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.

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  • identicon
    Celes, 2 Nov 2006 @ 12:26pm

    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.

    reply to this | link to this | view in chronology ]

  • identicon
    BASTARDS, 2 Nov 2006 @ 12:33pm

    STUPID GREEDY FUCKERS WANT TO TAX EVERYTHING!

    reply to this | link to this | view in chronology ]

  • identicon
    Ryan, 2 Nov 2006 @ 12:34pm

    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?

    reply to this | link to this | view in chronology ]

    • icon
      BenBishop (profile), 2 Nov 2006 @ 1:10pm

      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.

      reply to this | link to this | view in chronology ]

    • identicon
      J, 12 Nov 2008 @ 6:15pm

      Re: Bad Direction

      Are you an idiot. The Australian Government is not a small government - and you only have to look to the EU to see that they are already taxing things in second life by their VAT

      reply to this | link to this | view in chronology ]

  • identicon
    Aaron, 2 Nov 2006 @ 12:37pm

    Holy cow

    I would certainly hope they couldn't tax you until it becomes real money. I'd hate to see my tax bill after not paying my "fair share" of the millions of GP earned in the various Final Fantasy games over the last 15 years.

    reply to this | link to this | view in chronology ]

  • identicon
    Robert, 2 Nov 2006 @ 12:50pm

    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 =

    reply to this | link to this | view in chronology ]

    • identicon
      Frank, 3 Nov 2006 @ 4:08am

      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.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Nov 2006 @ 1:05pm

    it makes sense, yeah, that you can't spend virtual money for actual products. it is like the stocks. that's virtual money. you can't use it until it's changed to real money

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Nov 2006 @ 1:09pm

    How does that work for kids

    If game playing is going to be taxable, does that mean any kid that plays a video game is in violation of child labor laws?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Nov 2006 @ 1:22pm

    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.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous, 2 Nov 2006 @ 1:45pm

    basically like a capital gains tax,


    Surely you mean a capital games tax?

    ;)

    reply to this | link to this | view in chronology ]

  • identicon
    Brian, 2 Nov 2006 @ 1:47pm

    That's the gubmint for you...

    "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

    -Ronald Reagan

    reply to this | link to this | view in chronology ]

  • identicon
    Matt Bennett, 2 Nov 2006 @ 2:53pm

    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.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 2 Nov 2006 @ 2:57pm

    So if they decide to tax in-game money can you pay your entire tax bill with Linden dollars?

    reply to this | link to this | view in chronology ]

  • identicon
    Stuart, 2 Nov 2006 @ 10:01pm

    It makes sense to tax people making money online etc, but the problem is that it's very hard to police. Money can come from so many different sources.....

    Stuart
    http://www.earnersblog.com

    reply to this | link to this | view in chronology ]

  • identicon
    Sketchplanet - Art for Everyone, 5 Apr 2008 @ 11:50pm

    How come..

    How can they chase you up on it?

    reply to this | link to this | view in chronology ]

  • identicon
    Paul, 29 Jan 2009 @ 7:02pm

    sheesh

    Taxing maybe when the money becomes real...maybe...

    Until then its a joke to even consider it.

    Its way too early before taxing becomes a possibiilty.

    reply to this | link to this | view in chronology ]

  • identicon
    Charles Linden, 29 Mar 2014 @ 4:27am

    Taxes

    the only thing certain in life is death and taxes

    reply to this | link to this | view in chronology ]


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