ATO chases Crown for alleged $100m in unpaid GST

By William Brown Updated
ATO chases Crown for alleged $100m in unpaid GST

The Australian Taxation Office is in a battle with Crown Resorts over an alleged $100 million in unpaid GST.

The Australian Financial Review reports that the unpaid GST is in relation to Crown’s now scrapped junket partnerships program.

In the latest round of the two-and-a-half year stoush, the Commissioner of Taxation told the full federal court that the fact that Crown paid commissions to junket operators meant that its dealings with them were not purely “gambling activities”, meaning they are not subject to a GST carve-out for such transactions.

This argument fell short at the trial stage, with Federal Court Justice Jennifer Davies ruling in Crown’s favour in September.

Junkets are a way of bringing offshore high rollers to Crown’s Australian casinos in exchange for commissions and rebates, but have come under pressure following media reports the practice was central to breaches of anti-money laundering laws at the company.

The ATO said that because Crown paid commissions and rebates to junkets, those transactions were not pure gambling activities, meaning they should be subject to regular GST laws.

Under these laws, gambling operators only pay tax on the margin of profit they make on bets so they do not have to calculate GST liability for every wager made minus every payout.

The tax regulator said that as the commissions junkets receive are used for promotional activities, they are not standard gambling activities under these laws.

Crown fights back against claims it owes for unpaid GST

But Crown hit back by repeating the argument, which proved successful in the trial stage of the case, that the junket payments are not separate from its gambling dealings with those operators.

“It’s an accounting situation in which the existence and amount of one party’s liability to the other can only be ascertained by discovering the ultimate balance of their mutual dealings,” Mark Robertson, QC, appearing for the casino giant, told the court.

“Under a junket arrangement, there is a notional win or loss, that’s common ground, that is calculated by reference to the outcome of transactions, which can’t be separately cashed out.

“What we are left with at the end of the day, is the manifest excessiveness of the GST assessments that have been issued by the Commissioner.”

In the original judgment, Justice Davies found that Crown did not need to include commission costs and win-loss rebates to the tour operators when calculating its GST liability.

Labelling the ATO’s tax calculations as “excessive”, she said the relationships between casinos and junkets were “one integrated and indivisible transaction” with any rebates paid between the two parties “not separate and distinct amounts to be disintegrated from the collective win-loss results.”

She found they formed either “part of the consideration for the applicants’ gambling supplies or the monetary prize, meaning they still fell under the category of gambling activity”.

Although the ATO stands to gain $100 million in unpaid GST if the full court finds in its favour, the case is unlikely to change Crown’s tax liabilities for its junkets operations as the company ended its relationship with all junkets in November.

Faced with the prospect of the NSW gaming regulator denying it its casino licence, which did later occur, though there were strong signs that the licence may now go ahead, Crown said it would not work with junkets again unless they were subject to regulatory checks and approvals.

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