Private ruling: GST and gambling
Date of advice: 8 June 2023
Published: 31 July 2023
Ruling period: All tax periods ending on or after 30 April 2023

Ruling: Q1: Is the entity entitled to include reward points redeemed by patrons as total monetary prizes in the calculation of its global GST amount under subsection 126-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 where those points are earned at a different venue? | A1: Yes.

Relevant facts and circumstances: The entity makes gambling supplies and operates a rewards program. Rewards points are earned by patrons when they wager on gambling events. The points earned can be redeemed for further gambling supplies. The entity has entered into an agreement with another entity which allows the rewards program to be used across the two venues. Patrons may earn rewards points and either venue and can redeem them on gambling supplies provided by either entity.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 126-10

Reasons for decision: Summary: Generally, an entity that makes gambling supplies calculates its GST net amount in accordance with section 126-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which requires the calculation of the entity's 'global GST amount' as defined by section 126-10: | Detailed Reasoning - 126-10 Global GST amounts: (1) Your global GST amount for a tax period is as follows: (Total amount wagered - Total monetary prizes) × 1/11 where: total amounts wagered is the sum of the consideration for all of your gambling supplies that are attributable to that tax period. total monetary prizes is the sum of: (a) the monetary prizes you are liable to pay, during the tax period, on the outcome of gambling events (whether or not any of those gambling events, or the gambling supplies to which the monetary prizes relate, take place during the tax period); and (b) any amounts of money or digital currency you are liable to pay, during the tax period, under agreements between you and recipients of your gambling supplies, to repay to them a proportion of their losses relating to those supplies (whether or not the supplies take place during the tax period). The entity makes gambling supplies and, in addition to money being paid as prizes, awards patrons with reward points. The definition of 'total monetary prizes' is based on a liability to pay an amount on the outcome of a gambling event. It is not sufficient that the reward points are awarded by the entity to the patron's account, they must be redeemed for cash or as consideration on further gambling events. The Goods and Services Tax Ruling, Goods and services tax: prizes (GSTR 2002/3) discusses the Commissioner's view in relation to gambling supplies and states: 189. A common practice in the gambling industry is for points to be awarded to players to encourage their further participation in gambling events or to facilitate the purchase of products or services sold in the club, hotel or casino. ... 191. We consider that participation in a gambling event has its own outcome. Points awarded for participation, or on a result, are points awarded on the outcome of the gambling event. 192. When points are awarded for a winning bet, or for participation, and the points are redeemed for money (or redeemable gambling chips if paid by a casino), the money (or chips) is a monetary prize. This monetary prize is included in the total monetary prizes for the purposes of calculating the global GST amounts in section 126-10. 193. However, points awarded for the purchase of meals, beverages and other non-gambling services supplied by an entity, or points purchased by a participating member, are not awarded on the outcome of a gambling event. Where these points are redeemed for money, this amount cannot be included in the calculation of the global GST amount as a monetary prize. These points need to be separated from points awarded for gambling activities as the GST treatments are different. If the points cannot be separately identified they can be apportioned on a reasonable basis. 194. Where points awarded on the outcome of a gambling event are redeemed for a non-monetary prize (which does not include redeemable gambling chips if provided by a casino), the value of that prize cannot be included as a monetary prize for the purposes of calculating the global GST amount When a patron redeems rewards points on further gambling supplies, the patron is receiving the value of the points as money. The money that the entity is liable to pay at that time can be included in total monetary prizes for the purposes of section 126-10 of the GST Act. Paragraphs 208 - 211 of GSTR 2002/3 explains that the rewards points must be redeemed in order for the amounts to be considered a monetary prize: 208. When points are redeemed for money (or gambling chips if paid by a casino), we consider that the money paid is a monetary prize. Therefore, the money paid can be claimed as a monetary prize in the section 126-10 calculation of a gambling supply provider. 209. For these gambling points to be claimed as total monetary prizes, it is not sufficient that they are merely awarded by a gambling supply provider. At the time of the awarding of points, there is no liability upon the gambling supply provider to pay money (or if the provider is a casino, to pay the value of the points in the form of gambling chips). 210. When gambling points are redeemed, the player is entitled to receive the value of them as money (or in the form of gambling chips if the provider is a casino). The money that the gambling supply provider is liable to pay the player at that time can be included in total monetary prizes for the purposes of section 126-10. When a patron earns rewards points at the other venue but redeems them on gambling supplies made by the entity the entity has not made the supply of the gambling event but is liable to pay the prize under the agreement between the two entities. GSTR 2002/3 supports the conclusion that the entity that is liable to pay the monetary prizes doesn't necessarily have to be the entity making the supply of the gambling event when it discusses cross-venue jackpots from paragraph 224: 224. Some gaming machines in licensed clubs and hotels may be linked to provide opportunities to play for larger jackpots. Participating clubs and hotels contribute to a 'jackpot fund' to cover the payment of a cross-venue jackpot that is set up. It is not known when and where the jackpot will be won. 225. The contributions into the jackpot fund are treated as being a monetary prize for the purposes of section 126-10, as they are for the sole purpose of being paid out as a monetary prize. The contribution to the jackpot pool by each participating gambling supply provider has the same effect as if the amount had been paid out by them as a monetary prize on the outcome of a gambling event. Each contributing member is entitled to claim the value of the extent of their contribution to the jackpot pool as a monetary prize when calculating their global GST amount. Example 29: Cross-venue jackpots 226. Ten of the Koala Sporting Club's gaming machines are linked to the Animals Sporting Club's Jackpot Network. As a participating member club of the network, Koala Sporting Club is required to contribute a percentage of the revenue of these machines to the jackpot pool. These contributions are a monetary prize for the purposes of section 126-10. The entity is liable to honour the rewards points earned by a patron at the other venue under the agreement it has with the other entity. Therefore, the entity is entitled to include the rewards points redeemed as money on gambling supplies as total monetary prizes in the calculation of its global GST amount under subsection 126-10(1) of the GST Act.