Question

0. Mrs Jones is the owner of a large racehorse stud and horse training business. She employs eight staff and holds a training licence. Mrs Jones’ involvement in the racing business is her full-time occupation and she attends as many race meetings as possible (over one per week). Mrs Jones is also a very keen punter, betting on both her own and other horses, and during the last year she had several very big wins which netted her $120,000 in winnings for the year.

   Discuss whether the receipt of $120,000 is ordinary income under s 6-5.

Answer 1

whether the betting is a business activity on its own and therefore ordinary incomeor, if not, is the punting a transaction of the horse training and racing business and thereforeordinary income under s 6-5?

It can be seen that the courts have applied a higher test of business to gambling activities. Tobe judged as being in the business of gambling it is necessary to show that you take acommercial decision in relation to the gambling. This would require the ability to alter the

odds or to manage the risks, such as would be the case for a casino or book-maker. It is notlikely that the gambling would be a business in its own right in this case.It is more likely that the gambling will be part of the horse racing and training business, In this case it could be argued that the high level ofparticipation in the horse racing business makes the gambling part of the business. This is aquestion of fact and a conclusion either way is fine.