$53 million budget tax hit for Victorian racing

The Victorian government has slashed its estimated tax revenue from racing and sports betting in the current and upcoming financial years by $53 million in a forecast which could have a significant impact on the local racing industry.

A new Point Of Consumption Tax regime begins in Victoria on July 1, with the rate to rise from 10 to 15 per cent. That prompted the state government to initially increase its projected annual revenue from $303 million to $462 million in last year’s forward estimates.

However, budget papers released on Tuesday reveal the declining wagering market has forced the government to revise this year’s racing and sports taxation revenue from $303 million back to $277 million, an 8.5 per cent shortfall.

Meanwhile, under the new tax regime, the 2024-25 revenue is forecast to be $435 million, $27 million, or 5.8 per cent, less than initially expected.

For clarification, POCT makes up a significant amount of that revenue, but racing and sports taxation also includes aspects such as wagering licence fees. There is no breakdown of specific percentages in the budget papers.   

Part of the deal for the increased POCT rate was that the spoils would be split 50-50 by the government and the Victorian racing industry. The $27 million change in projected revenue this year would be a hit on the projected revenue to flow to the three codes of Victorian racing in 2024-25.

The Straight understands that Racing Victoria has been working on its own more conservative POCT revenue projections for some time, and Tuesday’s budget details did not take it by surprise.  

However, it does create further uncertainty as the pending rise in the POCT rate will occur in the same financial year where the racing industry will no longer have access to the ongoing ‘joint venture funding’ from the previous deal with Tabcorp. 

This was worth $128 million to Racing Victoria in 2022-23, with the government promising the industry would be no worse off under the new regime.

Tabcorp and the Victorian government signed a 20-year deal in December where the wagering giant will pay $600 million up front and $30 million a year for the licence until 2044. The details of where that upfront money is to be spent has not yet been confirmed by the state government.

The difference in betting and sports revenue projections across the next three financial years of forward estimates are even more dramatic, with a reduction of $91 million on previous estimates.

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The StraightBren O’Brien

When the new POCT-linked funding model was announced in May last year, Racing Minister Anthony Carbines said it provided Victoria’s $4.7 billion racing industry with “vital long-term certainty”.

He said it ensured racing “continues to be funded from wagering generated on its product – helping the industry to back jobs and events that bring in millions of dollars each year to communities right across the state”.

“This latest increase to the point of consumption tax strikes the right balance and brings us into line with other states and provides long-term certainty for Victoria’s vibrant racing industry.”

That ‘certainly’ on funding does not appear to have survived past the proposed implementation date of the new tax.

As recently as December, in its mid-year budget update, there was no sign that the Victorian government was revising down its racing and sports tax projections, despite a significant downturn in wagering activity in the second half of 2023.  

It maintained its bullish projections, which included a 52 per cent jump in 2024-25 and 3-4 per cent annual rises in tax revenue.

The $435 million projected for 2024-25 represents a 57 per cent rise on the current financial year. It is not clear whether additional revenue from the 20-year Tabcorp deal has been built into this modelling. 

The tax revenue is then expected to grow by 2-3 per cent over the following three years.

In contrast, the New South Wales government did respond to the softness in the wagering market by revising its projections down for its racing taxation at its mid-year review in December by $46 million for the current financial year and $187 million over the forward estimates.

It prompted rumours that the government was considering raising the POCT to 20 per cent, having been at 15 per cent since mid-2022. The 2024-25 NSW budget is expected on June 18.

In related detail from the Victorian budget, overall revenue from gambling taxes is forecast to be $2.7 billion in 2024-25 and then decline by an average of 1.1 percent a year over the forward estimates.

The reduction in revenue is attributed to the government’s harm minimisation measures on electronic gaming machine revenue.

Meanwhile, there is $165 million allotted for Gambler’s Help services, education and research.