Are gambling wins taxable? Typically, winnings from gambling are not taxable. BUT, there is a caution to this. The winnings of a “professional” gambler are taxable.
Whether gambling wins (and losses) are taxable depends on whether a taxpayer is “carrying on a business” of gambling. In determining whether a taxpayer is a professional gambler and thus carrying on a business, the following questions are relevant:
There are three main court cases that consider the tax consequences of gambling winnings.
In the first, Evans v FCT, the court stated that a “mere” punter may be carrying on a business if the relevant gambling activities are systematically conducted to obtain favourable odds.
In Evans, the taxpayer’s winnings were found not taxable as the taxpayer did not maintain an office or employ staff, did not keep any records and did not subscribe to any tipping services.
In the second case, Babka v FCT, the court confirmed that mere punting may constitute carrying on a business. On the facts of that case, the gambling winnings were not taxable as the chance of betting on a race suggests that it is rare for the individual to be deemed to be carrying on a business.
In the third case, Brajkovich v FCT, the Full Federal Court reiterated the principal criteria for determining whether gambling winnings are taxable. These characteristics include:
On the facts, the Full Federal Court found that the winnings were not taxable as the punter merely conducted gambling activities for pleasure rather than conducting a business.
The court noted that a significant element of skill in conducting gambling activities may have tax consequences.
The team at Waterhouse Lawyers understand and hold considerable tax expertise that enable us to assist you determine whether your gambling winnings are taxable.