With the number of taxation laws that come in and out and change and morph in Australia, it’s no surprise that good tax agents are in hot demand within the country. In some of the latest updates to the tax system, which some companies may find as a bit of a rude shock, Australia has limited access to the Research and Development (R&D) tax incentive, banning activities related to gambling that fall under the banner. The new ruling will be in effect from the next financial year in Australia, starting July 1, 2025.
Try as they may to attract players with their new no deposit bonus codes, operators will still need to face this inevitable fate. The changes to the R&D initiative are detailed in the Mid-Year Economic and Fiscal Outlook, published under the Budget 2024-25 by the Australian Government.
Changes to The R&D Initiative for Gambling
Since 2021, Australia has allowed certain provisions for research and development undertaken by companies reporting taxes within Australia. This initiative was born out of a realisation that plenty of innovative companies were taking their operations offshore, as it led to lower costs, lower taxes, and usually both.
While Australia isn’t exactly known as an innovation hub, we’d like to aspire to be. Some dream stories have come out of the country, such as Canva and Atlassian, and, of course, the REA with realestate.com.
However, keeping innovation within the country is hard with these other competing factors. The R&D tax initiative is designed to make for some excellent tax breaks for entities that are doing true research and development activities in Australia.
Of course, being a taxation law, there are plenty of provisions, and there have been plenty of changes over the few short years since it’s been in existence. The initiative itself came after a 2016 review of the existing R&D taxation rules, that, at the time, were thought to be a little antiquated.
However, since 2021, gambling companies have flown in under the radar, even as mining and gas, Australia’s more well-known exports, were much more closely scrutinised under this ruling. That is, until now. As part of the new ruling, gambling activities are now fully excluded from the initiative, save for gambling activities that are purely focused on harm reduction.
What Will the Impact Be?
As a country that is spending more per capita on gambling than any other country in the world, you might think that the impact of these changes could be quite good for taxpayers. As gambling R&D will be taxed at a higher rate from July on, there will be more money for the government, from these companies, to invest in other things.
While Responsible Wagering Australia has commented that it may result in a more sluggish jobs market and money going overseas instead, it is unknown as yet what the impact will be. Will companies continue to invest in gambling R&D within the country, under the current taxation system? Or will they head elsewhere for refuge?
It would be safe to assume that the industry might’ve known this was coming for some time. The Australian Government’s inquiry into online gambling published in 2023 was fairly damning of the industry as a whole and made some pretty harsh requests for the government to consider. This included a complete ban on all forms of online gambling advertising within three years - something which is highly unlikely to happen.
Where to Next?
While those in the industry have already course adjusted to these new changes, as they will continue to do, it marks another day in an ever-changing legislative landscape. When gambling is legalised and tightly controlled within a jurisdiction, companies engaging in that business can always expect the worst and brace for impact.
With plenty of risk-planning activities, backup plans, and other modes of working thought through, gambling companies are indeed some of the most agile that you will come across. With a need to be nimble to comply with new requirements, as well as still make revenues, there is a lot that other businesses can learn from those in the industry.
While tax laws for both businesses and individuals will always continue to change and evolve, gambling companies are perhaps some of the best-prepared out there to continue rolling with the punches. And for those in the tobacco industry who’ve just been cut out of the picture, too? Well, they’ve been adjusting their tactics and changing course since the 1980s. Ultimately, this amendment – although not ideal – is just a minor setback for an already thriving industry whose growth shows no signs of slowing down any time soon.
