Is Tax Deducted from My Jackpot Prize Winnings or Money?

The government has a rather interesting perspective of gambling winnings in Australia as compared to other places in the world. Because gambling winnings are viewed as the result of good fortune rather than income, they are not considered taxable income. Gambling is also not considered an occupation. It is qualified as purely a recreational hobby. In most other places of the world, all winnings are taxed, no matter what level. Here in Australia, the government taxes gambling operators instead that means casinos are taxed and not the players.

Taxation of gambling operators in Australia differs from state to state and different gambling services are taxed in a different way. There are taxes on the turnover, on player loss and net profit. As gambling operators need to obtain a license to offer their services, certain fees must also be paid at this stage of gambling business development.

Gambling establishments bear the entire burden of taxation. Although taxation policies differ from state to state in Australia, the responsibility always falls upon the operator to pay rather than the gambler. If you conduct gambling activities, GST is payable on the margin between money received and money paid out for a gambling event.

This is what the Australian Taxation Office have to say:

  • If you’ve won something in a prize draw or lottery run by your bank, building society, credit union or other investment body, you must declare on your tax return the value of any benefits or prizes you received. Prizes may include cash, low-interest or interest-free loans, holidays or cars.
  • However, you don’t need to declare prizes won in ordinary lotteries such as lotto draws and raffles.
  • If you’ve been a game show contestant, you only declare prizes you won if you regularly receive appearance fees or game-show winnings.
  • If you sell or otherwise dispose of an asset that was a prize from a lottery, you may make a capital gain, which must be declared on your tax return.

Poker winnings are not taxed in Australia

Offshore Gambling

Online: Be aware that technically, it is illegal for online gambling operators to provide services to Australian citizens located within the nation-state. Therefore there is a lower level of protection in regards to real-money winnings and payouts because these companies skirt the law.

In Person: Gambling in other countries just isn’t as sweet as it is in Australia. Imagine the shock to find out that a $1,000,000 winning in Las Vegas is reduced down to approximately $700,000. When gambling in foreign countries, be aware that as a “NRA”, a non-resident alien is taxed at 30%. There are some countries that have a lower tax rate due to treaties, but unfortunately Australia isn’t one of them.

It is clearly mentioned by ATO that if you’re an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare any foreign income in your income tax return.

New Zealand Punters

Like Aussies Kiwis too don’t have to pay taxes on their pokies wins. The tax authority Inland Revenue you will find gambling is mentioned many times but in very few cases do gamblers ever need to pay tax on their winnings. Here also gambling is most often considered recreation and not income. This remains true even when using overseas online betting sites.

An exception where gambling may be considered income for tax purpose is professional gambling. The precedent for this is the case Duggan v C of IR 73 ATC 6001. In short when gambling becomes a means of producing income rather than a pastime it is taxable income. Unlike Australian gambling law which allows most professional poker players to claim they are recreational, in New Zealand poker winnings are considered taxable income if the player has little to no income from other sources. Outside of professional poker play, it is very rare for gambling winnings to be taxed in NZ.

Poker winnings tax

The Department of Internal Affairs (DIA), who again controls all gambling in New Zealand, states this clear as day. Here is quote from their page on prohibited gambling activity:

“The prohibition is on remote interactive gambling in New Zealand and therefore does not prohibit gambling conducted overseas. For example, it is not illegal for someone in New Zealand to participate in gambling over the Internet if that website is based overseas.”

This shows that neither the New Zealand Gambling Act nor any other NZ law makes using overseas gambling websites a crime. What is illegal is to advertise these websites and the penalty is $5,000 per offense. This means casinos offshore cannot market in NZ on TV, newspapers or any other mediums. If players find their sites and use them, there is no crime for either the operator or player.

Future Taxation of Gambling

Although some politicians might aim to find ways to further tax the gambling industry, adding taxation to winning is an extremely unpopular opinion to everyone within the industry. Even with the extra incentive of lower taxation on the corporate side, operators worry that taxation of gambling winnings will decrease the overall amount of money spent in casinos.

Australians spend quite a bit of money gambling compared to other countries. Any changes in taxation might decrease the total amount of money spent by Australians, which will negatively effect gambling operators.

This could cost the industry a considerate amount of current customers as well as potential ones. Therefore, it is unlikely for any  politician to push an agenda that would effect gambling, as it would surely alter their political careers.

Here is the detailed report on Australia’s future tax system on gambling.

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