Another Bad Article

[FSL009]

windfall from gambling is considered a result of 'luck' rather than 'skill'. They will never classify poker as a game of skill because as per my previous discussions, it would open up all sorts of taxation loop holes.

although windfall gains are considered luck based, taxation of poker profits has nothing to do with it being a game of skill.

They could be taxed under our current rules where the activities are undertaken on a commercial basis with a view to profit. The point is to date people have successfully shown that they are not doing anything with a view to profit, that they are doing it for the challenge of the game, not for profits.

ie hobby v business test not windfall gain v effort/skill test.

individual or government, could consider such a small percentage of total online players deriving a living, large or small, could be considered 'inequitable',

Most people in Australia just think that anyone earning 750K + a year and not paying tax is inequitable and unfair when they earn 45K and pay tax and lose their welfare payments that helped them get their kids to school each week in clothes and with lunch. people dont look at the community. the government only see whats in the papers, I doubt too many labour front benchers have an online account and read these forums or 2+2 so the perception from papers is the reality....unfortunately.

tax and reg comments various

As you note there is a few ways this could end but the taxation of players is not linked to regulation in any way, shape or form.

[MrRegan]

Originally Posted by FSL009

although windfall gains are considered luck based, taxation of poker profits have nothing to do with it being a game of skill.

They could be taxed under our current rules where the activities are undertaken on a commercial basis with a view to profit. the point is to date people have successfully shown that they are not doing anything with a view to profit, that they are doing it for the challenge of the game, not for profits.

ie hobby v business test not windfall gain v effort test.



most people in Australia just think that anyone earning 750K + a year and not paying tax is inequitable and unfair when they earn 45K and pay tax and lose their welfare payments that helped them get their kids to school each week in clothes and with lunch. people dont look at the community. the government only see whats in the papers, i doubt to many labour front benchers have an online account and read these forums or 2+2 so the perception from papers is the reality....unfortunately.

As you note there is a few ways this could end but the taxation of players is not linked to regulation in any way, shape or form.

But they cant be undertaken on a commercial basis due to legislation providing that gambling is based on luck not skill, Regardless of whether they intended to make a profit or not, they could intended to make all the profit in the world but no australia company has ever had to defend it's position in this case because no such company exists, and if any such company did exist it would fall under the context of 'loss minimization' because as stated, gambling is considered a factor of LUCK rather than SKILL therefore NO long term profitable venture can possibly exist.

Also what percentage of this lower quartile of Australians earning 45k a year (a highly undervalued figure) would be willing to risk a years gross wages in a single 8hours session? As per all business its a case of risk and reward and in respect to poker the risk is exponential compared to your chances of long term success.

On top of this how many Australian poker players can you name that have made over 500k a year Averages over the past 5yr period and why should the success of the handful of highly skilled Australians beating the odds's have direct influence on an entire countries legislature?

EDIT: under current rules, encase i've misunderstood your point,yes, they are commercially taxed in the form of gross rake. on a personal level their is no such provision available to government regardless of intent.

[FSL009]

[quote]

But they cant be undertaken on a commercial basis due to legislation providing that gambling is based on luck not skill

Which legislation? please specify Act and section you are talking about.

Regardless of whether they intended to make a profit or not, they could intended to make all the profit in the world but no australia company has ever had to defend it's position in this case because no such company exists

Are you talking about the providers of online gaming or the players?

, and if any such company did exist it would fall under the context of 'loss minimization' because as stated, gambling is considered a factor of LUCK rather than SKILL therefore NO long term profitable venture can possibly exist.

Which ATO ruling, intepretive decision, case or section of our tax law are you relying on for this statement?

[MrRegan]

[quote=FSL009;276417]

Which legislation? please specify Act and section you are talking about.



Are you talking about the providers of online gaming or the players?



Which ATO ruling, interpretive decision, case or section of our tax law are you relying on for this statement?

Court Precedence:

School of Law, Murdoch University, "Gambling and taxation - Australia" Volume 2, Number 2 (July 1995), Kee, Pei-Teing

Graham v Green [1925] 2 KB 37 - Relation to income derived solely from gambling

Trautwein v FCT (1936) 56 CLR 196; Case K25 78 ATC 243 - Ruling on gambling based income relying on luck rather than skill.

And to quote the federal court in In the case of Brajkovich v FCT (1989),

"the gambler who seeks to demonstrate that he is ... a businessman has more to show by way of system and profit motive than those who engage in more conventionally "commercial" activities"

Aka you want to show your in the business of betting you need more then a system and a motive for profit to be recognized as a business enterprise.


Legislature:

25(1) of the Income Tax Assessment Act (ITAA) (1936) (Cth)[19] : If a tax payer is found to be in the business of gambling than losses occurred therein would be tax deductible

Also refer to ruling [21] of the legislature that although it is possible for a person to be in the business in of betting, it requires more than to be a mere punter to be recognized as a business of betting (aka poker player), as upheld in the Brajkovich case.

This was just a quick search with rough copy pasta referencing, if you would like more recent case rulings and legislature I'll happily provide it in the morning.

[Strong Play]

Originally Posted by Starcitybust

P.s., my mate who is an editor at the Sydney morning herald, and a poker network reader, has just suggested one of their journos look into the story of these poker players winning so much and not paying taxes. Will be interesting to see how that works out.

And just like that, you became an enemy of the entire forum.

[FSL009]

Court Precedence:

School of Law, Murdoch University, "Gambling and taxation - Australia" Volume 2, Number 2 (July 1995), Kee, Pei-Teing

Graham v Green [1925] 2 KB 37 - Relation to income derived solely from gambling

Trautwein v FCT (1936) 56 CLR 196; Case K25 78 ATC 243 - Ruling on gambling based income relying on luck rather than skill.

I will set the above to the side for the moment given that they are very very old. remember the current tax law is split into two Acts some sections are contained in the ITAA 1936 most of the relevant provisions are in the ITAA 1997 (ITAA = Income Tax Assessment Act)

And to quote the federal court in In the case of Brajkovich v FCT (1989),

"the gambler who seeks to demonstrate that he is ... a businessman has more to show by way of system and profit motive than those who engage in more conventionally "commercial" activities"

Aka you want to show your in the business of betting you need more then a system and a motive for profit to be recognized as a business enterprise.

Although this case is a leading case in relation to whether gambling outgoings are deductible I dont know that it adds as much value in determining whether or not profits from something that is very much profitable will not be assessable. It does add some comments that are useful but just dont ignore the context of the case is my only warning.

Legislature:

25(1) of the Income Tax Assessment Act (ITAA) (1936) (Cth)[19] : If a tax payer is found to be in the business of gambling than losses occurred therein would be tax deductible

This section is now called section 8-1 of the Income Tax Assessment Act 1997 although it does the same thing. the case you mentioned above is discussing some of the concepts around this section, but if an ATO officer today took a liberal view of this section and let you through with your losses then there are now specific non-commercial loss restrictions that I discussed above in my original comments these are contained in section 35-10 of the ITAA 1997. I point out that the ATO are not worried about deductions where people are losing money they are well protected in these situations by the deferral of losses on non-commercial activities (not long term profitable) that meet the criteria for being a business. So the old argument that it would open a can of worms is not really an argument since these rules were enacted in 2000.

Also refer to ruling [21] of the legislature that although it is possible for a person to be in the business in of betting, it requires more than to be a mere punter to be recognized as a business of betting (aka poker player), as upheld in the Brajkovich case.

This was just a quick search with rough copy pasta referencing, if you would like more recent case rulings and legislature I'll happily provide it in the morning.

No that is fine, I know the cases and the law, it was me testing you out to find out where your thinking was cause i couldnt understand why you were talking about companies....still dont. but anyway.

As a guess maybe you should read some of the things you found, then come back and we can have a discussion about them properly.

Cheers

[Strong Play]

[?] thank god it's not 1936

[chenyan]

Credit to FSL for continuing to bash his head into a wall talking tax law with Regan.

The luck vs skill test is not determinative, so I don't understand why it keeps being brought up as some magical reason for poker being "un-taxable". Wasn't it only last month we were all pointing out how poker was obviously a game of considerable skill (Phil Ivey WSOP argument was tossed around a lot). Regardless, poker is not comparable to roulette or two-up. There is no way it would be held to be all luck.

In Brajkovich v Commr of Taxation (Cth) the Court identified six indicia by which the existence of a gambling business could be determined:

1. Whether the betting is conducted in a systematic, organised and 'business-like' way;

2. Its scale: ie the size of the wins and losses;

3. Whether the business is related to, or part of, other activities of a business-like character, eg breeding horses;

4. Whether the bettor appears to engage in his activity principally for profit or principally for pleasure;

5. Whether the form of betting chosen is likely to reward skill and judgement or depends purely on chance;

6. Whether the gambling activity in question is of a kind which is ordinarily thought of as a hobby or pastime."

It saves way more time, and streamlines arguments, to simply refer to these factors when arguing poker winnings are taxable/non-taxable income. Pick a number and we can debate it. Also, it would be handy to establish which sections of (outdated) legislation you're relying on.

Some of the 'online pros' from this forum would be in trouble according to this list imo, but it's a case by case decision which really isn't worth the hassle at the moment it seems.

[bazooka87]

Pokerstars could face Australia action | eGaming Review

Cliffs: company that runs marketing for Stars in Australia owned by Oldford Group, one of the entities sought for forfeiture by defendants of the DOJ indictment.

[MrRegan]

FSL: Mate, as i said, quick referencing search at 11pm citing extracts as proof of concept.

Your referal to "section 35-10 of the ITAA 1997" covers personal income tax through sole proprietorship or partnership and the restrictions on non commercial deductions, current, past or future. My original discussion was regarding the formation of a Limited Liability Company based on the business or betting and cited old (yet valid) precedence establishing why this is not possible, but we will set aside the Corporations Act for now and work with what you've provided.

Now the original point i was trying to make was it is unlikely they will recognize pokers as a legitimate source income or a profession for the pourpose of taxation was because of possible tax loopholes allowing for tax credits based on losses occurred in a downswing. You keep restating "deferral of losses on non-commercial activities", but if they were to acknowledge poker as a taxable profession than any losses suffered by a business established for the purpose therein would be, get this, direct commercial activities.

Originally Posted by chenyan

Credit to FSL for continuing to bash his head into a wall talking tax law with Regan.

The luck vs skill test is not determinative, so I don't understand why it keeps being brought up as some magical reason for poker being "un-taxable". Wasn't it only last month we were all pointing out how poker was obviously a game of considerable skill (Phil Ivey WSOP argument was tossed around a lot). Regardless, poker is not comparable to roulette or two-up. There is no way it would be held to be all luck.

In Brajkovich v Commr of Taxation (Cth) the Court identified six indicia by which the existence of a gambling business could be determined:

1. Whether the betting is conducted in a systematic, organised and 'business-like' way;

2. Its scale: ie the size of the wins and losses;

3. Whether the business is related to, or part of, other activities of a business-like character, eg breeding horses;

4. Whether the bettor appears to engage in his activity principally for profit or principally for pleasure;

5. Whether the form of betting chosen is likely to reward skill and judgement or depends purely on chance;

6. Whether the gambling activity in question is of a kind which is ordinarily thought of as a hobby or pastime."

It saves way more time, and streamlines arguments, to simply refer to these factors when arguing poker winnings are taxable/non-taxable income. Pick a number and we can debate it. Also, it would be handy to establish which sections of (outdated) legislation you're relying on.

Some of the 'online pros' from this forum would be in trouble according to this list imo, but it's a case by case decision which really isn't worth the hassle at the moment it seems.

""The luck vs skill test is not determinative, so I don't understand why it keeps being brought up as some magical reason for poker being "un-taxable". ""
"Pick a number and we can debate it" Accepted.

5. Whether the form of betting chosen is likely to reward skill and judgement or depends purely on chance; , sounds alot like luck vs skill to me.

Point me to a court ruling or piece of legislature that distinguishes poker from other forms of gambling as a game of skill rather than luck?

Excuse me i have a date with a brick wall..