The Gaming Dollar - Where does it go?
Gaming accounts for on average about 63% of club income (down from over 70%, 5 years ago) and is still a major determinant of the club's financial health.
So where does a dollar of club gaming turnover go?
At the outset, it should be remembered that turnover is not income or revenue.
In the case of gaming, for every dollar of turnover, between 90 and 92 cents is returned to the player (RTP), with the club retaining 8 to 10 cents of every dollar bet. Lotto, by comparison, has a RTP of 56% meaning that the operator retains 44 cents of every dollar bet. The RTP for other forms of gambling in NSW for example are: TAB 85.4%, Keno 75.2%, Lotteries 61.1%, Instant Lottery 58.8% and the Pools 46.4%.
By law gaming machines in the ACT are set to return at least 87% to the player. Gaming machine operators have the capacity to increase this amount as a further incentive to players, but of course this reduces the hold to the provider.
Gaming Dollar Breakdown
Assuming that out of every dollar of turnover, 90 cents is returned to the player - the hold to the club (or the Gross Gaming Machine Revenue - GGMR) is 10 cents - so where does that 10 cents go?
First the Government(s) gets its share - gaming tax and GST are applied to GGMR. The gaming tax is an income tax, not a tax applied to a club's surplus. In 2007/08 the ACT Government took 2.1 cents in gaming tax and the Federal Government 1.0 cent in GST - a total of 3.1 cents.
Secondly, clubs are required by law to contribute at least 8% of Net Gaming Machine Revenue (NGMR) to eligible community recipients. To arrive at a NGMR figure, taxes and the administrative cost of running gaming are deducted from the GGMR. The ACT Government estimates a notional amount equivalent to 15% of GGMR is needed to run gaming operations - or 1.5 cents. This is probably on the low side. This brings the notional NGMR figure in at 5.4 cents (after deducting the 3.1 cents tax and 1.5 cents attributed to gaming on-costs from the 10 cents).
In fact clubs have consistently contributed well over the legislated amount of 8% in recent years. The discretionary element has ranged from 5% to 7%, taking the average overall level of community contributions to over 12%. Following the deduction of legislated (8%) and discretionary (say 5%) community contributions of 0.38 cents and 0.27 cents respectively, clubs are left with an amount of 6.25 cents out of the 10 cents to run the club.
Thirdly, from this amount clubs pay wages, buy goods and services, provide training, offer member services, conduct marketing, service their debt etc. Any leftover revenue (or surplus) is used by clubs to accommodate depreciation and undertake new developments, improve member services, build new facilities - or generally to maintain and hopefully sustain their viability. None of the money is paid out in dividends to privateers or individuals.
Of course the level of any surplus varies widely between individual clubs depending on their circumstances. In a reasonable year, it is estimated that overall club sector surplus will be about 5%, but under the current tough trading environment 2.5% or even less is more likely.
In summary the key thing to remember is that all revenue (including gaming revenue) earned by ACT clubs is distributed in a range of ways - back to the community:
- first, the Government receives their share in the form of gaming tax and other charges levied by the ACT Government and at the Federal level, GST;
- secondly, there is the legislated requirement to allocate at least 7% of NGMR to eligible community recipients and as noted above clubs have allocated consistently more - averaging 12% over the past 10 years;
- thirdly, the remainder is the used by the club to buy goods and services, pay wages, service debt etc - in others words it is used to operate the club; and
- finally, any residual revenue (or surplus) is then used to enhance the services and amenities for members, improve club facilities and community infrastructure, and invest in the club's future.
The important fact is that none of the surplus or excess revenue is able to be accrued privately - dividends are not paid to individuals and the money stays with the club and is used for the benefit of its members - the people of Canberra who are part of the ACT community.