James Packer-backed Crown casino group wins court case over tax liabilities

The James Packer-backed Crown casino has won a court case over tax treatment of GST on its contracts with junket operators.

Crown Casino in Melbourne. Picture: AAP/Michael Dodge

The James Packer-backed Crown casino group has won a case in the Federal Court against the Australian Taxation Office in a suit involving what could be worth more than $100m in GST payments.

In a judgment handed down in the Federal Court on Thursday, Justice Jennifer Davies agreed with Crown that the ATO’s assessment of Crown’s liability for GST on its casinos in Melbourne and Perth as a result of contracts with junket operators, was excessive.

The case, over the tax treatment of commissions paid to junket operators which bring groups of VIPs into casinos to gamble, will reduce total GST collections by Crown’s casinos in Melbourne and Perth.

But it will have little total impact on the company’s bottom line over time as, under the GST regime, casino operators pay GST to the federal government on their gambling turnover, but are reimbursed by their respective state governments.

Crown launched the case in 2018 to get clarity around the tax law on the GST treatment commissions paid to junket operators, ahead of its proposed move into NSW with the opening of its casino at Sydney’s Barangaroo later this year.

“We are happy that this decision clarifies the position on the treatment of commissions in the calculation of GST,” Crown Resorts chief executive Ken Barton told the Australian.

Mr Barton gave evidence during the court hearings in his former role as chief financial officer of Crown.

The case involves a dispute over whether the cost of commissions and win/loss rebates in contracts between casinos and junket tour can be taken into account in calculating liability for GST.

Crown challenged determinations made by the ATO on the business of its Crown casino in Melbourne and Burswood casino in Perth which claimed that the commissions and rebates could not be treated as a cost of business and thus a deduction on GST liability in calculating its global GST payment obligations

Junket operators are groups of players who attend a casino together for set periods of time who play on special gambling terms negotiated with the casino operator and receive VIP treatment.

Casinos give junket groups special deals which better than they could negotiate individually as VIP players.

Crown was challenging the ATO’s assessment of its liability for GST covering the operation of its casino in Melbourne from July 1, 2010 to July 31, 2015 and its casino at Burswood from October 1, 2007 to June 30, 2010 and July 2011 to July 31, 2012.

The judgment said that Crown lodged business activity statements which took into account the cost of turnover commission and win/loss rebates when calculating their global GST payable.

But, in its assessment, the ATO excluded the cost of amounts of commission and win/loss rebates claimed by Crown from their calculation of global GST payable on the basis that commissions and rebates did not come within the GST Act as “consideration”.

Crown challenged the ATO assessments of its GST liability as being excessive, using sample periods of February 2012 for Burswood and June 2015 for Crown.

In her judgment Judge Davies challenged the ATO’s interpretation of GST tax law on the contracts with the junket operators.

“I accept that accounting for the outcomes of the applicants’ gambling supplies is one integrated and indivisible transaction of which the commission and rebates to be paid to the junket tour operator by the casino and rebates to be paid to the junket tour operator by the casino and the rebates to be paid by the junket tour operator to the casino are inseverable components,” she said.

“The applicants have shown the assessments for the sample periods were excessive,” he said.

The ATO has 28 days to lodge an appeal against the decision.

Shares in Crown Resorts closed down 0.2 per cent on Thursday at $9.20.