Is it possible to get a tax deduction from losses
In Australia, tax legislation clearly distinguishes between taxation of gambling income for amateurs and professional players. This determines whether losses can be accounted for as a tax deduction.
General rule
Amateurs: Gambling losses are not taken into account when calculating taxes and cannot be written off as a deduction.
Professional gamblers: Can account for losses as business expenses if gambling activity is deemed commercial.
ATO position:
Criteria for recognizing gambling as a business:
How professionals can write off losses:
Examples:
Risks and limitations:
Recommendations:
Conclusion
In Australia, the loss tax deduction is only available to players recognised by the ATO as professionals, subject to documentation of expenses. For amateurs, any losses have no tax consequences.
General rule
Amateurs: Gambling losses are not taken into account when calculating taxes and cannot be written off as a deduction.
Professional gamblers: Can account for losses as business expenses if gambling activity is deemed commercial.
ATO position:
- For most players, winnings are not taxed, so losses are not recognized as deductions.
- Deduction is possible only in cases where the game qualifies as a business, and the player keeps full financial records, including income and expenses.
Criteria for recognizing gambling as a business:
- 1. Regular and systematic activities.
- 2. Availability of business plan or game strategy.
- 3. Use of significant capital and its turnover.
- 4. Dependence of income on the game as the main source of funds.
How professionals can write off losses:
- Losses are reported on the tax return as part of the costs of obtaining taxable income.
- Accounting must be documented: bank statements, casino receipts, reports of gaming platforms.
- The amount of losses cannot exceed the amount of winnings when calculating taxable profit.
Examples:
- The amateur lost $5,000 AUD in the casino - there will be no tax deduction.
- A professional poker player with an income of $120,000 AUD and losses of $30,000 AUD can take into account this $30,000 AUD as a deduction, reducing the taxable base.
Risks and limitations:
- Attempting to claim an amateur status deduction could result in an ATO review.
- The lack of supporting documents deprives the right to deduction.
- Intentionally inflating losses qualifies as a tax violation.
Recommendations:
- 1. Determine your tax status as a player prior to filing your return.
- 2. Keep a detailed record of all bets, wins and losses.
- 3. Keep documents for at least 5 years.
- 4. When playing regularly, consult a tax professional for the correct classification of activities.
Conclusion
In Australia, the loss tax deduction is only available to players recognised by the ATO as professionals, subject to documentation of expenses. For amateurs, any losses have no tax consequences.
