He might not be on Australia’s rich list yet, but Tasmanian David Walsh is surely one of Australia’s most interesting high-net worth individuals.

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In the last few years, Walsh has poured vast chunks of his fortune into the country’s largest private art museum, Hobart’s Museum of Old and New Art, which has almost immediately become known as Mona since opening in early 2011.

But unlike the property developers, media barons and miners that dominate Australia’s rich list, Walsh hasn’t made his money through conventional means – he’s a professional punter with what appears to be a brilliant record.

Kudos to The Australian Financial Review for a revealing series of articles on Walsh and his syndicate of punters who based themselves in a Hobart hotel called Waggon & Horses and wagered billions of dollars on racing and the lottery game Keno.

Now, it’s long been the mantra of the Saturday punter that gambling profits are tax free – just as gambling losses cannot be claimed as deductions.

But Walsh is embroiled in a case with the ATO that could turn that logic on its head.

The case, in the Federal Court, involves the Tax Office trying to hit Walsh with a tax bill for an additional $37.7 million for the 2004-06 financial years, plus interest, due to Walsh’s shareholding in the punters’ syndicate.

While Walsh has always argued these were recreational winnings, the ATO believes the fact that the syndicate set up three companies to provide it with statistical analysis and other services shows this was more than a simple punters’ club.

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In a statement to the AFR, Walsh said the punters’ club members were not shareholders of the services companies and reiterated his position on the tax treatment of gambling winnings. It’s worth quoting him at length:

“To begin with, I have always treated the proceeds of my gambling as the ATO told me. Their opinion, sought a number of times, was that gambling winnings aren’t taxable. In fact, to my knowledge, no gambler has ever been assessed as taxable.”

“There have been frequent reviews and audits into my gambling, all of which have found that winnings are not taxable, perhaps in part because no one knows how to treat losses and deductible expenses.”

The last point is a very good one: If the ATO wants to tax winnings, should losses also be deductable? This case could set some very interesting precedents.

Interestingly, Walsh’s winnings would have been taxable in the United States, where wins on bingo, Keno, poker tournaments and some other forms of gambling are reportable and taxable in certain circumstances.

Australian governments love gambling taxes. Could a case like the ATO vs Walsh change their minds on taxing punting wins?

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I’d say not, but it certainly makes this battle one worth watching.

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James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.