Update on Australian Capital Territory’s Point of Consumption Tax

ACT Point of Consumption Tax

The ACT point of consumption tax cost licensed gaming sites over AU$650 thousand over the first 4 months of 2019.

Four months after the Australian Capital Territory instituted its 15% point of consumption tax (POCT), gaming operators are feeling the effects on their business. The Australian Capital Territory passed a 15% point of consumption tax on online betting services in June 2018. The ACT point of consumption tax took effect on January 1, 2019.

The point of consumption tax wasn’t the only tax increase that went into effect on January 1st. Western Australian also passed a 15% on net revenue that went into effect January 1.

Two other Australian states passed similar laws which took effect on the 1st day of the year. New South Wales instituted a 10% POCTs, while Victoria passed an 8% point of consumption tax.

Previously, South Australia approved a 15% POCT that began on July 1, 2017. Queensland subsequently passed a 15% point of consumption tax that triggered on October 1, 2018. The Northern Territory and Tasmania are the only Australian state and territorial governments without a POCT.

ACT Gambling Tax

In the ACT, sports bets on bookmaker sites are taxed. That means wagers on team sports and single-player sporting events like golf and tennis. It means wagers on thoroughbreds, harness races, and greyhound races.

The ACT taxes proposition bets on political elections, celebrity scandals, and the Academy Awards. Every time an Aussie sportsbook or racebook wins a bet, it pays the 15% POCT tax.

When lawmakers passed the tax, they expected to generate an added A$2 million per year. So far, the results are on pace to match the predictions.

What is a Point of Consumption Tax?

Aussie readers might want a primer on POCTs. A point of consumption tax forces licensed gaming sites to pay a tax on their revenues no matter where their headquarters is. Offshore online casinos, poker sites, and bookmakers for years avoided the kind of taxes Australian gaming operators faced.

Aussie lawmakers designed the series of point of consumption taxes (POCTs) passed last year to close that loophole. Offshore online betting sites who want a license in Australia now must pay a 15% POCT.

Betfair on Australian Consumption Taxes

Longtime operators complain that the POCT is an increase on taxes they already pay. For instance, Betfair addressed the new tax on its website. When asked whether Betfair already paid a consumption tax, it said, “Yes.”

Then Betfair added, “All Australian licensed wagering operators including Betfair 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.”

Northern Territory Gaming Licenses

So do Australian gaming sites, which caused many local operators to complain. Unregulated online gaming sites do not pay such taxes, so the Aussie sites complain they still operate at a disadvantage. They do, but the state governments can do little to enforce a law against sites which do not follow the law.

Even the regulated gaming markets can undercut the POCTs. The Northern Territory handles much of the licensing in Australia’s regulated gaming market. The Northern Territory chooses to keep its gaming taxes low, so it can draw foreign gaming sites to NT.

Since Northern Territory won’t pass a POCT law anytime soon, more operators will migrate to the NT jurisdiction.

ACT Poker Machine Reforms

ACT passed more than a point of consumption tax last June. With the same stroke of a pen, the Australian Capital Territory passed a pokies reduction law. Currently, the ACT has roughly 5,000 land-based poker machines.

The new law calls for a reduction of poker machines to 4,000 by the year 2020. Roughly 985 pokies must be eliminated in the next year if the ACT expects to reach the goal.

To offset the lost revenues, ACT lawmakers passed the Club Industry Diversification Support Package to help ACT clubs and pubs transition to non-gaming revenues. While the Diversification Support Package is unlikely to end pokies play anytime soon, it is supposed to replace the 20% in revenue losses a reduction to 4,000 pokies would cause.