Gambling has been deeply woven into Australia’s economic and social fabric, providing entertainment for many while also creating social and fiscal consequences. At the state and territory level, it is a highly regulated industry, but one that is vital to our budgets, contributing billions of dollars annually to help prop up the bottom line.
Revenue from gambling comes in many forms, primarily from taxes and levies on poker machines, casinos, lotteries, wagering and online betting. While many major tax bases, like income tax, goods and services tax (GST) and excise and customs duties, are federally controlled, gambling taxes fall largely within state and territory jurisdiction. This has made gambling revenue a key and reliable cash cow for governments and their budgets. The tax generated from this contentious activity helps fund a broad range of public services, including health, education and community infrastructure projects.
This financial benefit comes with its own trade-offs, as state and territory governments balance reform to address the societal costs of gambling harm with their reliance on gambling to meet fiscal priorities.
How big is gambling for state budgets
Taxation on gambling activity now delivers close to $10 billion every year to state and territory governments. In the latest release of the Queensland Government Statistician's Office (QGSO) annual gambling activity report, $9.4 billion in gambling taxes were generated by states in 2023-24 alone. Australians spent $32 billion on gambling in 2023-24, comparable to the entire Northern Territory’s Gross State Product of $33.1 billion. Typically, population distribution largely determines spending across states and territories, with New South Wales leading the way with over $13.3 billion spent by NSW gamblers, well over a third of national expenditure and earning the state government $3.5 billion in revenue, 6.9% of the state's total. Victoria follows with gambling expenditure totalling $7.3 billion, just over half of NSW’s total, yet still amassing over $2.4 billion in taxes and levies, 5.9% of state revenue and over two-thirds of what NSW generates in taxation. The greater conversion in Victoria, at 33%, compared to NSW’s 26%, stems from structural factors. Victoria has higher statutory taxes on its products and offers few concessions; for example, according to the Victorian Gambling and Casino Control Commission, lotteries in Victoria, its second-largest taxed product, saw around 79% of spending paid to tax in 2023-24. Poker machines at hotels and clubs faced an effective tax of 41.8% on the dollar, while NSW taxes club gaming machines at variable rates from 0% to 29.9% depending on the profit band.
Outside the big states, the standout concern is the Northern Territory: in 2023-24, an astonishing 12.1% of the territory’s total revenue came from gambling tax and levies, far greater than runner-up Queensland, which totalled 7.5%. The territory suffers from a small tax base, like payroll tax and stamp duty, but has positioned itself as a licensing hub for gambling operators. Most large betting agencies, like Sportsbet and Bet365, are based in Darwin because they face relatively low wagering taxes compared to other jurisdictions. This may be attributed to the territory’s need to raise revenue through alternative means to meet fiscal requirements; however, it highlights the territory's great dependence on gambling for its budget. Nevertheless, across the country, gambling tax revenue remains far less important to state budgets than other bases like payroll tax, which generates over a quarter of total state tax and land and stamp duties, which account for another third, while gambling contributes much less, totalling about 6.2% in 2023-24.
The fiscal dilemma
Gambling harm in Australia is a significant hit to our wallets. This is forcing federal, state and territory governments to work on reform and introduce tighter regulations to curb the impact gambling has on society.
As published by the Australian Institute of Family Studies, one of the solutions that has been proposed to limit gambling expenditure is a pre-commitment system for electronic gambling machines. This system requires users to set a limit before using pokie machines, a method common in many European countries but not yet fully introduced in Australia, with proposals for New South Wales, Victoria and Tasmania delayed or scuttled over the years. This change is heavily resisted by the gambling ecosystem, with organisations like ClubsNSW and the Tasmanian Hospitality Association lobbying against the proposed changes. The profound influence of these parties on legislation stems from governments' notable reliance on gambling revenue, which makes it harder to ignore industry stakeholders with leverage.
Regulations have been tightened despite pushback, with pokie machines being a key target area, given they're responsible for the majority of gambling losses in Australia. New South Wales has a legislative cap on gaming machines, which has been reduced from 99,000 to 95,739 in December 2024. Following its Electronic Gaming Machine (EGM) tax review, published in February 2024, Victoria has introduced gambling reforms to reduce gambling harm and prevent money laundering, including mandatory pre-commitment and carded play for all EGMs. Load-up limits of $100 have also been introduced, while spin rates for machines are down to three seconds. A mandatory closure of all EGM areas between 4:00 am and 10:00 am for clubs and hotels is also in place. These Victorian reforms have led the Department of Treasury and Finance to project revenue steadily contracting from 2025-26, indicating a positive impact of reforms on reducing gambling harm.
Western Australia’s approach to minimising gambling harm should serve as an example for others, as it demonstrates how restrictive policies can be enforced to curb gambling expenditure. It has effectively banned pokies across the state, with an exception for Crown Perth Casino; this, along with a different gambling structure, meant that gambling tax revenue contributed only about 2.5% of the state's tax revenue in 2023-24. Western Australia didn’t rely on gambling as a major source of income, which made it easier to regulate, whereas in other states where gambling is highly saturated, this is now much harder, as it cuts a sizable portion of revenue from government coffers.
Winners and losers
Behind these budget numbers sit clear winners and losers. Venues, like pubs, clubs and hotels, which offer patrons the opportunity to wager and use pokie machines, derive significant revenue from gambling activity. Casinos build their business model around gambling and present it as entertainment, while governments see the tax windfall as a significant contributor to their bottom line.
Losers are often found in the more vulnerable communities. Low-income households and those in financial stress are most at risk. According to the Liquor and Gaming Authority, in New South Wales, the heaviest pokie machine losses are concentrated in Sydney’s west and lower-income areas, highlighting the link between economic disadvantage and machine density. In Victoria, gambling activity is estimated to account for 22% of the state’s mental health sector costs, according to the Victorian Responsible Gambling Foundation (VRGF), with over-representation found in emergency departments, alcohol and other drug settings, alongside mental health services. With the Victorian Department of Health estimating total gambling harm costs the state $14.1 billion in 2022-23 and the state generating $2.4 billion in tax and levies from gambling activity in 2023-24, the question arises whether the fiscal gains can justify the scale of social harm.
Harm minimisation programs are funded by the government, but they're grossly inadequate. The Queensland Audit Office noted that, despite the state collecting $1.9 billion in gambling taxes in 2022-23, only 0.6% was returned to harm minimisation programs, labelling it “inadequate”. In Victoria, the VRGF’s 2023-24 budget was only $41.9 million, allocated for the prevention, research, education and treatment of gambling harm, which is 1.7% of the $2.4 billion in tax collected that year.
Moving forwards
Given this tension between revenue and harm, governments and other institutions will need to adjust, like Victoria has done with its reforms. States and territories can gradually shift away from generating tax revenue from gambling by reforming the tax mix, by broadening payroll and land tax bases or seeking support from the Commonwealth, for example, by acquiring a greater share of GST. Shifting more into efficient tax bases like land tax is politically challenging, reforms like replacing stamp duty with a broad land tax are encouraged by economists, but are tough to pass as homeowners and politicians are wary of taxing the family home, especially given the difficult situation of housing affordability
Across the economy, many industries can also play their part in reducing gambling harm. Venues that offer gambling services can invest in staff training and compliance measures to meet regulatory requirements. They may also diversify their income away from gambling into food and drink or other forms of entertainment. Banks need to enhance transaction monitoring, identify harmful gambling patterns and provide opt-out or blocking tools for customers. Developing responsible gambling tools like spending alerts, budgeting tools and help lines can also be pursued. Accounting and advisory firms should assist venues in modelling the impact of reforms and tax changes, assessing the impact on revenue and valuations, while helping develop diversification strategies. Educational institutions can work to address gambling harm and work towards improving financial literacy, offering professional development for teachers, social workers and health practitioners in dealing with gambling harm.
Final Word
Gambling is a significant yet not dominant part of state tax bases. This revenue comes with incredible social costs, especially for low-income and disadvantaged communities. States and territories face a fiscal dilemma; their income is important to them, but they're being pushed to reduce gambling harm, which will eat into their budgets. There is evidence of reforms to gambling, and a precedent in effective regulation set by states like Western Australia can be followed.
This incentive to bring change should not fall solely on the government; business and community groups are equally important. Developing methods to reduce reliance on gambling now, while preparing for tighter regulation in the future, is necessary. Tax bases may be broadened, tax mixes shuffled to move away from gambling, while ongoing political coverage and inquiries continue to build pressure for change. Going forwards, the core question will remain: should states and territories' budgets lean on gambling losses to fill coffers, or should policy prioritise public health, even if it means a shortfall in revenue?
