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Gambling Tax Reform

Gambling taxes are the 5th largest source of South Australian state taxes, although the revenue has been declining over the last decade. However, there is some concern among gambling harm prevention advocates that state governments' reliance on gambling taxes creates a conflict of interest given the government role in regulating gambling. But the issue should not be exaggerated as governments also have to pay for community harm caused by gambling, and not taxing gambling would simply result in a profit boom for gambling businesses.

SACOSS' major report, Losing the Jackpot, outlined four key rationales for taxing gambling:

  • taxing the extra profits that arise from the regulation from supply of gambling
  • incorporating the costs of gambling harm into gambling prices
  • sending a price signal to minimise gambling harm
  • general revenue raising.

However, South Australian gambling taxes do not always meet the above rationales and reform is needed to better utilise gambling taxes to contribute to harm prevention. Losing the Jackpot proposed a range of reforms, including the introduction of a point of consumption wagering tax (which the state government introduced in 2016) and replacing the current tax discount to tax rates for clubs with differential tax rates based on harm minimisation so that machines or venues with $1 bet limits (per spin) would pay the lower rates of tax.

Differential Tax Rates on Pokies

In South Australia, there are different tax rates applying to income derived from poker machines (“Net Gaming Revenue”) depending on whether the venue is a hotel, a club or the casino. For hotels and clubs there is a $75,000 tax-free threshold, and then different tax rates applying progressively to six income brackets above that. However, the rates that apply in these brackets are different for hotels and clubs. Clubs have significantly discounted tax rates, so that for instance, the rate of tax on net gaming revenue between $75,000 and $399,000 p.a. is 27.5% for hotels, but only 21% for clubs. In the top bracket (over $3.5m p.a.) the rate is 65% for hotels, but 55% for clubs.

These two tax concessions (the tax-free threshold and the differential tax rates) amounted to $18.7m (in 2014-15) in potential revenue lost to the South Australian government. This is a significant impact on the state budget, but there is nothing inherent in a club being not-for-profit that means its poker machines are less dangerous or causing less harm.  In fact, the concessions do not fit any of the rationales for gambling taxation.

SACOSS is recommending abolishing the differential tax rates in their current form, and instead tying concessions to the adoption of the key harm minimisation measures of $1 bet limits per spin. For instance, those venues operating machines limited to $1 bet per spin would be entitled to the concessional tax rates, while those who wish to run the most dangerous high-intensity gaming machines would pay tax at the full rate.

This would provide a financial incentive for harm minimisation and change the concession arrangements from being based on incorporation status to a more gambling-appropriate rationale. When SACOSS tested this idea in a survey of 1,000 South Australians, 63% of respondents supported the idea, while only 16% opposed it - making it the most popular tax reform proposal put forward by SACOSS.

For more information

SACOSS' major report Losing the Jackpot: South Australia's Gambling Taxes (2017).

Wagering Tax

The face of gambling in Australia is changing and the tax system has to change with it.

With the rise of online betting on sports and racing, international bookmakers have set up shop in virtual gambling tax havens. The revenue they get from South Australian punters is taxed in the Northern Territory or other jurisdictions where gambling taxes are capped at very low levels. That is not fair to local bookies who pay gambling taxes here, or to the South Australian community who miss out on the revenue which could pay for vital services – including the harm caused by gambling.

A "point of consumption" Wagering Tax operates in the UK to tax bets where they are made, not where the bookmaker is based. SACOSS put forward the idea of such a tax here in early 2016, and in its 2016-17 Budget, the State Government announced the introduction of a point of consumption wagering tax of 15% on the net revenue made by bookies’ from bets made in SA, effective from 1 July 2017.

This point of consumption wagering tax will see the big online bookmakers, like Sportsbet and Ladbrokes, pay gambling taxes on their revenue in SA for the first time.

The Wagering Tax is expected to raise around $10m per year, that is:

  • $10m of tax revenue that does not have to be found from payroll, land or vehicle taxes; or
  • $10m of services for the South Australian community.

The government has announced that $500,000 per year from the wagering tax will go to the Gamblers Rehabilitation Fund to support problem gamblers. It is the first time that betting taxes will contribute to the Fund which has until now been supported by poker machine taxes.

Small bookies with net revenue of less than $150,000 per year will be exempt from the tax.

The wagering tax is a tax on bookies’ revenue, it is not a tax on punters.

SACOSS supported the introduction of the proposed wagering tax because it is fair and will ensure that revenue from South Australian betting is taxed in South Australia, and that the money raised can be directed to services for South Australians. We congratulate the government for the introduction of the tax and the parliament for passing the bill into law.

For more information

Download the 8-page SACOSS Policy Brief on SA's Proposed Wagering Tax

Download the 2-page SACOSS Fact Sheet: SA's Proposed Wagering Tax

See also:

SACOSS' major report Losing the Jackpot: South Australia's Gambling Taxes which first called for place of consumption taxatio.n

Published Date: 

Monday, 29 August 2016