Income tax: are amounts set aside by registered clubs to pay 'linked poker machine' jackpots:(a) assessable income of the club ? (b) deductible to the club ? Note : This Draft Determination (TD) only relates to clubs that are not exempt from income tax.

Under the Regulations of the Liquor Administration Board, registered clubs in New South Wales are required either to set aside in a separate bank account or obtain a bank guarantee for monies which would be paid to persons who win jackpots on linked poker machines, where the jackpot exceeds $10,000. If a club sets asisde those monies in a separate bank account, those monies cannot be used for any purpose other than to pay those jackpots.

Where amounts of assessable income, such as proceeds from poker machines, are set aside in the above manner, their assessability is not affected. Although they have been carried to a reserve or sinking fund they are appropriations of assessable income (See Mersey Docks & Harbour Board v. Lucas (1883) 2 TC 25).

The amounts set aside are not deductible, because there is no presently existing liability to pay the jackpot until it has been won. Payment is contingent upon the player winning the jackpot (See Nilsen Development Laboratories Pty Ltd & Ors v. FC of T (1981) 144 CLR 616; 81 ATC 4031; 11 ATR 505).