Tabcorp hits back at Racing Queensland in UBET tax row

24 July 2019

Australian operator Tabcorp has rejected claims by Racing Queensland that its UBET subsidiary was not entitled to withhold AU$11m (£6.2m/€6.9m/US$7.7m) following the introduction of the state's point of consumption tax.

A filing with the Supreme Court of Queensland states that Racing Queensland is seeking compensation for alleged underpayment of taxes by the operator. 

The initial claim was filed in June, but details have only just emerged as to why the horseracing organisation has opted to pursue legal action.

Racing Queensland said UBET is required to pay the tax under two contractual arrangements; firstly the Queensland Product and Program Deed (QPP) between UBET and Racing Queensland, which sets out the long-term commercial relationship between the parties, including fees payable by UBET.

The organisation also cites the Deed of Understanding (DOU) between Tabcorp and Racing Queensland, which includes minimum financial commitments UBET was to make to Racing Queensland, and sets out annual top up payments for the calendar years 2018 to 2020 should UBET not meet these commitments.

However, Tabcorp has rejected Racing Queensland's claims, saying it “intends to defend its position vigorously” and is in the process of preparing its formal defence to the claim.

With regards to the QPP, Tabcorp believes UBET is entitled to reduce or offset the fees paid to Racing Queensland by the amount of the increase in wagering tax paid as a result of the 15% net betting revenue tax inroduced from 1 October, 2018.

Racing Queensland, however, believes that while UBET is entitled to reduce or offset its contribution, it can only do so by a smaller amount. 

“The difference in view relates, in part, to how the ‘increase’ in tax is calculated," Tabcorp explained. "Rather than referring to the actual increase in wagering tax paid by UBET, Racing Queensland’s position appears, based on the claim, to be that it is only the increase attributable to the change in specified percentages that is relevant, being from 14% to 15% for totalisator wagering and 10% to 15% for fixed odds wagering.

“Racing Queensland’s position does not appear to reflect other differences between the wagering tax regimes, including that the [previous tax regime] had a deduction for [goods and services tax] that is not contained in the point of consumption tax.”

Tabcorp views Racing Queensland’s stance as being that UBET should receive no reduction or offset to reflect the increase in tax on sports wagering revenue. Once the increase in tax is calculated, UBET is only permitted to reduce or offset fees paid to Racing Queensland by a sum equal to 39% of the increase.

“Accordingly, Racing Queensland alleges that, under its reading of the QPP, UBET has underpaid it by an amount of approximately $11m (inclusive of GST) for the period October to December 2018,” Tabcorp said.

“The potential impact of the alleged underpayment is then extended across the term of the QPP until 2044, although the precise impact is variable and dependent on several factors, including future trading performance," it explained. “As UBET believes that it is entitled to be 'made whole' in respect of the impact of the [point of consumption tax] for the duration of the QPP, it does not consider that there has been an underpayment.”

In regards to the DOU, Tabcorp said that based on the claim, Racing Queensland appears to believe that the payment calculations shoudl not factor in any reductions or mitigation measures to factor in the impact of the point of consumption tax.

Tabcorp said that if this is indeed the case, UBET would be required to pay the full, increased wagering tax increase for the period, irrespective of the outcome on the QPP. As such, the operator concludes that the DOU does not require any such repayment.