ATO wins appeal over $100m GST dispute with Crown Resorts
Crown Resorts has been dealt another tax-related loss, but thankfully for the James Packer-backed group, it probably won’t cost too much.
Crown Resorts faces another payout after the ATO won an appeal in the Federal Court concerning $100m in GST from the commissions and rebates paid to high-roller gambling tour operators, for junkets.
But unlike a recent tax underpayment issue which saw Crown pay the Victorian government $61m in taxes and fees after a royal commission discovered the James Packer-backed group had been incorrectly calculating pokie revenue, the decision is likely going to cost Crown only the ATO’s legal bills.
That is because the full-bench judgment, handed down on Friday by Justice Mark Moshinsky, will result in the federal government picking up the disputed junket-related tax revenue, as opposed to the states.
“Crown will be carefully considering the judgment,” a Crown spokeswoman said on Friday.
The legal battle with the Tax Office kicked off in 2018 when Crown Resorts sought clarity over the GST rulings made by the ATO for Crown’s Melbourne and Perth casinos over several years.
The sticking point was how the revenue stream between Crown and junkets — which receive commissions and rebates from wins and losses — should be constructed and therefore taxed.
Court documents show that Crown paid at least $1bn in commissions and rebates to junkets operating in Crown Perth and Crown Melbourne between 2007 and 2015.
Crown said these payments to junket operators should be included within the amount they pay out to gamblers, which is subtracted from the revenue from which GST is paid.
The ATO argued that the commissions and rebates to junkets were used for promotional activities and could not be considered a typical gambling activity, meaning they should be taxed under normal GST rules.
Last September Justice Jennifer Davies ruled that interpretation was“excessive” and that rebates and commissions paid by the casino to junkets were part of “one integrated and indivisible transaction” that fell under gaming GST rules, which the ATO has now successfully appealed against.
Crown has pledged to no longer do business with junkets after its failure of Crown to perform in-depth due diligence on its junket partners with organised crime links left its casinos vulnerable to money laundering, prompting the Bergin Inquiry to temporarily revoke Crown’s NSW casino licence earlier this year.
Also on Friday Crown announced its incoming CEO, former Lendlease boss Steve McCann, will relocate from Sydney to Melbourne to take up an additional role as CEO of the group’s Melbourne casino.
Mr McCann will be replacing Xavier Walsh as the boss of Crown’s flagship casino after a Victorian royal commission into the company heard he failed to fully disclose the Victorian tax underpayment issue to executive chair Helen Coonan.
The underpayment arose from Crown incorrectly deducting loyalty club expenses like meals and free parking from pokie revenue since 2012 - a practice Mr Walsh knew about as far back as 2018.
Mr McCann is yet to be formally appointed group CEO, as he is still awaiting regulatory approval. However, it is expected he will receive probity before the end of the month, around the time Ms Coonan intends to retire from the company.
His relocation to Melbourne reflects a legal requirement for the Melbourne’s casino boss to be a Victorian resident, which was violated for many years when Barry Felstead was in charge of Crown Perth and Melbourne.
It also reflects the commission’s scrutiny over whether it is in the state’s interest to allow the massive casino-hotel complex to be run by a group with competing assets in Australia.
“Underlining the importance of Crown Melbourne to the business, Mr McCann will relocate from Sydney to Melbourne as soon as practicable and subject to Covid-19 interstate travel restrictions,” Crown told the ASX on Friday
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