Horse Racing, Stock Trading and Tax

[cmh888]

A punter can do the equivalent of fundamental and technical analysis when betting on a horse race. They do this to minimise risk, and maximise their probability of success (sound familiar!). If successful, this is a tax-free venture for the average weekend punter, and can be extremely lucrative. There is very sophisticated software available to help the punter hone their skills, and information can be obtained in the form of statistics, ratios, charts and more.

There are many similarities between how a sophisticated punter makes a selection, and how a stock trader makes a selection.

Why is shares trading taxed and horse racing isn't?

 

[stoxclimber]

Because in racing most people lose money, while in stocks most people make money.

So if racing was taxable income, the ATO would be losing out on $.

 

[kgee]

Interesting subject. Of note Australian Alan Woods is one of the most successful in both horse racing and playing the shares. He made his first million going short on the hong kong stockmarket just b4 the crash ,designed a computer programme for horse racing making $150 million.Now he lives in a penthouse above happy valley in HK. Don't know how much he pays in taxes

 

[bean]

If you are a professional puter and that is your living . You pay tax..you keep a record of all your bets just like buying and selling shares...Now to make sure everyone pays tax whether you win or lose we have the TOTE or TAB for win pool 15% is taken out for government taxes TAB operations etc.
SO you have a losing bet you are paying taxes.
In the UK you could pay GST on your bet at outlay for example if you had 10pound win on a horse at 5 to 1 (say GST 10%) your initial bet could be just 10 pound or 11 pound you have paid the GST. If the horse loses well you have lost 11 pound if it wins your collect is 60 pounds...sorry but we( government takes GST 10% 6 pounds so you get back 54 pounds. but if you had paid GST in the bet you would get back 60 pounds.

With pokies, horses or lotto the government gets there share if you win or lose...with stock sits only if you win

 

[wayneL]

A punter can do the equivalent of fundamental and technical analysis when betting on a horse race. They do this to minimise risk, and maximise their probability of success (sound familiar!). If successful, this is a tax-free venture for the average weekend punter, and can be extremely lucrative. There is very sophisticated software available to help the punter hone their skills, and information can be obtained in the form of statistics, ratios, charts and more.

There are many similarities between how a sophisticated punter makes a selection, and how a stock trader makes a selection.

Why is shares trading taxed and horse racing isn't?

Stock market is easier as it is zero sum (supposedly) whereas punting has a negative expectancy.

For instance with the stock market you can create a positive expectancy technical system with no reference to fundamentals. You cannot do this unless using some sort of martingale staking plan... and that is dancing with the devil.

Sure there are professional punters who have an edge, but it is MUCH harder than share trading.

 

[theasxgorilla]

Stock market is easier as it is zero sum (supposedly) whereas punting has a negative expectancy.

Can I ask why you said 'supposedly'?

 

[wayneL]

Can I ask why you said 'supposedly'?

Because long term I think is is positive sum, but I don't know how to prove or disprove it mathematically.

 

[kgee]

Sure there are professional punters who have an edge, but it is MUCH harder than share trading.

I reckon that depends on what your talent is....a gifted gambler may say the stockmarket is harder to play

 

[cmh888]

If you are a professional puter and that is your living . You pay tax..you keep a record of all your bets just like buying and selling shares...With pokies, horses or lotto the government gets there share if you win or lose...with stock sits only if you win

But there is no system to track a punter's identity and their wins. It would have to be a very honest punter to keep accurate records of all bets and declare all wins! Also, yes, the government does have gambling related taxes, but punters usually bet on set odds and realise that exact amount if they win. The money they receive is the real amount, according to the odds they bet against.

So with most horse racing, there is no 'double taxing'. With trading shares there is, even though both are effectively a form of gambling and punters can take measures with both to minimise their risk.

I once started a [very] small punters club to see how we went. On average, we managed to get some gain for 3 out of 4 races (either a win or a place). The returns were much larger (percentage-wise, not dollar-wise as we were $5 punters!), and within a much shorter period of time. Our choices were made using free internet statistics sites. They were informed selections, just as my stock selections are.

I say reduce the tax assault for trading stocks, and apply it more evenly across different forms of punting!

 

[son of baglimit]

Also, yes, the government does have gambling related taxes, but punters usually bet on set odds and realise that exact amount if they win. The money they receive is the real amount, according to the odds they bet against.

betting thru the TOTE, as already explained, has the taxes taken FROM THE POOLED MONIES before dividendws are declared, so thru the tote the punter has paid his tax.
betting thru fixed odds (the various bookies) is taxed when the bookie has to pay a turnover tax (a small fixed percentage of the money going thru his till, whether he wins or not) and therefore restricting the odds the bookie can offer the punter because he has to keep in mind that every bet he takes, WIN OR LOSE, he will pay tax on it. the tax rate varies, but is about 1%.
state govts in australia have in the past enticed bookies to operate from their state by offering lower tax rates (NT), while overseas tax havens have large numbers of online bookies operating from their shores.
and before you cry foul over that 1% rate, understand how a bookie runs a BOOK, to appreciate how much tax that really means.

i am not a bookie, just have some knowledge on how it works.

 

[cmh888]

You obviously know a lot more about how bookies operate than me! So a bookie has x,y and z (one of which is tax) they have to factor in before offering fixed odds right (just as, say, a business owner has to factor in x,y and z before setting a price for the goods they sell). What you are saying is that my fixed odds of 1/2.70 (for example), is in real terms higher than that, but has been lowered to accommodate for taxation which is then paid by the bookie. Only difference is, that the business owner factors these things in too, and I still have to pay tax (GST) on my end purchase (I know that part has nothing to do with shares, just trying to illustrate a point).

Thanks for your input, I will endeavour to learn about how bookies keep books and try to get my head around that 1% tax!

 

[son of baglimit]

Thanks for your input, I will endeavour to learn about how bookies keep books and try to get my head around that 1% tax!

in summary, lets assume a bookie has taken $100k in bets, and the race results in him paying out $97k (fairly common, as he's trying to make only a few thou per race) - remember he's taken $100k in bets, and PAYS 1% OF THAT ($1k) AS TAX, leaving him with $2k profit, not $3k. now do the same again, but with the bookie paying out $120k on the race !!!!!!!!!!

more bookies go broke than succeed these days.

 

[cmh888]

Thanks for that!

I suppose my first post was too simplistic. My line of thought was simply ...

If I bet on a horse and win, I put the money in my pocket and walk away. I don't have to declare it to anyone as extra income, and I personally don't have to pay any tax on it.

If I bet on shares and win, I do have to declare it as part of my tax return, as extra income, and I personally have to pay tax on it.

This, despite the fact that I can fundamentally and technically research my selections for both to minimise my risk of losing.

Go the gee gees!

 

[theasxgorilla]

Because long term I think is is positive sum, but I don't know how to prove or disprove it mathematically.

I have had the same inkling myself. Derivatives and currencies and inflation etc. all add layers of complexity so I think proving it would be serious Nobel prize material.

 

[stoxclimber]

Stock market is zero sum around the index. But the index is positive expectancy (rational expectations argument etc., you're participating in the general economy which is growing)

 

[trading_rookie]

Question to all you punters. While watching the series finale to the brilliant drama series 'Hustle' on the ABC they set up a sting involving a syndicate that owns all the horses in a race and then decide amongst themselves which horse will win...is this fact or fiction?

 

[son of baglimit]

never heard of such a situation - in theory possible obviously, but i dont think the stewards would allow it to happen that way in the 1st place - go speak to j hawkes, g waterhouse & d hayes for their opinions on that scenario.