Tabcorp has successfully resolved a tax dispute, leading to a significant financial outcome for the company. The case revolved around the income tax treatment of payments related to various licenses and authorities. Tabcorp has disclosed that it paid the disputed amount of tax liabilities and interest in full, resulting in a refunded amount equivalent to 20% of the contested tax liabilities and interest.
Tax Dispute Resolution
Tabcorp announced that it will dismiss each of the proceedings initiated by taxpayers, effectively bringing an end to the legal dispute. The company, in accordance with the settlement agreement with the Australian Taxation Office (ATO), will make a payment of approximately $37.0 million to The Lottery Corporation Limited (TLC) under the separation deed that was part of the demerger process.
Demerger of TLC Operations
In March 2022, Tabcorp unveiled its plans to demerge TLC’s lottery operations from its wagering, media, and gaming services. This strategic move was implemented in June of the same year, culminating a process initiated in July 2021.
As a result of the settlement with the ATO, Tabcorp will recognize a benefit of approximately $45.0 million after tax. This financial gain will be reflected in the company’s financial statements for the year ending on June 30, 2024, and will be categorized as a significant item.
Impact on Future License Fees
The settlement also outlines an agreement regarding how Tabcorp will treat future license fees for the renewals of existing licenses. Subject to agreed-upon limitations, these fees must be treated as being of a capital nature. Tabcorp anticipates that this will not have any significant effect on its future financial results.
Background on TLC’s Spinoff
The journey to spinning off TLC was marked by thorough consideration of various options. Tabcorp initially explored selling its wagering and media business, receiving unsolicited proposals from entities like Entain, Betmakers, and Apollo Global. However, Tabcorp determined that none of these offers truly reflected the division’s value. Instead, the company chose to retain its wagering arm while spinning off the lotteries business, resulting in two separate entities.
One of these entities was renamed The Lottery Corporation, primarily comprising the former Tatts business but without gaming services. The second entity, named New Tabcorp, includes the wagering and media division alongside gaming operations.
Relief After Record Fine
The settlement brings welcome relief to Tabcorp, as it comes on the heels of a significant fine imposed in Victoria. Last week, the Victorian Gambling and Casino Control Commission (VGCCC) fined Tabcorp $1.0 million for its conduct during a system outage in 2020. The outage, lasting approximately 36 hours during the Spring Racing Carnival, violated the requirement for Tabcorp’s Wagering and Betting System (WBS) to be continuously available. The VGCCC criticized Tabcorp’s handling of the investigation and expressed concerns about the company’s ability to prevent similar issues in the future.