The case relates to income tax treatment of payments for various licences and authorities. Tabcorp says it paid the disputed amount of tax liabilities and interest in full. The refunded amount represents 20% of the disputed tax liabilities and interest.
Each proceeding brought by the taxpayers will be dismissed. In turn, and in line with the ATO settlement, Tabcorp will pay approximately $37.0m to The Lottery Corporation Limited (TLC) under the businesses’ separation deed.
In March 2022 Tabcorp set out details for the demerger of TLC lottery operations from wagering, media and gaming services. The demerger scheme came into effect in June of the same year, marking the end of a process that began in July 2021.
As such, Tabcorp will recognise a benefit of approximately $45.0m after tax from the ATO settlement. This will be reflected in financial statements for the year ending 30 June 2024 and treated as a significant item.
The settlement also includes an agreement as to how Tabcorp treats future licence fees for the renewals of existing licences. Subject to agreed limitations, Tabcorp must treat such fees as being of a capital nature.
Tabcorp says it does not believe this will have any material effect on future results.
How The Lottery Corporation came to be
The road to TLC being spun off was not a short or easy one. When plans were first set out to spin off the lotteries and keno arm after a strategic review, several options were put on the table, including a potential sale of Tabcorp’s wagering and media business.
Tabcorp said that several unsolicited proposals were made for the division. These included bids from Entain, Betmakers and Apollo Global, but Tabcorp said none represented the true value of the division.
Tabcorp opted to retain its wagering arm, instead spinning off the lotteries business. This ultimately resulted in two separate companies.
One of these businesses was renamed The Lottery Corporation and comprises most of the former Tatts business. However, this does not offer gaming services. The second business was named New Tabcorp and includes the wagering and media arm alongside gaming.
Positive news for Tabcorp after record Victoria fine
The settlement will come as a welcome relief to Tabcorp after last week being slapped with a record fine in Victoria.
The Victorian Gambling and Casino Control Commission (VGCCC) fined Tabcorp $1.0m over its conduct during a system outage in 2020.
Tabcorp’s Wagering and Betting System (WBS) went down on 7 November 2020, during that year’s Spring Racing Carnival. The service was unavailable for approximately 36 hours. The Wagering and Betting Licence and Agreement requires the WBS to be continuously available.
An investigation was launched but directives were issued after Tabcorp failed to voluntarily provide adequate information about the outage.
The VGCCC criticised Tabcorp’s conduct during the investigation, saying its response to the directions impacted its ability to understand the cause of the major outage. The regulator said it did not have confidence that a similar issue would not happen again.
In addition, the VGCCC referenced Tabcorp’s “repeated failure” to comply with directions. As such, it said the case warranted a record fine from the regulator.