Australia To Tax Money From Second Life, But Can Money Spent On Your Avatar Be A Write-Off?

from the H&R-Block-Next-To-Set-Up-In-Second-Life dept

There continues to be a lot of discussion about the real world implications of activity inside virtual worlds. One of the issues is how to deal with taxation, and it appears that Australia has taken the lead, announcing that they plan to tax money made in virtual worlds, specifically citing Second Life Linden Dollars. A spokesperson for the country’s tax office said that if you’re getting monetary benefit from the site, then it should be taxed like any other income. What’s not clear is when the money is taxed. Do they tax you when you’ve cashed in your Linden Dollars for Australian Dollars? If they did this, the policy would make sense, as it’s basically like a capital gains tax, which is levied after someone sells their stock. Or, do they tax the player based on their Linden Dollars even if they don’t cash out. This would be a ridiculous policy as it would basically be taxing people for playing a game. Assuming it’s the former, the taxation occurs after withdrawing the money, it could be a real boon for Second Life, as it would discourage people from taking money out of the in-game economy.

Rate this comment as insightful
Rate this comment as funny
You have rated this comment as insightful
You have rated this comment as funny
Flag this comment as abusive/trolling/spam
You have flagged this comment
The first word has already been claimed
The last word has already been claimed
Insightful Lightbulb icon Funny Laughing icon Abusive/trolling/spam Flag icon Insightful badge Lightbulb icon Funny badge Laughing icon Comments icon

Comments on “Australia To Tax Money From Second Life, But Can Money Spent On Your Avatar Be A Write-Off?”

Subscribe: RSS Leave a comment
Celes says:

The most likely method...

I’m not sure how Australia’s tax system works, but it’s more than likely that the tax would be levied when the money is converted from in-game money to real-world money, since there is no change in a gamer’s financial position until he/she cashes out that money. Taxing the in-game money would be pointless unless the Australian government decides to accept Linden Dollars as payment.

Ryan says:

Bad Direction

This better not lead other governments down the same dark path. There are many many gamers these days and we could all band together and overthrow small governments.
They used to be taxed in Second Life. They threw their own revolution and redid the system. Also, how would they be able to track every single person who plays Second Life in Australia?

BenBishop (profile) says:

Re: Bad Direction

I’m sure the Australian government will just insist that the company running Second Life reports all monetary withdrawls from the game. In the US I could see them requiring a 1099 be issued at the end of the year for any amount withdrawn above a certain watermark (e.g. $600). Once you have a 1099 it would work as either a normal self-employment or as a hobby. I don’t think it will be very hard for governments to track those bank transactions.

What I wonder about is what other regulation will be needed? What expenses will be available for write-off (i.e. will they accept Second Life as a self-employment or will they only accept it as a hobby? The difference is being able to write off the cost of the computer used to play it).

The distinction of Second Life rather than WoW (and many other games) is the expectation that money earned in the game can be removed at some exchange rate; I am not aware of that being possible in WoW (although there are transactions that happen outside the game which affect behavior in the game; those would be impossible to track).

Lastly, if you look at it as gambling winnings (earning money from playing a game) it does make a certain kind of sense.

Robert says:

Should translate into a writeoff

Since gambling and stocks can be written off, then paying to play the game should become one too if you’re loosing money, and since it’s the nature of these games to make tons of money (being truly a sink-hole since your money is spent playing and rarely turns profit), then people who sign on to play the game are essentially getting to play for free if they have a good accountant on their side.

p.s. I have never tried second life, so my thoughts on this could be off =

Frank says:

Re: Should translate into a writeoff

Since gambling and stocks can be written off

I’m not a tax adviser, but consult one before taking this advice. My understanding (subject to being wrong) is that with gambling, you can only deduct your losses against your winnings. If you win $10,000 and lose $50,000, you can only deduct $10K of your $50K loss.

Similar with stock losses, you can only deduct your losses from your winnings and a very small ($3K?) amount of the losses over that a year (rolling the remaining losses forward).

One of the reasons that the net did so well in the 90s was that the politicians in the US hadn’t figure out what it was or how to tax it. Once they get an inter-state taxation system going, net commerce will be drastically impacted.

Anonymous Coward says:

WoW says that there is no way to “purchase/sell” items from/to WoW, so they can’t be held accountable. however ppl will sell “gold and other items, levels” for real world currency. i.e. give me 30 bucks, and i give you 30 gold, i give you 100 bucks, you level me 40 levels. so it’s up to the individual to report earnings.

but WoW says itwon’t go after ppl doing this, it’s just your own risk.

Matt Bennett says:

I’m sure the pharse “like an other income” means when it’s transfered to real dollars. This is already the case anyway, here and elsewhere. If you sell a WoW sword for $1,000, that’s taxable income, just like anything else. That does actually make your subscription a business expensive, but only if you’re making taxable income .

Come on now, this is just like anything else and not newsworthy.

I still don’t see why the gov gets to tax casino winnings but you can’t count losses as an expense. THAT’S bullcrap.

Add Your Comment

Your email address will not be published. Required fields are marked *

Have a Techdirt Account? Sign in now. Want one? Register here

Comment Options:

Make this the or (get credits or sign in to see balance) what's this?

What's this?

Techdirt community members with Techdirt Credits can spotlight a comment as either the "First Word" or "Last Word" on a particular comment thread. Credits can be purchased at the Techdirt Insider Shop »

Follow Techdirt

Techdirt Daily Newsletter

Techdirt Deals
Techdirt Insider Discord
The latest chatter on the Techdirt Insider Discord channel...