Previously unknown Melburnian Joseph Hachem has rocketed to fame in the last week after winning the world’s richest “sporting” event, the World Series of Poker. He beat a field of 5,619 participants who had all paid US$10,000 merely to enter the tournament. His prize for winning was a lazy US$7.5 million.
Initially, news.com.au quoted Hachem’s wife as saying he was a professional gambler, while Hachem himself said poker is “a real serious hobby of mine.” But by the time Channel Nine news went to air, Hachem seemed persistent in saying poker was an occasional interest, and that he was just a mortgage broker who had got lucky. Why the change of heart?
The answer is simple: what would the Australian Tax Office think? A professional “sportsman” wins US$7.5 million in a legitimately organised “sporting” contest. Is this taxable? If so, Hachem will have to pay a whopping $4.85 million to the ATO.
The standard rule in business is that if you’re doing any activity with sole intent to profit, then your net income is usually taxable. However, if the activity is a hobby, then the income is not taxable. The fact that the income was sourced overseas would not invalidate these rules.
It will be interesting to watch the ATO’s response to this situation. It could open a pandora’s box of semi-professionals being subject to income tax provisions. And finally some advice for Hachem: keep enjoying your “hobby” and get professional accounting and legal advice. Immediately!