Home » What Is Gambling Tax: How to Deal With Your Winnings and Losses

What Is Gambling Tax: How to Deal With Your Winnings and Losses

It’s no secret that Aussies love to gamble. In fact, some 80% of Australian adults gamble, which is the highest rate for any country in the world. They enjoy playing pokie machines and other games in land-based casinos and gaming venues nationwide. They also enjoy gambling on their phones and visiting online casinos while on the go.

Of course, one of the most appealing aspects of gambling is the fact that there’s a chance of winning real money. Let’s check when someone wins what happens to gambling winnings and whether they are subject to tax in any way. This article goes into the financial aspect of gambling and how it’s affected by taxation. It concentrates on Australia, though it mentions several other countries for comparison and their taxes that affect gambling winnings.

What Happens With Your Gambling Winnings in Australia?

The Australian government considers gambling of all types to be a hobby or a pastime. It’s not thought to be work of any kind. Many Aussies take advantage of promotions such as no deposit bonus codes Australia so they can win without spending any of their own money. Therefore, there are no taxes on gambling. You could win a dollar or millions of dollars and wouldn’t have to pay any tax on your gambling winnings. According to the government, whatever money you’ve won from gambling hasn’t been earned through work but by luck.

Casino games are games of chance. Yes, some games, such as blackjack and poker, involve a level of skill as you have to make decisions that can affect the outcome. However, luck still plays a large part in it, and you can be as skillful as possible, but you’re never guaranteed a win. Improving your skills can help, but luck determines the outcome and whether you win or lose.

Taxing for Permanent and Temporary Residents

Anyone who’s physically in Australia, whether they’re a permanent resident, a temporary resident, or a tourist, gets to keep the entirety of their gambling winnings.

  • Whether it’s a big or small amount, all the money you win from gambling is yours to keep.
  • You don’t have to declare anything related to your gambling winnings when you come to do your taxes.
  • Plus, the government won’t ask you to declare your winnings so they can tax them.

If it’s decided one day that there’ll be a tax on gambling winnings, it won’t be retroactively applied. In other words, the only winnings affected by the new tax would be those won after the new tax law was enacted.

There’s also the fact that most of the time when someone gambles, they lose. And when someone is lucky enough to win, it’s nearly always on a small profit they’ve made. This is a one-in-a-million occurrence when you hear about someone winning a life-changing sum through gambling. The odds of this happening might not strictly be one in a million, but the point is that the most significant wins have the smallest chances of happening. Nearly all gamblers won’t make a profit, whether short-term or long-term, and most profits aren’t significant.

Income From Gambling

Some people are very successful at playing casino games and placing sports bets using tips to increase their winning chances. So much so that they can make a living and support themselves, and possibly others, through their gambling income. The best professional gamblers can make hundreds of thousands or even millions in gambling income annually.

Anyone who does this in Australia doesn’t have to worry about taxes on gambling winnings. No matter what you do with the money you earn from gambling, you’ve every right to keep it whole and do with it as you, please. If some people are lucky enough to make a living from gambling, good luck to them. If someone who earned a living from their gambling winnings had a job where they were paid a salary, their salary would be taxable because it would be earned through work. This wouldn’t affect the person’s gambling winnings in any way.

How Is Gambling Taxed in Australia?

If a gambler doesn’t pay tax on their gambling winnings, how does the Australian government get revenue from gambling activities? It’s simple: taxation happens at the corporate level, not the person. Companies that operate gambling facilities are taxed, not those who use those facilities and potentially win money.

Both physical and digital gambling venues earn income through adverts and the money players spend on games and bets. The operators of these venues pay taxes on their payment, the exact amount depending on the amount of income and other factors.

Should you decide to set up a gambling company, the government would be entitled to tax your company. Before setting things up, you would have to make sure you’re aware of how the tax is calculated and what and is factors contribute to it.

Taxes on Gambling Winnings in Other Countries

In some countries, it’s the same as Australia, so there’s no tax on gambling winnings. The UK is a prime example. Here anyone who gambles is free to keep all their winnings, and they’re not classed as taxable income at any time. Canada’s another country with no tax on money won from gambling.

The New Zealand government taxes winnings from gambling, but not in a significant way. Money earned from gambling is considered to have been obtained through luck, as in Australia, the UK, and Canada. The government, therefore, doesn’t tax it as it’s not earned from work. However, if you save your winnings, you’ll have to pay tax on the interest they gain over time.

Taxes on Winnings From Gambling in the US

The US, however, is completely different. When you’re in the US, every type of gambling you do is taxed, even if you only win a small amount of money. According to the Internal Revenue Service, also known as the IRS, you have to declare all gambling winnings on your tax return. If you win a prize from gambling, such as a car or a holiday, you’re required to declare the monetary value of the prize.

What further complicates matters is that the gambling laws are determined at a federal level, not a national one. This means that instead of there being a single set of laws for gambling that apply to the whole country, each individual state gets to determine its own gambling laws. Understandably, there’s a lot of variation, with some states legalizing several forms of gambling and others continuing to outlaw most, if not all, forms of it. The tax rates are also decided on a state level.

If you’re a resident of the US, you’ll have to report all gambling winnings when you sort out your federal income tax. This applies to both casual, and recreational gamblers as well as those who make a living from gambling. Even if you only gamble and win once and it’s a small amount of money you win, you’ll still have to mention it. Declaring all forms of taxable income is required when filing your federal income tax return. If you omit anything, you could end up getting into trouble at some point down the line.

About People Who Don’t Live in the US

If you don’t live there but decide to visit and gamble, your gambling winnings will still be subject to taxation. Most of the time, the casino will withhold a percentage of your winnings, usually 30%. For example, if you were to win $10,000, you would only be paid $7,000. That being said, some countries have a tax treaty with the US. If you’re from one of these, you can present the casino with a form that will confirm you’re from a tax treaty country; the casino should pay your gambling winnings in full or refund you any money it’s taken from you for tax purposes.

What to Do Before You Gamble

Whenever you want to gamble, make sure you know what will happen to your gambling winnings. If you’re in Australia, there’s nothing to worry about, as the government doesn’t tax any winnings from gambling activities. In other places, however, all gambling winnings, no matter what size, have to be declared and will be included in the calculation to determine how much tax you pay.

Even if a tax on gambling winnings is introduced in the future, it won’t be retroactively applied, and only the winnings won after the new tax law was enacted would be affected. The government in Australia gets revenue from gambling through taxation at the corporate level, meaning that companies that operate gambling facilities are taxed, not the individuals who use those facilities and potentially win money.

Wherever you are, whether at home or in a different country, find out the tax laws and whether these apply to winnings from gambling. It’s always best to know the laws and how they will affect your winnings. If in doubt, do some research online or ask a staff member at the casino or gambling venue for further details about the local gambling taxes.