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As you can imagine, we have access to all the best Racing information available and so in the eighties and again in 2001 I applied to the Australian Taxation Office for a private ruling. In general a private ruling will also apply to the public at large, although the tax commissioner reserves the right to change this. If you are concerned that you are winning and one day might get taxed, you should apply for your own private tax ruling. The form is on the ATO website and there is as far as I know; no application fee. Here’s the answer I received for the 2001 tax year.

Garry Robinson

Year ended June 2001

Section 6‐5 Income Tax Assessment (Act 1997)
Section 8‐1 Income Tax Assessment (Act 1997)


Are Racing and gambling wins assessable to the rulee?
Can the rulee claim a deduction for gambling and Racing losses


The rulee operates a business which provides computerized Racing information which is well patronized by punters. The business is operated from rented premises and has employees.
The rulee has a keen interest in Racing and places a large number of small bets which in the course of the year are expected to exceed $500,000. The Taxpayer does not necessarily keep detailed records of his transactions. The types of bets vary and are placed with a combination of Bookmakers and the TAB.




Are Racing and gambling wins assessable to the rulee? No.
Can the rulee claim a deduction for gambling and Racing losses? No.

For Neil Mann

Deputy Commissioner of Taxation, 28 September 2001
Of more interest is the Tax Office Explanation. All of this information is readily available under Freedom of Information.

(this does not form part of the notice of private ruling)
There have been several court cases which have considered whether or not a person was carrying on a business of gambling. This issue was summarized very effectively by Robert Gherghetta in his article Taxing the Punter: What’s the Betting? Which was published in September 1993 in Volume 28, No. 3 of Taxation in Australia. Extracts from that article which outline the various cases will be used, and then the facts of this Taxpayer’s case will be distinguished.
None of the cases referred to in Mr. Gherghetta’s article are on all fours with this case.
The article briefly discusses sections 25 and 51 of the Income Tax Assessment Act 1936 (ITAA) in the context of carrying on of a business of gambling. It also discusses the relevant Case Law.

Graham v Green (1925) 9 TC 309;All E.R. Rep. 690.
The first case mentioned in Mr. Gherghetta’s article is the English decision of Graham v Green. In that case a Taxpayer whose livelihood was derived from backing horses at starting price from his home was considered not to have profits or gains from a vocation, nor to have carried on a trade or adventure for the purpose of the U.K. Law. A Bookmaker could set the odds he offered in order to make a profit in the long run, and thus have a trade, adventure or vocation that would give assess‐assessable profits or gains. A mere punter, by comparison, was thought to be incapable of organizing affairs to assure a profit.

Trautwein v. FC of T (1936)56 CLR196
This case concerned a Taxpayer who operated several hotel businesses and established a stud farm for breeding racehorses. He raced his own horses as well as horses under lease, and also wagered at the track regularly and systematically. It was held that the Taxpayer’s racing and betting transactions constituted a business, the proceeds of which were assessable income. He was considered to be more like a Bookmaker than a punter. The Taxpayer was found to
be carrying on a business in the Racing industry, independent of his other business activities because he successfully combined his racehorse ownership with regular and systematic punting.

The Taxpayer in this case does not own an interest in any Racing animals. Whilst he makes regular bets he does not seem to be more heavily involved in the Racing industry than would a mere punter.

Martin v. FC of T (1953) 90 CLR 470
This case concerned a Taxpayer who made frequent and large systematic bets from home. The Federal Court decided that the Taxpayer was not carrying on a business because he only frequented one racecourse on regular race days. The main principle from Martin’s betting purely for please or satisfying an addiction, then he will not be carrying on a business. However, where his ‘Racing activities are so considerable, systematic and organized that it could be said to exceed the activities of a keen follower of the turf’, then he will be considered to be carrying on a business. We content that as the rulee has other sources of funds and does not rely on punting as his sole source of income, he is best described  as someone whose Racing activities do not exceed those of a keen follower’ of the turf. It would be improbable to describe him as carrying on a business in these circumstances.

Prince v. FC of T (1959) 12 ATD 45
This Taxpayer was a retired Bookmaker who made large gains from heavy and systematic betting. He also owned and raced several horses, not for the joy of winning, but rather, to make favourable bets. It was held that he was carrying on a business and the profits were assessable.
The case is similar to Trautwein and the same comments apply.

Shepherd v. FC of T, 75 ATC 4244
The Taxpayer in this case had a lifelong interest in horses which eventually led her to train and breed her own horses. She bought a horse which was later successful and made large gains from prize money and betting wins. The Court decided that she was not carrying on a business because her horse Racing activities were a minor nature until she acquired the successful horse and become a successful punter due to that one horse’s success. The Taxpayer did not have the dominant desire to make money; but rather her intentions were based on her devotion to her horses and the pleasure she gained from training them. She was primarily a wife and mother who devoted what time she could to a passion for horses. The facts in Shepherd’s care can be likened to those in the present case. She was a wife and mother whose domestic duties occupied most of her time, whilst in the present case the rulee has limitations of his time.

Case K25, 78 ATC 243
The Taxpayer in this case was considered to be carrying on a business. He attended most races held in Sydney, leased offices with six phones installed for betting, employed staff and used a computer to analyse Racing results and recommend future bets. He held telephone betting accounts with the TAB and opened a commission account with Automatic Totalisators Limited. The Board of Review Chairman believed that the Taxpayer adopted a system that was similar to that of a Bookmaker, and as such it was a business. The Taxpayer could not discharge his onus of demonstrating that his methods of operation were not conducted as a business. The system of betting used by the Taxpayer in Case K25 is different from the Taxpayer in this case. It is the Taxpayer’s familiarity and involvement with the Racing industry which give him an advantage over the average punter. Nevertheless the Taxpayer is only a mere punter as he does not employ the systematic approach to the activity described above.

Evans v. FC of T, 89 ATC 4540
This Taxpayer ran other businesses and had a keen interest in Racing, winning substantial amounts from betting. Hill J. held that the Taxpayer did not carry on a business because his gambling activities lacked the element of a system or organization. Such factors that might indicate that gambling activities are being conducted as a system include:
• The use of a computer to assess form guides or calculate odds (as in Case K25)
• The formulation of a plan designed to obtain the best odds
• The taking of steps to lessen or exclude the element of chance
• A fund of capital with which to bet
• Records of the punter’s position form day to day and week to week.
These factors were not present in Evans case. He did not spend large amounts of time studying form guides, he did not subscribe to any tipping service or use any predetermined plan, he had no sources of information from the tracks, he had no allocated capital with which to bet and he kept no records.

Babka v. FC of T, 89 ATC 4963
The Taxpayer had retired and devoted much time to betting on horses; he did not have a ‘system’ which minimised his risk; and his records were not kept with a view to recording financial information. Hill J. decided that ‘mere punting is inherently incapable of being a business’.
This element of chance remains the predominant factor in the outcome. The distinguishing facts in this Taxpayer’s case are that he had no retirement capital to rely upon, but had other sources of funds to support the activity. It can be argued therefore that the rulee is less motivated to make money than would have been the case with Babka.

Brajkovich v. FC of T, 89 ATC 5227
This is the last case considered in Gherghettta’s article. Brajkovich had accumulated sufficient wealth from his business activities as a life assurance salesman, real estate agent and property developer, that he decided to retire and concentrate on his gambling. He lost nearly a million dollars in heavy gambling, and sought to claim a tax deduction for the relevant income years. The full Federal Court decided that he was not carrying on a business because his betting did not rely on skill or judgment and this had no organization or system. Although he owned horses, it was found that this was merely supplementary to his gambling activities.

Again the rulee had funds to rely on. He did not need to make a profit to survive; rather he could indulge a gambling habit with other business income in the same way as Brajkovich did with significant business savings. In the circumstances and considering the facts supplied by the rulee it is apparent that the Taxpayer is not carrying on a business. The proceeds are therefore not assessable and the expenses and losses are not deductible.

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