Sportsbet Wins Australian Fee Case

by Mary Swire, Tax-News.com, Hong Kong

23 June 2010

Racing NSW has been ordered by the Australian federal court to repay Sportsbet more than AUD2m (USD1.75m) of a 1.5% turnover fee, which the judge regarded as having been collected in a "protectionist, discriminatory and unlawful manner."

The Sportsbet case hinged on the fact that on-course bookmakers only paid the fee if turnover exceeded AUD5m, with the result that almost all NSW (New South Wales) bookmakers paid no fees, such that the threshold discriminated against interstate bookmakers. Moreover he fees collected from Tabcorp and on-course bookmakers in New South Wales were, on the whole, returned to them via rebates.

According to Racing NSW chief executive Peter V’Landys, there was a commercial arrangement with Tabcorp, which operates the off-course totalizator in NSW, dating back to 1997, which enabled Tabcorp to obtain a refund of its fees.

Racing NSW racing bodies had imposed turnover fees since 2008, and the New South Wales government had said the legislation was to prevent interstate bookmakers (such as Northern-Territory licensed online bookmakers Sportsbet and Tasmania-licensed Betfair) from “free riding” on the state’s racing industries. Revenue was expected to yield AUD35m annually.

The part of Sportsbet's case which was against the state of New South Wales was dismissed because the unlawful conduct, according to the judge, was not in the legislation itself, but in the way the racing bodies imposed it. This may be subject to further appeal, if the basis for future fees can not be resolved through negotiation.

Justice Perram has dismissed a similar case by Betfair but said that the case was still open for further argument. Betfair had argued that fees should be charged on gross rather than net turnover which favoured Tabcorp's business model.

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