Proposed Amendments to Gambling Regulation Act: Post-2022 Arrangements and other matters

The Victorian Government has released its proposed amendments to the Gambling Regulation Act. The amendments relate mainly to the new gaming machine entitlements (“GMEs”) which are to take effect from August 2022.

Whilst the Bill has clarified some of the arrangements for the post August 2022 entitlements, it is clear there is much detail still to be released. It seems much of that detail will be included in proposed Ministerial guidelines or rules. The Government are going to have to work very hard if the Bill is to get through Parliament before it finishes sitting for the year and if the Bill is passed, the Department of Justice will have a very tight time frame to release all the further information required by venue operators prior to them being in a position to take up any proposed allocation of entitlements by early next year.

What are the main points of the Bill

1.     20 Year Term

The Bill confirms the term of the entitlements post August 2022 will be for a period of twenty years with one amount payable for the first ten years and a further amount payable for the second ten years. The formula for the amount payable for the first ten years has been previously released but the Minister has reserved a right to determine the amount for the second ten years at a later date.

We understand it will be possible to surrender any entitlements that have been allocated to a venue operator at either 2022 or 2032 without penalty.

2.     No Windfall Gain on Sale of New GMEs

If you sell a new GME before 16 February 2024, being 18 months after 16 August 2022, for more than its allocation price, then your gain will be forfeited to the Government.

For example, if a new GME is allocated to you for $60,000 but you on-sell it for $75,000, then you must pay the $15,000 gain to the Government.

It is not clear whether this rule only applies to the first sale of a new GME or also applies to subsequent re-sales of that GME which occur before 16 February 2024.

You can seek an exemption from the rule if either:

  • Your sale of the GME is related to your sale of the business of your gaming venue; or
  • You are only selling the GME because planning or gaming approval was refused for the proposed new venue at which you intended to use that GME.
3.     No Windfall Gain on Purchase and Re-Location of New GMEs

If you buy a new GME before 16 February 2024 and re-locate it to a higher-performing venue, the Government will calculate the “Hypothetical Allocation Price” or (“HAP”) being the allocation price that would have been payable had the new GME always been at the higher-performing venue. If the HAP is higher than the price you paid for the GME, then the difference must be paid to the Government.

For example, if original owner of the new GME sells it to you for $75,000 and you re-locate it to a different venue where the HAP is $85,000, then you must pay $10,000 to the Government.

Again, it is not clear whether this rule only applies to the first sale of a new GME or also applies to subsequent re-sales of that GME which occur before 16 February 2024.

Again, you can seek an exemption from the rule if either:

  • The vendor’s sale of the GME to you is related to its sale of its gaming business; or
  • The vendor is only selling the GME to you because planning or gaming approval was refused for the proposed new venue at which the vendor intended to use that GME.

The rule only seems to apply where there is a transfer of the GME from one owner to another. It does not apply if there is only a change of venue.

4.     New Gaming Tax Rates

From August 2022, the gaming tax rates will be as follows:

Table for months after August 2022

Column 1

Column 2

Column 3

The part of average revenue per gaming machine entitlement that:

Rate for club gaming machine entitlement

Rate for hotel gaming machine entitlement

does not exceed $2666

0·00%

8·33%

exceeds $2666 but does not exceed $6666.67

46·70%

55·03%

exceeds $6666.67 but does not exceed $12 500

51·17%

57·50%

exceeds $12 500

60·67%

65·00%

These rates are in line with what has previously been announced and in line with the policy guiding the formula for calculation of prices for entitlements post August 2022. That is, the calculation of purchase prices for entitlements and the new tax rates impose a greater burden on the highest performing machines.

5.     Review of Tax Rates in 2024

The Treasurer is required to conduct a review the new gaming tax rates after 16 August 2023 and report to Parliament by 16 February 2024 if the tax rates are not “operating as intended”. So, the Government has given itself the room to change the tax rates.

6.     Change to 50/50 Split

Currently, the Act requires that there must be a 50/50 split between hotel GMEs and club GMEs.

The amendments allow the Minister to make a declaration changing that split.

Presumably, this amendment is intended to deal with the situation where clubs don’t take up all of new GMEs which are offered to them and the Minister wants to re-issue those GMEs as hotel GMEs.

7.     Maximum Holding of Club GMEs

The Minister has the power to increase the maximum number of club GMEs which a person may hold from its current number of 420 GMEs to 840 GMEs.

The Minister could exercise this power at any time and does not have to wait until 2022.

8.     Clubs can “Lease” GMEs to Clubs

A club will be able to effectively “lease” its GMEs to another club for a fixed term (as long as the arrangement is approved by the VCGLR).

Presumably, this will allow larger, more professional clubs to hold club GMEs and then farm them out to smaller clubs under registered assignment agreements for a percentage fee.

The VCGLR could approve such arrangements as soon as the legislation is passed and there are provisions allowing for temporary changes to geographic areas to facilitate such arrangements.

9.     Cashless Gaming

The amendments prohibit offering free or discounted gaming tokens as an inducement to gamble or allowing patrons to use credit cards to acquire tokens or cash cheques for tokens.

The Government will be able to make further regulations for the conduct of gaming with “non-cash gaming tokens”.

10.    Cheques and EFTPOS Facilities

Cashing cheques at gaming venues will be prohibited.

Cash withdrawals at EFTPOS facilities in a gaming venue will be limited to $500 within a 24-hour period.

 

As noted there is considerable information still to be released in the form of Ministerial Guidelines and to be included in any proposed Agreement to be entered into with the Government.

For example, there has been no formal confirmation of how the 10% deposit amount is to be paid. Advice from the AHA indicates the Government is seriously considering a 5% deposit to be payable by both clubs and hotels in February 2018 with a further 5% deposit payable by hotels in February 2019.

We also note that there has been no detail released for the deferred payment scheme that will commence in August 2022 including whether a commercial rate of interest will apply. The rate of this interest repayment will obviously be of critical importance to venue operators. And whilst there has been much discussion about the potential surrender of club entitlements and therefore further entitlements potentially being available to hotel operators, there has been no detail released as to how that process will occur or the time frames for such a process. Any new venue operator or operator considering an increase in entitlements is still without much needed information. Please note that it has been released that any such re-allocation process from clubs to hotels will involve considerable layers of offers to other clubs and new operators prior to any possible offer to existing hotels.

What is known is that each venue operator needs to carefully consider the tenure of their leases prior to proceeding with the purchase of entitlements for a further twenty (20) year period and also consider its lease as a whole. There are a wide spectrum of lease provisions and many leases do not deal with the entitlement system or if they do they do not deal with it well.

As recently as yesterday the Government Gazette published the Entitlement Allocation and Transfer Rules. These Rules cover the allocation process and whilst not including the date of any proposed offer or allocation to venue operators the Rules do include that by 3 November 2017 venue operators and new entrants will have to submit an expression of interest for any new entitlements requested. New entrants are not limited to existing venue operators. The Rules also include transitional arrangements for allocation of entitlements and/or transferred entitlements. We will continue to keep you updated with the progress of the Bill and any further announcements from the Department relating to the detail as to how the post August 2002 system will actually work.

If you have any queries to what we know so far in relation to these arrangements, please contact either Elizabeth Priddle or Alison Elverd on (03) 9670 0722.