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What is Point of Consumption Tax when you bet on horse races online?

What is Point of Consumption Tax when you bet on horse races online?

A POC is a tax introduced by Australian State/Territory Governments that seeks to levy a consumption tax on all bets placed with any Australian licensed wagering operator by residents of their State or Territory. “Point of Consumption” refers to the location of the customer. This is different from “Point of Supply” which means the point where your offshore online bookie is located or licensed like Betfair which is licensed, in the Northern Territory and where they pay a tax for their license.

This means all Australian licensed wagering operators remit GST on the net margin they receive from gambling supplies provided to Australian consumers.  GST was introduced in Australia in 2000 as an indirect tax reform aimed to remove tax barriers between states and create a single market. GST is collected by the Australian federal government and distributed to the states and territories, however, the formula for distribution is not based on the actual point of consumption.

  • Online bookmakers, such as Sportsbet, BetEasy and Ladbrokes Australia, only had to pay the NT government wagering taxes up until July 2017 when South Australia first introduced its POC tax.
  • It works by taxing betting operators based on where a customer places a bet, instead of where the bookmaker is licensed. Since SA introduced its 15 percent POC tax, betting sites have to pay the state government every time a punter in the state places a bet.
  • Corporate bookmakers making less than $150,000 in wagering revenue per financial year do not have to pay the POC tax, under the SA model.
  • Similar taxes exist globally, but for different reasons. The UK introduced a Remote Gaming Duty, which taxes offshore online gambling operators on UK bets placed at the sites. The tax aims to make it a level playing field for UK-based gambling companies.
  • Since Australia introduced the Interactive Gambling Amendment Act 2016, offshore gambling companies cannot operate down under, and the POC tax does not apply to these operators.
  • Australian state and territory governments have estimated they could acquire up to $150 million per year with the tax, which is why many are considering following SA’s lead.

Introduction of POC by Australian State and Territory Governments

Though each state government may have different reasons, however, the following provides a guide on what these reasons may relate to and you may contact your local members for more information.

The United Kingdom (UK) POC model

It’s understood the State/Territory governments have sought to copy the United Kingdom (UK) POC model, however that model was introduced in an environment where most wagering operators were located off-shore and did not contribute any taxes in the form of licence fees or GST (VAT) to the UK government or product fees to UK racing/sports bodies.  The UK model now has these operators paying a POC to the UK government and a levy to UK thoroughbred racing via the Horserace Betting Levy Board, but this is still far less onerous than the heavy tax/fee regime in Australia for on-shore operators which includes:

  • Wagering licence fees
  • Wagering taxes
  • GST
  • Product Fees
  • POC

Comparison of taxes/fees paid by Betfair in Australia (by State/Territory) on Australian racing compared to off-shore wagering operators in the UK on UK racing:

Information Source: Betfair

The Reduction in Wagering Taxes Received From State Licensed TAB Operators

Currently, state governments charge wagering taxes to the licensed TAB operator in their State.  The wagering taxes the State Governments charge to the TAB operator in each State allows the TAB operator (Tabcorp) to enjoy ‘retail’ exclusivity as well as the exclusive pari-mutuel licence.

Due to the changing landscape where customers can bet freely online with any wagering operator and not in a retail outlet, wagering taxes from state-based TAB operators have been in decline and will continue to decline, which impacts state government revenues.  State governments are seeking to address the changing nature in how their residents bet.

The status of POC by state

State Status
South Australia The South Australian Government introduced a 15% POC on net wagering revenue on 1 July 2017.
Queensland The Queensland Government introduced a 15% POC on net wagering revenue on 1 October 2018.
ACT The ACT Government introduced a 15% POC on net wagering revenue on 1 January 2019.
Western Australia The WA Government introduced a 15% POC on net wagering revenue on 1 January 2019.
New South Wales The NSW Government introduced a 10% POC on net wagering revenue on 1 January 2019.
Victoria The Victorian Government introduced an 8% POC on net wagering revenue on 1 January 2019.
Tasmania The TAS Government introduced a 15% POC on net wagering revenue on 1 January 2020.
Northern Territory The Northern Territory Government has not made any representations on a potential POC model at this stage.

Australian national wagering tax

One of the recommendations of the Interactive Gambling Amendment Act 2016, was a National Consumer Protection Framework. The legislation, signed into law in 2017, proposed the Framework to protect Australian punters.

The Framework is currently in the works, with ongoing discussions between the Commonwealth, states, and territories in regards to a national approach to wagering taxation and consumer protection measures.

The independent body representing Australian bookmakers, Responsible Wagering Australia, has said the individual state-based online wagering taxes jeopardize a nationally harmonized approach.

Drawbacks of state-based online wagering taxes

Operators of Australian online betting sites have argued that they already contribute significantly to the national economy via job creation, paying wages and other taxes, plus sponsorships and race-field fees, which go to state racing bodies.

Bookmakers argue that it could force many operations to shut down or merge, in an already costly and competitive market.

The Northern Territory government is also against the state-based POC taxes, arguing that they threaten the 350 jobs that have been created by online betting companies. Additionally, around 18 licensed bookmakers pay $10 million per year to the Northern Territory Government, which could be affected too.

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