Betting companies will have to pay their fare share in Victoria with online bets to be hit with an 8 per cent tax, although it's about half that of other states.
The new "point-of-consumption tax", which is set to reap about $30 million a year, targets online companies that have been avoiding a state levy.
Most Australian online betting companies are licensed outside Victoria but this policy taxes earnings based on where a punter is located.
"We've got a situation at the moment where online gaming operators are effectively avoiding tax," Treasurer Tim Pallas told reporters on Monday.
Victorian betting agencies, already paying a six per cent wagering tax, will also pay the higher rate.
Companies will be responsible for working out the location of the punter placing the bet, Mr Pallas said.
"They are responsible corporate citizens. We'd expect them not to break the law," he said when asked how it will be policed.
The Victorian rate is just above half of South Australia's 15 per cent tax.
Other jurisdictions like WA are also considering a similar tax at the higher end of the scale.
Responsible Wagering Australia, which lobbies for bookmakers including Sportsbet, Ladbrokes and CrownBet, said the tax will have "negative" and "far-reaching" consequences for Victoria.
The lobby group's executive director Stephen Conroy said the online wagering industry employed about 1000 Victorians last year and paid $6 million in payroll tax.
"The online wagering industry already pays a significant amount of consumption tax through the GST, as well as corporate income tax to the federal government," he said.
Gambling operator Tabcorp, the joint venture partner of the Victorian Racing Industry, already pays a wagering tax to the state government.
VRI will receive 1.5 per cent of the net wagering revenue to soften the hit of the increased rate.
Tabcorp expected it would be no worse off as a result of the new tax.
"The point-of-consumption tax regime modernises the existing arrangements and addresses the growth in untaxed online betting," a company spokesperson said.
Shadow Treasurer Michael O'Brien said this was the 12th new or increased tax by the Andrews Labor government, despite a promise for no new taxes at the last election.
"This particular tax will certainly go on to punters," he told reporters.
"It would have been better to have actually had a leadership position and have a national approach."