Clubs and gaming
Clubs are a r esponsible gaming provider.
Canberra is the only jurisdiction in Australia where gaming is still largely owned and controlled through community-based clubs.
Clubs operate within a strong tradition of relevance to the community that supports them and which in turn they support.
Successive ACT Governments have rejected calls by taverns, hotels and the Casino to be given poker machines – choosing instead to put social responsibility ahead of revenue raising by restricting them to community based clubs.
This was confirmed in the Gaming Machine Act 2004 and subsequently by the Government following its review of the Casino Control Act.
ClubsACT believe that the demarcation of community-based as opposed to privately owned is clear, unequivocal and defensible socially.
Our continuing concern is that if this nexus is broken it will only be a matter of time before the major beneficiaries of profits from gaming machines will be the privateers – as they are in the other Australian jurisdictions. ClubsACT strongly oppose the push by hotels and taverns in particular to upgrade the draw card machines to poker machines and have called on the ACT Government to be vigilant and to reject any such move.
The privatising of gaming machines in these other jurisdictions has done little apart from significantly expanding access and contributing massively to the wealth of individuals.
In contrast, clubs are not about making a profit for a few, they are about spreading their operating surplus across the community. This is a situation that ClubsACT believe is the most appropriate for the ACT and should be maintained.
Clubs understand their responsibility to the community - they are prepared to play a leadership role, anticipate change and take pro-active measures to provide their gaming services in a professional and responsible manner in keeping community expectations.
The club sector believes that the best way to provide a responsible gaming environment and at the same time deliver the benefits to the ACT community is through the clubs and the ACT Government has accepted this proposition. The Gaming Machine Act 2004 only permits clubs access to poker machines and the Casino Control Act 2006 continues to prohibit gaming machines in the Canberra Casino.
In 2006/07, according to the ACT Gambling and Racing Commission, the club movement held xx gaming licenses, operated 5,200 gaming machines and had a turnover of $2,164 million (to be updated). The return to clubs was $184.0 million which represents about 70 percent of the total gross revenue earned by ACT clubs. The Government received $50.5 million (to be updated) - that is 26 cents in every dollar raised by ACT clubs through gaming machine operations is remitted to the Government as taxes, fees, rates and licences.
The key gaming indicators over the last 4 years and the change over the previous year are provided below:
| 2003/04 | 2004/05 | 2005/06 | 2006/07 | Change | |
|---|---|---|---|---|---|
| Gaming Licenses | 64 | 65 | 65 | TBA | 0 |
| Gaming Machines | 4930 | 5056 | 5066 | 5200 | +2.6% |
| Turnover | $2074.1m | $2040.4m | $2164.1m | TBA | |
| Return to Clubs | $191.3m | $185.2m | $191.3m | $184.0m | -3.8% |
| Gaming Tax | $50.1m | $47.9m | $50.5m | TBA |
The gaming dollar - where does it go?
Gaming accounts for on average about 70% of club income and is the major determinant of the club’s financial health.
So where does a dollar of club gaming income go?
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.
By law gaming machines 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.
Assuming that 90 cents is returned to the player and the hold to the club (or the Gross Gaming Machine Revenue - GGMR) is 10 cents - where does that 10 cents go?
First the Government(s) get their share – gaming tax and GST are applied to GGMR (it is an income tax, not a tax applied to the clubs surplus). In 2006/07 the ACT Government took 1.8 cents in gaming tax (to increase to 2.1 cents in 2007/08) and the Federal Government 1.0 cent in GST – a total of 2.8 cents.
Secondly, clubs are required by law to contribute at least 7% 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 5.7 cents (after deducting the 2.8 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 7% 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 (7%) and discretionary (say 5%) community contributions of 0.4 cents and 0.3 cents respectively, clubs are left with an amount of 6.5 cents of every dollar it receives to run the club.
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.
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%.
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;
- 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 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 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.
