Bookmaking was initially outlawed in New Zealand in 1920. However, many types of gambling remain, and many New Zealanders still gamble recreationally as well as professionally. In some cases, they are required to pay tax on the proceeds of gambling.
Gambling in New Zealand – Rules and Regulations
Gambling and bookmaking are generally prohibited in New Zealand unless authorised by the 2003 Gambling Act, which was last amended in 2022. Some specific types of gambling are legal under the act, and private gambling is also allowed. The Gambling Act covers all types of gambling, such as Casinos (including blackjack, poker, roulette, etc.), sports betting, gaming machines and lottery winnings. Some individuals and corporate entities profit from gambling activity. They are subject to income tax regulations, which are legislated by the 2007 Income Tax Act as well as the Goods and Services Act of 1985.
In New Zealand, certain gambling activities are criminal offences, with penalties including fines up to $20,000 for individuals and $50,000 for corporate entities, and imprisonment up to one year. The 2003 act bans new gambling establishment licences, aiming to gradually phase out gambling venues by not replacing casinos as they close, leaving six currently operational. Online gambling on local sites is illegal, though New Zealanders can use foreign sites, which cannot advertise in the country. Pokie machines in bars, along with lotteries and scratch cards, are exceptions, often run by charities and exempt from taxation due to their community contributions.
How does New Zealand differentiate between recreational and professional gambling?
It is estimated that up to 80% of New Zealanders gamble. There are two types of authorised gambler in New Zealand: recreational and professional. Recreational gamblers partake as a hobby, as a source of entertainment or fun. The winnings are not intended to provide their livelihood. Professional gamblers do so specifically to make money and to provide a livelihood. Professional gamblers usually play games of skill like poker or blackjack, whereas recreational gamblers are more likely to play games of chance such as casino games, gaming machines or the lottery. Due to the odds always favouring the bookmaker or provider in games of chance, professional players are far less likely to play.
Taxation Policy for Gambling Winnings in New Zealand
There is generally no tax on personal gambling winnings in New Zealand, as it is considered private recreation, a hobby not designed to make a profit. This applies to almost all gambling winnings, including sports betting, casino windfalls and lottery winnings.
What tax exemptions apply to gambling winnings in New Zealand?
There are some exceptions to this rule, as the tax exemption only applies to casual gamblers, who are defined as individuals gambling for recreation rather than for a source of income.
What are the Criteria for Professional Gamblers?
Professional gamblers like professional poker players must pay tax on their winnings as it is their livelihood and a source of income. Professionals are defined as individuals earning a living through gambling. New Zealand law does not explicitly mention the difference between recreational and professional gambling for tax purposes but does distinguish between hobbies and professions in general. This differential is what draws the line between professional and recreational gamblers.
The Inland Revenue Department makes clear its policy on taxing prize money on the government website https://www.ird.govt.nz/income-tax/withholding-taxes/schedular-payments/making-schedular-payments/taxing-prize-money
What are the Tax Obligations for Professional Gamblers?
Professional gamblers must declare their gambling proceeds in their annual tax return. Casual gamblers are not required to do so. The amount of tax paid depends on their total yearly earnings. Taxes start on the first dollar earned and are charged at 10.5% up to NZ$14,000. Amounts $14,001-$48,000 are taxed at 17.5%, $48,001-$75,000 at 30%, $75,001-$180,000 at 33%, and all amounts higher than $180,000 at 39%.
Professional gamblers can claim their losses as tax deductible but must show evidence of them. For example, a detailed logbook of cash withdrawals for use at casinos. However, these deductibles cannot be greater than the income reported on their return. Such deductibles are not available for casual gamblers.
What is New Zealand’s legal framework for gambling taxation?
The 2003 Gambling Act does not make provisions for the taxation of gambling prizes. Matters relating to taxation of prizes are set out in the 2007 Income Tax Act. Companies running gambling establishments such as casinos pay additional company-specific taxes covered by the Goods and Services Tax Act 1985.
Overseas entities are only required to pay goods and services tax (GST) of 15% in New Zealand since they are not registered there. However, casinos still operating in New Zealand are required to pay GST as well as corporate income tax at 28%. As of March 2024, there are proposals in place to increase taxation for overseas-based casinos.
The purpose of the legal framework acts is to ensure equity and fairness in the system. The goal of the system is to ensure tax is not paid on one-off winnings such as a lotto win and only applies to those attempting to make a living. A government agency named the Inland Revenue Department (IRD) is responsible for governing taxation in New Zealand, including for gambling winnings.