A $139 million reality check – Victorian government’s racing tax shortfall

The Victorian government’s expected returns from racing and sports betting taxes have been slashed by $36 million for the 2025/26 financial year as the expected windfall from an increase in the Point Of Consumption tax rate has fallen short of expectations.

Victoria lifted its Point Of Consumption Tax (POCT) rate from 10 per cent to 15 per cent at the start of the current financial year, coinciding with the end of its long-term joint venture with Tabcorp.

It had predicted in last year’s state budget that it would generate an extra $158 million in tax revenue via racing and sports betting taxes in 2024/25 as compared to 2023/24.

But in the 2025/26 budget released on Tuesday, it is now expected that the overall return for this financial year will be $406 million, $29 million less than what was budgeted.

The tax shortfall is expected to be even greater in 2025/26, with budgeted returns of $416 million as opposed to the $451 million projected via forward estimates last year.

When introducing the new tax rate last year, the Allan government had projected through forward estimates its returns via racing and sports betting taxes, the lion’s share of which is made up of POCT, would total $1.818 billion up to 2027/28.

However, the revised figure is now $1.679 billion, a $139 million shortfall on expectation across this and the next three financial years.

The agreement Racing Victoria and the two other racing codes have with the state government sees 50 per cent of POCT receipts flow back to the industry.

A reduction in overall tax receipts would have a knock-on impact on industry funding, although the precise amount is hard to calculate, given other revenue, along with POCT, is rolled into the racing and sports betting taxes bracket contained within the budget.

Racing Victoria has said it uses its own projections when it comes to wagering revenue and doesn’t utilise government estimations around taxation returns in its future planning.

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The StraightBren O’Brien

RV insists its projections for the increase of revenue through the additional cut of POCT were much more conservative and it doesn’t expect the shortfall in the budget to impact its bottom line.

However, the regulator is under substantial financial pressure with a monetary loss of $11.4 million in 2023/24.

It also announced a substantial restructure this week, with up to 15 per cent reduction in its workforce.

Betting turnover on Victorian racing to this point of the financial year is 5 per cent down on what it was last year. That was after a 10.2 per cent drop across the previous financial year, where it fell to $7.9 billion.

Falls in turnover have a double impact on Racing Victoria as it affects the funding it receives through race field fees as well as via the new POCT-based funding pass-through.