INVITATION TO JOIN LUXBET’S CLUB XTRA

ClubXtra is exclusive to owners and trainers and rewards you with a 12% win bonus on top of Luxbet’s premium odds (which include Best Tote or Top Fluctuation) when you bet on a horse you own or train. To take advantage of the ClubXtra 12% bonus, you need to be a Luxbet.com account holder. Visit Luxbet.com for details on how to register your horses with ClubXtra.

For those of you who don’t have an account with our exclusive corporate wagering partner Luxbet.com, here’s a special limited offer for NSWROA members.

Open a new account now with Luxbet.com now, and they’ll credit you with an additional 20% bonus on your first deposit amount, up to $1000. Simply enter promo code NSWROA2 on the registration form when you register online at www.luxbet.com or call 1300 LUX BET (1300 589 238). Hurry, conditions apply, see Luxbet.com promotions page for details.

As you are aware, Luxbet.com is a major partner with the Association in a one-year sponsorship deal.

Luxbet is part of Australia’s premier gambling and entertainment group Tabcorp. Luxbet.com is not only dedicated to providing punters with competitive odds, Luxbet.com is the only corporate bookmaker totally committed to returning a significant percentage of profits back into the racing industry. By supporting the thoroughbred, harness and greyhound racing codes, they are helping to ensure a viable future.

We encourage members to support Luxbet.com. Open a Luxbet.com account today, and you’ll receive a 20% bonus on your first deposit, up to $1000* and make sure you register with ClubXtra to pocket 12% more on your winning payouts when you bet on a horse you own or train!

2009 RACING’S NIGHT OF CHAMPIONS – A GRAND AFFAIR

The countdown is on to the New South Wales Racing Industry’s Night of Nights and the flagship event of the Association, Racing's Night of Champions, which is to be staged at The Grand Pavilion at Rosehill Gardens on 13 August 2009.

Without giving too much away about the night, some of the incredible items that will feature in the Monster Auction will include:-

• a wonderful trip to Dubai for the opening of the Meydan Racecourse, the world’s largest racecourse, for the 2010 Dubai World Cup – a definite once in a lifetime experience. For a sneak peak at this incredible prize, visit the Ambassador Travel website www.ambassadortravel.com.au and click onto the Dubai World Cup icon – you will be truly amazed.
• the ‘Anita’ necklace by Lester Brand – a Baby South Sea pearl strand strung with an 18ct white and rose gold enhancer set with diamonds

The Silent Auction will also feature some wonderful prizes including:

• a Black Shelly dress by outstanding designer, Alex Perry
• a “Dynasty of Kings” print by renowned equine artist Lyn Beaumont
• a “Samantha Miss” memorabilia piece which includes her racing plates worn in all her group wins.

Other Silent Auction item categories include: Accommodation, Art, Electronics, Horse Products, Jewellery, Memorabilia, Millinery and Technology, to name but a few.

In yet another “first” for the night, NSWROA is pleased to advise that a FREE bus service will run from Randwick and the City to the function – departing from the William Inglis & Son complex at Randwick and at a convenient location in the City.

If you are interested in utilising the bus service, please phone the office and reserve your seat as it should be noted that places are strictly limited.

For those of you thinking of booking accommodation for the night close to the function, I am pleased to advise that there is a special “Racing’s Night of Champions” rate (including breakfast) available at the Mercure Sydney Parramatta which is located a short distance from Rosehill Gardens. For further information regarding this offer, click here.

And finally, a reminder that last year’s event was sold out many weeks prior to the function – so “book now” to avoid disappointment. Click here for a booking form for the event.

For further information regarding the Racing’s Night of Champions, visit the NSWROA website www.nswroa.com.au.

I look forward to seeing you on the night.

MANAGING RISKS FOR RACEHORSE OWNERS

Our good friends and corporate partner Gow Gates Insurance Brokers, have kindly prepared, via Kingsley Edwards, B.Agr.Ec (Syd.), Dip.Fin.Serv. (Ins. Broking), ANZIIF (Snr. Assoc.), C.I.P., the following update on 9 July 2009:

Racehorse owners know they are involved in a risky business. There are ways, however, to manage those risks which put the odds in their favour. The start of the new racing season is an opportune time to consider this issue.

The three main areas of risk generally identified in owning racehorses (whether owned outright, in partnership or as a syndicate member) are defined in this article as having a horse that:

• does not perform on the racetrack (performance risk);
• suffers an injury or illness so it cannot race competitively (injury risk); or
• dies during its racing career (mortality risk).

These major risks can each be managed to a lesser or greater extent by implementing simple strategies in order to minimise the impact on the owner.

Performance risk is of crucial importance because the universal aim of anyone who owns a racehorse is for their horse to win races, or at least perform at a level to pay its own way. Selecting an unraced horse (usually as a yearling) which will have sufficient racing ability to become a performer in its racing career is an inexact science. The unknown factor of its racing ability makes this the least manageable of the three risks mentioned above. The principal method available in reducing the risk of non-performance in this selection process is to seek professional (and independent) advice prior to purchase from a specialist equine vet, bloodstock agent and/or thoroughbred trainer. Purchasing a tried horse is an alternative that allows a better understanding of its ability to race, thereby lessening that risk.

Having bought the horse, managing the risk in order to maximise the chance of success on the track largely depends on those who are responsible for its care. Choosing a trainer and an agistment farm where the horse is spelled and pre-trained that are experienced professionals and respected as such in the industry is essential in mitigating the risk of poor performance. In addition, the quality of the facilities they provide, the priority of the horse’s safety and level of care/treatment, and the vet they use are also primary considerations.

Injury risk can result from a myriad of reasons, many of which cannot be controlled. The chance of a horse being unable to race as a result of an injury (e.g. a horse breaking down) or ill health can be decreased by adopting the same approach as noted above (viz. applying specific criteria in selecting a trainer and spelling/pre-training property). Notwithstanding these efforts to keep the horse sound and healthy, as the old saying goes: “if you wrap a horse in cottonwool, then it will probably choke!”.

Mortality risk is the most manageable of the three major risks faced by racehorse owners. The reason for this is that the financial loss experienced from the death of a horse can be managed effectively through insurance. The standard insurance policy for racehorses protects the owner against the death of the horse due to accident or illness. Cover extends to circumstances where the horse sustains an injury or sickness and a vet certifies that the horse’s suffering is incurable and so excessive that immediate destruction is imperative for humane reasons. Cover usually includes transport of the horse anywhere within Australia and surgery conducted by a qualified veterinarian under local or general anaesthetic. In addition, the policy covers the risk of loss due to the horse being stolen.

The purpose of the policy is to indemnify the Insured for loss of their asset. In other words, it intends to place the owner in the same financial position after the claim is made, as before the claim was made, by paying them the horse’s fair market value. The premium paid by the owner for the insurance policy is calculated as a percentage of the Sum Insured and as such, the Sum Insured is the maximum amount the policy will pay out (provided it is less than or equal to the fair market value). As a consequence, the Sum Insured should represent this fair market value at any given time, so in the event of a claim a prompt settlement can be made. A review of the Sum Insured should be conducted regularly; for instance when any event occurs which alters its value (e.g. if it wins a higher grade race than it has won before, or performs particularly poorly over a couple of runs), or at the conclusion of each racing preparation. Trainers are usually familiar with the market for buying and selling racehorses and may be able to advise on a realistic price for the sale of the horse, forming the basis for the Sum Insured. Otherwise, a formal valuation can be obtained from a bloodstock agent. Once this has been determined, an astute broker will ensure that the horse’s performance is monitored throughout the policy period to maintain an appropriate figure.

The mortality insurance policy does not, however, transfer all the mortality risk as the policy does not cover malicious acts or pre-existing injury/illness (i.e. any illness, disease, lameness, injury or physical disability at the commencement of the insurance will not be covered).

There are, of course, no guarantees in racing, but the risk management tools outlined above offer a greater likelihood of owners achieving their goal: owning a good performer that remains sound; and also providing some financial protection in the unfortunate event of the horse’s death. Mortality risk, via the use of insurance, is the most effective way of minimising the main risks encountered by racehorse owners and thus the best able to be managed.

For more information on this subject, please contact Kingsley Edwards, Thoroughbred Insurance Manager at Gow-Gates on (02) 8267 9940 or kedwards@gowgates.com.au.

Disclaimer: The information in the above article is intended as a guide only and should not be relied upon without seeking independent professional advice.

WINNERS ARE GRINNERS

A WINNER – there are no better words for an owner to hear! As members are aware, as part of our membership renewal process, NSWROA requested members to forward the names of their racehorses in order for us to acknowledge their racing triumphs in our publications.

Accordingly, hereunder are the lucky NSWROA members who had winners in June 2009:

BUDGET ATTACK ON “HOBBY FARMS” – DRAFT LEGISLATION CLARIFIES MANY ISSUES

Our good friend and Racing’s Night of Champions supporter, Paul Carrazzo of Carrazzo Consulting, has provided his views on the abovementioned issue.

This office issued a special release to the racing and breeding industry on 14 May 2009 re the Budget announcement relating to the intended changes to the “Non-Commercial Loss” (“NCL”) rules affecting the deductibility of business losses for High Wealth Individuals (HWIs).

The new NCL rules proposed were to ensure losses from unprofitable business activities cannot be used to reduce salary, wage and other income of high income earners by tightening the application of the NCL rules. Individuals with an Adjusted Tax Income (“ATI”) of over $250,000 will instead have losses quarantined to the business activity, i.e. they can only be applied if the activity makes a profit into the future.

Individuals who do not meet the above income requirement, but who can nonetheless objectively demonstrate that there business is commercial can apply to the ATO to exercise discretion, via a private ruling application, to allow the loss. Individuals can also apply for the ATO to exercise discretion when there are exceptional circumstances (e.g. EI, drought, fires etc).

In the past few days the ATO have released draft legislation re these new rules and upon review and related discussions with senior officers in Treasury, I am now in a position to comment with greater certainty on the application of these new rules.

Adjusted Taxable Income (“ATI”) now defined

These rules only affect individuals (or partners who are individuals) with an ATI of over $250,000. To date, we could only speculate on what ATI meant for the purpose of these rules.

The draft legislation now defines what ATI is, vis-a vis:

• Taxable income for that year;
• Reportable fringe benefits for that year;
• Reportable superannuation contributions for that year; and
• Total net investment losses for that year.

Reportable Superannuation Contributions (“RSCs”) now part of ATI

The surprise inclusion in this amount is reportable superannuation contributions, a component that may make many HWIs, many of whom have “salary sacrifice” arrangements with their employers, subject to these new changes, i.e. by pushing ATI over $250,000.

RSCs is defined as the sum of the following:

• The amount contributed to a super fund during that year by an individual’s employer or associate of that employer. In effect, this also includes “salary sacrificed” contributions of the employer on behalf of the employee; and
• The individual’s deductible personal super contributions for that year.

“Total net investment losses” – what are they?

The inclusion of these is also a worrying development as many HWIs partake in negatively geared investments, e.g. via property or shares.

Per the ATO definition, you will make a “total net investment loss” when the amount of allowable deductions you claim for your financial investments and rental properties is more than the gross income you receive from those investments.

The only consolation out of this definition is that tax free pensions are not included in ATI, a relief for many older taxpayers who are involved in breeding and/or racing as a business.

Other issues clarified by the draft legislation

In summary, these are:

• The ATO has confirmed that carried forward revenue losses are taken into account when calculating ATI, given that “taxable income” is inclusive of this deduction.
  For example, if a HWI has wages income of $350,000 in the 09/10 tax year and has a carried forward tax loss of $125,000 arising from his prior breeding activities, this loss when deducted takes 09/10 taxable income to $225,000 ($350,000 less $125,000). Assuming no other ATI amounts, he avoids these changes as ATI is less than $250,000;
• In calculating ATI, a deferred/quarantined loss under the NCL rules cannot be taken into account;
• A deferred Non Commercial Loss in existence prior to 1 July 2009 can be deducted by the HWI to reduce taxable income when the relief provisions have been met, i.e. a private ruling has been approved;
• If a HWI has a loss “quarantined” under these new rules, this loss can be deducted in a future tax year when ATI falls under $250,000 and one of the four NCL commerciality tests is met;
• The ATO confirmed that it is very likely that the person who can provide a “viability report” required with a private ruling application is that defined in taxation ruling TR 2007/6, the current ATO ruling relating to the application of the current NCL rules. This ruling notes that an appropriate “independent source” includes:
  " industry bodies or relevant professional associations, government agencies, or other taxpayers conducting successful comparable businesses."
• If a HWI seeks a private ruling and is unsuccessful, the loss derived for that year can still be quarantined and carried forward as the ruling is only addressing the commercial viability of the business, not its income tax business status.

ATO accepting comments on draft legislation

Comments on this draft legislation must be lodged with the ATO before 26 July 2009. You can be assured that the industry will closely evaluate these new changes and relevant comments will be passed on. The racing and breeding industry derives serious investment from HWIs and it is imperative that these new rules does not drive these people out of the industry. Our office, as usual, will be very active in this process.

You are welcome to contact me if you wish me to clarify or expand upon any of the matters raised in this article.

PAUL CARRAZZO CPA
CARRAZZO CONSULTING CPAs
TEL: (03) 9329 7044 FAX: (03) 9329 8355 MOB: 0417 549 347
E-mail: paul.carrazzo@carrazzo.com.au Website: www.carrazzo.com.au

DISCLAIMER: Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their particular circumstances with an accountant specialising in this area.

2009-10 FIXTURE CARD

An electronic copy of the 2009-2010 Fixture Card is now available to members. Click here to access.

NSWROA is currently awaiting delivery of the “hard copy” cards.

If you would like a “hard copy” of the card, simply contact the office and same will be sent to you by mail.

MEMBERSHIP MATTERS

If you are receiving this newsletter by “snail mail” and have recently obtained an email address, please advise the office of your new email address.

Yours in Racing
Ray McDowell, President
17 July 2009