxing Gambling Winnings in Australia: Summary
There are many reasons why being True Blue rocks and rules, but nothing tops gambling. Not only is Australia the gambling capital of the world per capita, but it’s also Australian taxes, or the complete lack of them to be honest, that makes gambling in Straya so tempting. Yes, mates, the Interactive Gambling Act is a bit of a mess with quite a few loopholes and grey areas, but in reality, nothing prevents you to gamble in well regulated online casinos with a proper gambling license.
And to put a cherry on the top, all of your casino winnings, online or land-based, are totally tax-free because gambling is not considered income. Just one reminder, and it’s a big one – you will pay taxes on your casino winnings if you and your business are in any way related to the casino industry.