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The ATO case against multi-millionaire MONA founder David Walsh

The ATO case against multi-millionaire MONA founder David Walsh

Mega-successful professional punter and millionaire arts enthusiast David Walsh must think we are all stupid. He wants us all to believe that his little punters’ club comprising him and 18 other hand-picked professional punters that generates a turnover of more than $2.4 billion dollars annually is not a business but a mere hobby.

Thankfully the Australian Taxation Office is not that stupid and it is chasing Walsh hard for $37.7 million for the 2004-06 financial years, plus interest for unpaid tax on his little punters’ club hobby.

Walsh claims the ATO has done a U-turn on previous advice it has provided him that income from the gambling wins was not assessable. The Power Index's sister site Crikey understands that Walsh was provided a private binding ruling from the ATO that confirms that advice. The ATO is bound to abide by that ruling so long as the taxpayer has provided all relevant facts for it to make an informed decision.

But if the ATO subsequently believes it was not told everything, then the private binding ruling is no longer valid and all bets are off -- so to speak.

The tax office position on gambling and betting wins has been well documented since 1991 when the income tax ruling IT 2655 was publicly released. The ruling says that betting and gambling wins will not be assessable unless the taxpayer is carrying on a business and they provide examples of the criteria the courts have used to determine whether in fact a business is being carried on.

Crikey sources have revealed that the ATO case is “strong” and it has the various members of the punters’ club by the “short and curlies”. How on earth can anyone support the notion that Walsh and his cronies are carrying on a hobby when we know the following from Federal Court documents and what is on the public record:

  1. The syndicate employs about 300 people at its offices in Hobart and Sydney and it runs a global gambling operation that places bets on races in Japan, Hong Kong, England, Australia and the US.
  2. Destroying business records and using encryption software to attempt to hide details of their $2.4 billion global gambling business.
  3. Conducting management discussions orally to avoid “leaving a paper trail”.
  4. Three holding companies have been formed to provide analysis including form, competitiveness, style of racing and on-track behaviour for the gambling syndicate.
  5. Four members of the club have left Australia amid inquiries and audits by the Tax Office.

Furthermore, if the ATO wins the Federal Court action against Walsh and the court confirms the ATO allegations regarding the destruction of business records and concealing the true facts when requesting a private binding ruling from them, then the tax office should refer the matter directly to the Commonwealth Director of Public Prosecutions. These are serious matters and any allegations concerning a taxpayer that may have been deliberately deceiving the commissioner of taxation deserves the higher sanction of prosecution.

Historically, courts in Australia have been reluctant to make a finding that a taxpayer is carrying on a business of betting or gambling. When I worked in the ATO, I was always told to back away from making a case against gamblers as they did not want to set a precedent of allowing the gamblers’ losses. Let’s face it; most gamblers lose -- don’t they?

The Federal Court next month will not doubt be influenced by the decision of their brother judges in a leading tax case in 1989 on gambling wins known as the Brajkovich case. The full court in that matter established that gains and losses from gambling or wagering transactions are not taxable in the absence of a business. They ruled that the principle criteria for determining whether there is a business of gambling include the following:

  1. Whether the betting is conducted in a systematic, organised and “businesslike” way
  2. Its scale: i.e. the size of the wins and losses
  3. Whether the betting is related to, or part of, other activities of a businesslike character, e.g. breeding horses
  4. Whether the bettor appears to engage in his activity 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
  6. Whether the gambling activity in question is of a kind that is ordinarily thought of as a hobby or pastime.
A lot of that applies to Walsh.


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