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Point of consumption gaming tax: where are you punting?

Point of consumption gaming tax

Gary Chiert and Dorian Beaver discuss the recently announced consumption wagering tax in the NSW State Budget.

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Horse racing

The New South Wales (NSW) Government recently announced in the 2018-19 Budget the introduction of a 10 percent point of consumption wagering tax, to apply from 1 July 2019.

The tax will be applied to all bets, including online or telephone bets placed by NSW punters. This measure is in line with initiatives introduced or announced by other States and Territories, except Tasmania and the Northern Territory, although certain features of the tax such as the rates and the tax-free threshold vary.

By taxing wagering based on the punter’s location, the tax is intended to adapt to changes in the gambling market where many bets are placed online or by phone.

At present there is no specific state based tax on online gambling; rather there are State and Territory based point of supply taxation. This has resulted in the Northern Territory becoming a popular centre for a thriving online gaming industry.

The tax will be levied on net wagering revenue, which we expect to be consistent with other States and be the total of all bets, fees and commissions, less winnings-paid. Operators with a net wagering revenue below $1 million will not be subject to the NSW version of the tax. Similar to other States, there are measures to compensate the racing industry.

The budget refers to NSW residents being subject to the tax and also to their location. The preceding consultation paper discussed whether the location should be based on the customer’s usual place of residence or the actual location of placing the bet, before noting that using the actual location may be difficult to implement. Guidance in relation to the Victorian version of the tax indicates that proxies may be used when determining a customer's location is difficult.

With the introduction of a point of consumption wagering tax by almost all States and Territories, it will be important to ensure that systems for online and phone wagering are able to capture the State or Territory of the location of the customer when placing a wager, or that proxies are endorsed by the State and Territory revenue offices.

Lessons can be learned from other State taxes that require a taxpayer’s systems to apply rules of apportionment. For example, insurance duty compliance activity by the State and Territory revenue offices often focusses on the correct apportionment of insurance premiums between the States and Territories. Refunds are theoretically available for duty overpaid on mis-attributed premiums (ie ‘unders’ and ‘overs’ should net out to an extent, although the rates vary). However:

  • interest for tax defaults means the underpayments have a greater impact
  • there are often time restrictions for seeking refunds, but no timing restriction for defaults and
  • the costs to remediate faulty apportionment systems can be more than the underpayments of the tax.

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