Private ruling: Am I in business - gambling
Date of advice: 2 October 2025
Published: 17 November 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the income derived from your gambling activities assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: Qualification and experience You are a full-time university student studying xxxx and expect to finish your studies by the end of 20XX. You are also employed on a casual basis. Your gambling history You began gambling on horse racing in early 20XX and occasionally placed bets on sports such as AFL, soccer, and rugby. Bets were primarily placed through a betting agency, with additional use of other bookmakers. All gambling during this period was conducted manually and on a casual basis. Your net position during the manual betting period was a small profit each year. Automated gambling You began developing a betting system in January 20XX and dedicated a significant amount of time each week to its development until June 20YY. A friend was also involved in the process. The initial version of the system became operational in June 20XX. In addition to enjoying the fun and challenge, your motivation for creating the system was to benefit your professional career in the future. The system runs on a schedule and places bets only on horse racing markets. It operates autonomously and does not require human intervention. A total of $X was invested in creating the system, with funds contributed by both you and your friend. Profits and losses are shared accordingly. Apart from your friend, you do not share your betting system and approach with any third parties. You spend time each month updating the system and intend to continue using it as long as it remains profitable. Record-keeping You maintain a single account with the betting agency. Additionally, the system generates logs that allows you to track performance. Your gambling activities in the 20XX-XX income year You undertook a major upgrade between September 20XX and January 20XX.The second version of the system has been in use since then. You provided monthly activity statements from the betting agency for a full income year, demonstrating high-volume betting and consistent monthly profits.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Subsection 6-1(1) of the ITAA 1997 states that assessable income consists of ordinary income and statutory income. | Detailed Reasoning - Ordinary income: Section 6-5 of the ITAA 1997 provides that ordinary income is income according to ordinary concepts, generally including 3 categories - income from rendering personal services, income from property and income from carrying on a business. | Detailed Reasoning - Carrying on gambling or betting as a business: Under subsection 995-1(1) of the ITAA 1997, "business" includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee. The Macquarie Dictionary defines "hobby" as "a spare-time activity or pastime, etc., pursued for pleasure or recreation". Gambling or betting can be carried on as either a business or a hobby. Winnings derived from gambling or betting are only assessable under section 6-5 of the ITAA 1997 if you are carrying on a business of betting or gambling. Taxation Ruling IT 2655 Income tax: betting and gambling: whether taxpayer carrying on business of betting or gambling (IT 2655) is issued in consequence of three Federal Court decisions reported as Evans v. Federal Commissioner of Taxation (1989) 20 ATR 922 ( Evans ), Babka v. Federal Commissioner of Taxation (1989) 20 ATR 1251 ( Babka ), and Brajkovich v. Federal Commissioner of Taxation (1989) 20 ATR 1570 ( Brajkovich ). The issue in each of these cases was whether a taxpayer with no businesslike connection with the racing industry (e.g. as a trainer or breeder of horses) was carrying on a business of betting or gambling on races. In Evans , Justice Hill of the Federal Court acknowledged that mere punting could potentially constitute a business but concluded that the taxpayer was not carrying on a business based on the facts. He emphasised that for a punter to be considered as conducting a business, their betting activities must be systematic and aimed at securing the most favourable odds. While the volume and size of bets are relevant, they are not decisive. What was missing in the taxpayer's case was a structured or organised approach - he did not maintain an office or employ any staff to assist him; he did not keep any records; he did not use a computer or subscribe to any tipping or information services and did not spend a lot of time studying form. These absences led to the conclusion that the taxpayer's gambling lacked the necessary elements of a business. In Babka , the Federal Court (Hill J) again assumed that mere punting could, in some cases, amount to a business, but found that the taxpayer's activities did not constitute a business. Following some guiding principles, the taxpayer mainly relied on judgment and instinct when selecting horses and placing bets. This absence of system and organisation meant his activities resembled those of a keen hobbyist, not a business operator. Hill J acknowledged that with modern tools like computers, punting could potentially become systematic and profit-driven enough to be considered a business. However, he cautioned that due to the element of chance inherent in gambling, it would be rare for such activity to meet the threshold of a business. In Brajkovich , the Full Federal Court outlined key criteria for determining whether gambling amounts to a business. The court also added that gambling which involves a significant element of skill is more likely to have tax consequences than gambling on merely random events. While no Australian court has definitively held that a taxpayer's gambling activities did constitute a business, the courts have consistently stated that it is possible - but only if the activity is highly organised, systematic, and profit-driven. Consequently, the Commissioner adopts 6 criteria derived from the three court decisions in determining whether a taxpayer is carrying on a business of betting or gambling. These criteria include: 1. Whether the betting is conducted in a systematic, organised and businesslike way; 2. The volume and size of the betting; 3. Whether the betting is related to or part of other activities of a businesslike character; 4. Whether the betting activity is principally for profit or principally for pleasure; 5. Whether the form of betting chosen is likely to reward skill and judgment or depends purely on chance; and 6. Whether the betting activity is of a kind ordinarily thought of as a hobby or pastime. These criteria must be considered collectively and in their entirety to determine whether gambling or betting is conducted in a highly organised, systematic, and profit-driven manner. | Detailed Reasoning - Application to your circumstances: 1. Whether the betting is conducted in a systematic, organised and businesslike way The Commissioner considers that your activities are conducted in a systematic, organised and businesslike manner. The assessment is based on the following: • Using the system, you maintain full control over strategy and risk management by applying data analysis, automation, and continuous improvements to optimise betting performance. • You invest a significant amount of time into the development and improvement of the system, along with a routine of minor updates. • The system automatically makes betting decisions using consistent, data-driven logic, helping reduce gambling risks despite the presence of chance. • The system has not been used for any other purposes. 2. The volume and size of the betting The system operates continuously with minimal supervision and places bets on a schedule, aligning with horse racing events. During the 20XX-XX income year, a total of X bets was placed. Betting volume increased significantly following a major system upgrade in January 20XX, which contributed to higher profits in the subsequent months. The total amount wagered over the year was $X. By comparing your previous manual betting activity, which was conducted recreationally, the Commissioner considers that the substantial increase in both betting volume and performance may indicate that your activities are transitioning from a pastime to something more closely to a business operation. 3. Whether the betting is related to or part of other activities of a businesslike character You and your friend have independently designed and implemented a sophisticated betting system that operates autonomously, placing bets on horse racing markets. Your approach involves the development and application of a custom-built system that combine data analysis, and automated decision-making. Although you are not involved in related racing activities such as horse breeding or training, the Commissioner considers that your betting activities are fundamentally linked to software programming and engineering. Instead of relying on chance like typical recreational gambling, your betting uses a structured, data-driven approach. 4. Whether the betting activity is principally for profit or principally for pleasure You stated that, in addition to enjoying the fun and challenge, your motivation for creating the system was to build skills. While your behaviour may reflect mixed purposes, the Commissioner has considered several relevant factors and concluded that the dominant purpose behind your data-driven operation is principally profit-driven, even though it remains intellectually stimulating, enjoyable, and career-related. The following factors support this conclusion: • Clear profit intent: The system remains in use as long as it continues to generate profits. • Continuous operation: The system operates continuously with minimal supervision, placing bets in alignment with horse racing schedules. • Advanced technology: The use of automation and sophisticated betting strategies indicates an intent to maximise returns, rather than support casual or recreational use. • High-volume betting: The placement of high-volume bets demonstrates a calculated scale aimed at generating consistent monthly profits. • Realisation of gains: A substantial withdrawal of winnings provides evidence of financial gain and intent to realise profits. • Risk management: Bet size reduction during periods of loss to preserve capital reflects a mindset typical of profit-driven activities. 5. Whether the form of betting chosen is likely to reward skill and judgment or depends purely on chance Your university studies have provided a strong technical foundation for developing the system, and your commitment to the entire process goes well beyond a recreational hobby. While betting is typically considered a chance-based activity, your system reduces the element of chance by using advanced technology and applying sophisticated betting strategies. This is clearly demonstrated by the consistent monthly profits achieved. Accordingly, the Commissioner is of the view that although chance has not been entirely eliminated, it has been reduced to a level comparable to that found in business operations conducted by bookmakers or professional gamblers. As a result, your betting activities are more likely to reward skill and judgment than mere luck. 6. Whether the betting activity is of a kind ordinarily thought of as a hobby or pastime. Betting or gambling is generally regarded as a recreational activity, a hobby pursued for enjoyment, excitement, or personal challenge. In several court cases, despite the varied approaches taken by the taxpayers, their betting activities were found to lack the essential elements of a business and were ultimately treated as hobbies. These cases highlight that casual engagement, reliance on chance, and the absence of commercial structure are key indicators of recreational betting. In contrast, your operation is built on a sophisticated, data-driven system, similar to those used by professional gambling enterprises. Given these factors, it is difficult to conclude that your system was created for recreational use. Therefore, the Commissioner considers that your betting activities cannot be characterised as a mere hobby. | Detailed Reasoning - Conclusion: Based on the above factors, the Commissioner is satisfied that you were carrying on a business of gambling or betting during the 20XX-XX income year, as the use of the system combined with sophisticated betting strategies demonstrates a systematic approach aimed at maximising returns. Accordingly, the income derived from your gambling activities is ordinary income and assessable under section 6-5 of the ITAA 1997. | Detailed Reasoning - Further issues for you to consider: We have limited our private ruling to the 20XX-XX income year. Whether you are in business of betting or gambling is assessed on a yearly basis as your circumstances may change from year to year.