Frequently Asked Questions - FAQ
Why Choose Us?
Our mission is to bring You closer to Racing and provide a personalised Strategy to assist selecting the right horses to achieve your desired goals based on your goals and budget.
Do you wish to race a horse and win Now? Would you like to take your partner on Saturdays in her nice new high heels to see your horse race at Flemington or Randwick? Do you have a large or small Budget? Let us assist to maximise your experience based on your needs.
We understand very well that most people come into racing without knowing which horse will get them to win their ideal races or achieve the goals they are looking for. This is why 98% of people believe Racing is pure luck!
Just like any Business, Racing is a very profitable sport if you build a structured system and have the right team assist you to execute. It is no fluke that 85% of the top races are won by the same 5% of owners!
We are here to make your goals quantifiable and real. Feel free to contact us today to learn further about our strategy and how we can personally assist you no matter your budget.
We help cater the right horse to serve you and your goal. Not leave you alone to make a choice based on pure guesswork with long term results being mainly unfulfilled. We pride ourselves by stating each client we serve will race with a very personalised strategy to achieve their dreams and goals.
I Am Interested In Purchasing A Share, How Does It Work?
Once you have contacted us in regards to purchasing a share, an information pack will be sent to you containing all the requested information and a Product Disclosure Statement (PDS). This information has been reviewed and approved by Racing Victoria Limited (RVL) to ensure integrity and full disclosure of all information before being provided to you.
As An Owner, What Am I Entitled To?
As an owner, you are entitled to have input to the naming of the horse and full access to information regards to its progress, race entries and planning.
Owner privileges include race day entry, member’s tickets, mounting yard access, promotional gear and open days. As an owner, you will have control related to decisions during and after its racing career. Such decisions will be made as a group along with the racing manager and trainer. No decision on your horse will be made without your input.
How Much Does It Cost To Maintain A Share?
It cost approximately $25,000 per year to maintain a horse. So if you own a 5% share the following may apply:
$25,000 / 52 weeks = $481 per week
$481 / 20 shares = $24.00 per week per 5% share
We advise that you budget $25 per week for your 5% share. You will receive bills in arrears directly from your trainer or speller. When spelling a horse, it usually cost about $800 per month which means your cost as a 5% share holder will be $40 for the month. When your horse is in training it cost about $3,500 per month depending on how many race starts it may have, how many visits from the vet, etc. This equates to about $175 per 5% share for the month.
So Upkeep Is Estimated At $24 Per Week. What Does This Cover?
This covers spelling, training, pre-training, getting your horse to the races, trial and race nominations, open days and vet visits (although, very occasionally certain vet procedures may incur a small additional fee). It works out to be $24 per week on average over the course of a year. However, it does not include nomination fees for Group and some Interstate races, and we certainly hope this is a problem we encounter! A Group Race means considerable prize money and indicates that your horse has ability. All is discussed with the owners and the trainer prior to such decisions being made.
How Are My Expenses Billed To Me?
All suppliers will bill you directly. We believe that it is in your best interests to pay directly with supplier to ensure that you understand exactly what you are paying for without the crossing over of many hands.
What Is Included In The Initial Share Price?
Cost such as breaking in & education, vet inspections, insurance and Inglis or Magic Millions race nominations are calculated into the advertised price. The product disclosure statement provided will outline all related expenses in detail. Such start-up costs are included in the initial share price in order to ensure your horse is given the best possible education plan and preparation to be successful.
As An Owner, What Correspondence Do I Receive Regarding My Horse?
Owners receive email updates at a minimum of once per week. These emails at times include photos, video footage and audio reports on your horse and are designed to keep you informed as to its progress and movements. When trialling or racing, field nominations, pre race and post race comments on your horse are forwarded along with any other relevant information. We also hold stable open days, paddock visits and track work sessions which allow our owners to be as involved as possible. We have also recently introduced detailed race assessments which are sent to owners prior to race day. Providing such assessments to owners insures detailed information on all runners in the race and gives owners an outsiders opinion on the field and possible race scenarios.
How Is Prizemoney Distributed?
Racing Victoria Limited (RVL) distributes prize money to all individual owners sometime after the race, in accordance with the percentage of the horse owned by the particular owner. This prize money is normally direct deposited into the owner’s nominated bank account, by Racing Victoria.
Does My Name Appear In The Race Book?
Yes. If you own an interest of 5% or greater, then your name will appear in the race book as an individual owner, and therefore entitles you to full owner privileges
Am I Able To Inspect The Horse Myself If I Am Interested In Purchasing A Share?
You most certainly can. Simply contact us and we can arrange a suitable inspection time. We encourage such interest from current and potential owners.
What Should I Expect During My Racehorse Ownership Experience?
We indeed hope that we can bring you a thoroughbred which will be a city winner and beyond. But it is important to be realistic and to enjoy the whole adventure of being an owner. Racing is a place where many great friendships are formed and the thrills and excitement associated with anticipation of your horses’ next race can only be understood once you are an owner and have a place in Racing’s family.
You may own a share in a horse that races competitively in the country or provincial areas, or the next champion which contests the rich race meetings in town. In any event, racehorse ownership is extremely addictive, a fantastic thrill and the ultimate adrenalin rush!
Am I Able To Sell My Share Later On If Need Be?
Yes. If you find yourself in a situation where you need to sell your share due to personal or changing financial circumstances, then we can aid you in doing so. All aspects of the sale including price, market conditions and time frame are discussed with the selling client in order to obtain the best result possible.
So What Happens Once My Horse's Racing Career Is Over?
It will then be discussed amongst the owners as to what happens to the horse. Most horses have residual value once their racing career is over. A Filly usually goes to stud and can be valuable if they have had a solid racing career. About 90% of colts are gelded for various reasons. If your horse was to remain a colt and have a successful racing career, then he may be sent to stud. This can prove to be financially rewarding for owners of the colt. All proceeds of sale are distributed according to the share amount owned minus associated cost.
Tax Benefits of Owning a Racehorse
The major tax benefits of owning a racehorse are outlined below.
1. Winnings not taxable
A hobby racehorse owner is not taxed on winnings, regardless of how much prizemoney is earned.
I must emphasise this latter point as we take many enquiries here from concerned racehorse owners who have been racing on a hobby basis for years and just because they get lucky with a good racehorse, believe that the ATO will of a sudden tax them on their winnings!
2. Capital Gains Tax exemption if horse interest cost $10,000 or less
Hobby owners who buy a share in a racehorse that cost $10,000 or less will not pay Capital Gains Tax (CGT) when they sell the interest in the horse – regardless of how much is received.
N.B. The cost price also includes any GST levied on acquisition.
Mark buys a 1/6th share in a racehorse for $9,900 (inc. GST). The horse wins a stakes race and he decides to accept an offer to sell his share for $100,000.
The horse cost less than $10,000, thus no CGT is paid by Mark. If Mark had bought all of the horse for $9,900, the same CGT exemption applies.
Tax Tip – if the horse cost greater than $10,000, CGT can be avoided if that interest is split between other parties, e.g. husband and wife. For example, if a horse share cost $17,600 (inc. GST), no CGT will be paid where that interest is split 50% between a husband and wife, resulting in each having an interest that costs $8,800 each.
3. GST and tax deductions can be claimed if you conduct a racing “business”
Not everyone will enter the world of horse racing merely with the intention of being a “hobby” owner.
If your horse racing activities are of a significant scale and meet certain other ATO criteria, your activities may be considered a “business” for tax purposes and will also meet the criteria for GST registration. This means:
Losses on your horse racing activities are tax deductible; and
Any GST incurred in buying and maintaining your racing stock can be claimed back.
The primary business factors the ATO wants demonstrated for a horse breeding business and/or racing business to be accepted are listed below:
- whether the activity has a significant commercial purpose or character;
- whether the taxpayer has more than just an intention to engage in business;
- whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity;
- whether there is repetition and regularity of the activity;
- whether the activity is of the same kind and carried on in a businesslike manner such that it is directed at making a profit;
- whether the activity is better described as a hobby, a form of recreation or a sporting activity. The taxpayer must demonstrate that the activity does not rely primarily on chance as distinct from business acumen;
- the size, scale and permanency of the activity;
- the use of experts and consultants;
- the keeping of proper records;
- the existence of a business plan evidencing viability. In particular, it may be necessary to outline whether, given the number and quality of the horses, it is reasonable to expect that the taxpayer can make a profit if the horses are reasonably successful;
- prior horse industry experience;
- if the activity started with limited numbers, is their consistent growth in the scale of the activities (e.g. increase in mare numbers and/or foals, racing stock);
- time expended on the activity;
- registration of a business name;
- establishing a separate bank account; and
- does the taxpayer have control of the stock?
The current ATO horse industry tax ruling indicates that it is now easier for horse racing activities to be accepted as a “business” if they are integrated with a breeding activity also being conducted. Generally speaking, it is difficult to demonstrate a racing business with the ATO unless it is associated with breeding or training activities.
There are many significant tax deductions available to a legitimate racing business, including lease premiums on bloodstock.
4. If horse owned more than 12 months, 50% CGT discount applies on sale
A hobby owner that owns a horse share that is subject to CGT on sale (i.e. share cost more than $10,000) can take advantage of the general 50% discount applying to capital assets. The discount applies if the horse is owned for at least 12 months prior to sale.
Gabriella buys a yearling colt for $13,200 (inc.GST). After some very promising trials, he is sold to Hong Kong for $80,000 unraced.
The colt is subject to CGT as it cost greater than $10,000. The prima facie gain is calculated as $62,800 ($80,000 less horse cost of $13,200 less other eligible costs of $4,000).
Gabriella owned the colt for 14 months prior to sale and thus a 50% discount applies to the gain of $62,800, resulting in a discounted gain of $31,400 ($62,800 @ 50%).
5. Normal capital losses can be offset against a capital gain on a racehorse sale
Under the general CGT rules, a capital loss on the disposal of one asset can be offset against a gain on another asset.
For some reason, many think this rule does not apply to a capital gain made on the sale of a racehorse – gladly I can tell you that it does!
So, in our above example, Gabriella could offset her $62,800 capital gain against another capital loss she may have, say $10,000 relating to shares sales of a prior year, to reduce her prima facie horse gain to $52,800. After the 50% discount, her gain is reduced to $26,400 ($52,800 @ 50%).
6. Personal use assets not part of small business CGT concession “net assets” calculation
The CGT rules now contain special concessions for small business owners who dispose of capital assets (e.g. goodwill, buildings etc).
These concessions are very generous and often mean that no capital gain is paid on the sale of a profitable business (especially where the owner is over 55).
However, to access these concessions, small business owners must meet 4 “basic” tests, one of these tests being that the net value of the owner’s CGT assets must not exceed $6 million dollars just before the time of sale.
It is not well known, but the CGT assets counted for this test excludes the value of what are known as “personal use assets”. A racehorse is designated by the ATO as a personal use asset.
This could be very helpful to an owner who owns a very good racehorse, worth say greater than $500,000, as such an asset is excluded from the net assets test and could result in the owner staying under the required $6 million dollar threshold and thus meeting the net assets test and accessing the small business CGT concessions.
7. Non-residents are not taxed on capital gains on racehorses
Racehorses are excluded from the class of assets that non-residents must pay Australian Capital Gains Tax on.
Thus if the non-resident lives in a tax regime where Racehorses are also not subject to tax on sale, the disposal of an Aussie horse for a large profit will be 100% tax free.
8. If starting a horse breeding business, you can transfer a filly into the business @ market value and utilise the 50% CGT discount
Many hobby racehorse owners get the breeding bug as a result of racing a successful filly (or two) and decide to commence a commercial breeding business. Refer above as to the ATO indicators needed to demonstrate a breeding business.
Under special trading stock rules, the race filly can be transferred to the new business at either cost or market value, depending on what suits the owner best. If the filly was acquired for $10,000 or less, say, her transfer to the new business at a high market value will not only avoid capital gains but result in larger “write-off” claims (see below) for the mare within that breeding business.
For example, eligible mares can be systematically written-down to $1 by the age of 12 years. Mares acquired at age 12 or greater can be written down to $1 in the year of purchase. These are excellent incentives for anyone contemplating commencing a breeding business.
N.B. Even where the transfer of the filly to the new breeding business at market value attracts capital gains tax, the gain will most likely be subjected to the 50% CGT discount discussed above.
You are welcome to contact Paul Carrazzo CPA of Carrazzo Consulting - Thoroughbred Taxation Experts - if you would like him to clarify or expand upon any of the matters raised in this article, as follows:
Tel: 61 3 9982 1000
Mob: 0417 549 347
Fax: 61 3 9329 8355