How do I treat GST in the gaming licence renewal form?
The gaming licence renewal (GC7 Gaming Machine Account Summary form) is completed on a GST exclusive basis. The amount recorded for gaming proceeds should be the amount of gaming machine bankings less GST. All costs should also be recorded on a GST exclusive basis.
It is best practice for all authorised purpose payments to be made on a GST exclusive basis.
What are the different types of payments?
The club has three types of payments, non-gaming payments, authorised gaming expense payments and authorised purpose payments.
Non-gaming payments include costs associated with the bar, courtesy coach and commercial investments.
Authorised gaming expense payments include items such as gaming duty, gambling equipment depreciation and licensing fees.
Authorised purpose payments include items such as the general maintenance and development of the clubrooms (excluding the costs associated with the bar).
Some costs fall within all three categories. For example, some of the club’s electricity costs will relate to the bar and be a non-gaming cost, some will relate to the running of the gaming machines and be an authorised gaming expense, and some will relate to the lighting and heating of the clubrooms and be an authorised purpose. In such cases, the cost needs to be apportioned between the various categories.
What cost apportionments should I make in the gaming licence renewal?
The gaming accounts need to include a modest apportionment for costs such as electricity, insurance, wages, repairs and maintenance, accountancy and audit.
As a general guide, the apportionments should be approximately:
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Item
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Apportionment when annual gaming revenue is between $0 and $250,000.00
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Apportionment when annual gaming revenue is between $250,000.00 and $750,000.00
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Apportionment when annual gaming revenue is over $750,000.00
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Electricity
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$1,000.00
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$3,000.00
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$5,000.00
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Insurance
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$750.00
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$3,000.00
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$5,000.00
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Wage and salary
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$2,000.00
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$15,000.00
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$20,000.00
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Repairs and maintenance
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$250.00
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$2,000.00
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$5,000.00
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Accountancy
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$750.00
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$1,500.00
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$2,500.00
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Audit
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$750.00
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$1,500.00
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$2,500.00
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What amount should the gaming duty be in the gaming licence renewal?
The gaming duty should be 20% of the GST inclusive gross gaming revenue (GST is not payable on gaming duty, so the actual amount paid should match the sum recorded in the GC7).
What amount should the problem gambling levy be in the gaming licence renewal?
The problem gambling levy should be 1.08% (from 1 July 2022) of the GST inclusive gross gaming revenue (GST is payable on the problem gambling levy, so the actual amount paid should be 15% higher than the sum recorded in the GC7).
What should the electronic monitoring costs amount be in the gaming licence renewal?
The electronic monitoring costs are based on the number of machines operated and the number of days in which the machines are turned on. The fees should equate to $1.90 per machine, per day of operation.
What is the minimum authorised purpose return the Department will accept?
Most clubs have a licence condition requiring a minimum of between 25% and 37.12% to be applied or distributed to authorised purposes.
The Department is being more lenient regarding the minimum authorised purpose requirement for clubs. The Department is now relicensing clubs that have an authorised purpose return of 25% or more.
What should I do if I am not going to be able to adhere to the licence condition requiring 37.12% to be applied to authorised purposes?
The club should apply to the Department to have the minimum authorised purpose percentage reduced. The club should not simply breach the licence condition and hope that no sanction action will be taken.
How do I increase the club’s authorised purpose return?
Increasing gaming revenue will increase the authorised purpose return, but this is often difficult to do. The other way to increase the authorised purpose percentage is to reduce the costs allocated to the gaming account. This can be achieved by including only a modest cost apportionment for electricity, insurance, wages and salary, repairs and maintenance, accountancy and audit.
The authorised purpose percentage is also affected considerably by the way in which depreciation is calculated. If a new gaming machine is purchased and this is depreciated using the diminishing value method, 40% of the purchase price will be incurred as a gaming cost in the first year, significantly reducing the gaming profit and thus the authorised purpose percentage. If the gaming machine was depreciated over five years using the straight line method, only 20% of the purchase price would be incurred as a gaming cost in the first year. This reduced cost will assist to achieve a higher authorised purpose percentage.
If the club has gaming bankings of less than $3,500.00 per week, the club should consider reducing its gaming machine numbers to seven or less. Clubs that operate seven or less gaming machines are eligible to pay reduced licensing fees to the Department.
How do I ensure that the club’s authorised purpose distributions do not exceed the amount of authorised purpose funds generated?
Clubs should ensure that the amount allocated to authorised purpose payments does not exceed the gaming profit (the amount generated for authorised purposes each year). If a club makes a gaming profit of $100,000.00, the amount allocated to authorised purposes should not be more than $100,000.00. The amount of gaming profit is reduced by non-cash items, namely depreciation. It is possible for the club in the example above, to have more than $100,000.00 in cash available to allocate to authorised purposes, but the sum allocated should never exceed the gaming profit made each year.
To ensure that the club’s gaming account cash amount is similar to the amount which may be lawfully allocated to authorised purposes, the following should be undertaken:
- A sum equal to the depreciation amount should be transferred out of the gaming account into a separate account. This account should be used to purchase new equipment.
- A sum equal to the apportioned gaming expenses (the apportionment for electricity, insurance, wages and salary, repairs and maintenance, accountancy and audit) should be paid out of the gaming account into the general club account (if the general club account paid these costs in full).
- If new gambling equipment is purchased and there are not funds available in the depreciation account to pay for the items, the club should loan the gaming account the money needed to purchase the items, and this loan should be repaid from the gaming account to the club account at the same rate as the depreciation. For example, if a new gaming machine is purchased for $10,000.00, and the machine is to be depreciated over five years using the straight line method, the $10,000.00 loan from the club account to the gaming account should be repaid over five years at $2,000.00 per year.
How do I know if the club is able to purchase new gambling equipment?
The club should calculate the additional depreciation amount that will be incurred in the first year and ensure that this additional cost does not result in the gaming machine profit (the authorised purpose percentage) falling below the minimum authorised purpose percentage specified in the club’s gaming licence.
How should the club fund the purchase of new gambling equipment?
The Department’s preference is for clubs to draw a cash equivalent of the depreciation and place this sum into a separate account. These funds can then be used for upgrading and replacing machines.
If new equipment is purchased and there are not funds available in the depreciation account to pay for the items, the club should loan the gaming account the money needed to purchase the items, and this loan should be repaid from the gaming account to the club account at the same rate as the depreciation. For example, if a new gaming machine is purchased for $10,000.00, and the machine is to be depreciated over five years using the straight line method, the $10,000.00 loan from the club account to the gaming account should be repaid over five years at $2,000.00 per year.
What rate should the club be depreciating its gaming items?
The straight line method is now the Department’s preferred method for determining depreciation on gaming machines, but the diminishing value method is also acceptable. New gaming machines should be depreciated over a period of no more than three to five years. Once a depreciation rate is selected, that rate should be applied consistently throughout the life of the asset. Gaming machine software (games) should be either expensed, or have a rate reflecting its short asset life (e.g., under two years). Obsolete machines should be written off at the earliest point in time, particularly where machines are not capable of being upgraded. All other assets should be depreciated at rates consistent with the Inland Revenue Department’s prescribed depreciation rates for income taxation purposes.
The Department’s preference is for clubs to draw a cash equivalent of the depreciation and place this sum into a separate account. These funds can then be used for upgrading and replacing machines.
What costs should be paid direct from the club’s gaming account?
The following costs/payments should be made direct from the club’s gaming account:
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- gaming licensing fees;
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- electronic monitoring fees;
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- gambling machine duty;
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- problem gambling levy; and
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- gaming machine service and repair costs.
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The following costs allocations/payments should be made direct from the club’s gaming account:
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- gambling equipment depreciation; and
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- authorised purpose allocations/distributions.
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Costs which are a combination of an authorised purpose, authorised gaming expense and a non-gaming cost (such as a club manager’s salary) should be paid out of the club account. The gaming apportionment should then be subsequently paid from the gaming account to the club account. Apportionment payments should be made by actual payments, not via setoff, in order to ensure there is a clear audit trail.
What items are allowed as an authorised purpose payment?
In order to make an authorised purpose allocation or payment, the authorised purpose must be specified in the club’s licence. It is therefore prudent for the authorised purpose statement in the club’s licence to be very wide and include “any charitable purpose and any non-commercial purpose that is beneficial to the whole or a section of the community”.
The following club items are an acceptable authorised purpose payment:
- a portion of the club’s staff wages (the portion that does not relate to bar work or gaming compliance duties);
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- general club administration costs, e.g., general maintenance and development of clubrooms and payments for running costs such as rates, insurance, electricity, gas, security, publicity, communication systems, stationery, computers, laundry and cleaning. The administration costs must exclude any bar area;
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- reasonable affiliation fees and capitation fees to national organisations;
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- club mortgage repayments, provided that the loan was not used to purchase commercial or investment property;
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- the purchase and maintenance of a club vehicle for use for the welfare of members, for assistance with sports participated in by members and for the provision of services to members (excluding any private use or use as a courtesy coach);
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- Anzac and Poppy day commemorations, provided that the provision of alcohol, food or entertainment is excluded;
- memorabilia, plaques and maintenance of an RSA cemetery;
- executive travel expenses for club conferences;
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- Sky TV at clubs; and
- sporting adjuncts within a bona fide club. This includes the costs of providing equipment and premises. The costs associated with travelling to compete in tournaments is also acceptable.
Can the club use its authorised purpose money to purchase or make grants for clothing?
Grants/authorised purpose payments for amateur teams’ playing uniforms or playing strips are considered acceptable by the Department. The Department expects that the club will retain ownership of the uniforms. If the item of clothing will in reality become owned by the individual and tend not to be handed back to the club at the end of the season, a grant should not be made for the item.
Grants/authorised purpose payments for the following items are not considered acceptable by the Department:
- dress uniforms;
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- jackets that are issued to individual players and then considered to be personal attire;
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- polo shirts and training tee shirts which are to be retained by the individual recipient;
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- warm-up and wet weather apparel;
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- sports bags issued to individuals;
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- footwear;
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- socks; and
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- promotional tee shirts for personal use which are to retained by the individual recipient.
How often should the club allocate its authorised purpose funds?
Clubs must apply or distribute its gaming machine profits to authorised purposes frequently so there is no accumulation of funds in the dedicated gaming account. Ideally authorised purpose funds should be allocated monthly, but three monthly is acceptable.
What are the net proceeds committee requirements?
The club must have a net proceeds committee. The net proceeds committee is responsible for allocating the gaming profits. The net proceeds committee must comprise of at least three persons. At least three of the net proceeds committee members must also fall within the definition of a club key person (executive members or senior management staff). The Department’s view is that three people need to vote on each decision. Four people are therefore needed if a person abstains due to a conflict.
Are the club’s staff allowed to play the gaming machines?
Club staff must not use or play unclaimed credits in any circumstances (including credits found that are less than $2.00).
Club staff must also never play the club’s gaming machines when the club is closed.
There is however, no other formal prohibition on club staff playing the club’s gaming machines. Any policy regarding club staff not being allowed to play the gaming machines, is a matter to be determined between the club and its staff as an employment term.
Can the club pay a prize to a non-member who is not signed in?
The Gambling Act 2003 does not prevent a club paying a prize to a member who is not signed in. A club is however, free to adopt a policy that it will not make prize payments to non-members who are not correctly signed in. Such a policy may only be enforced if there is clear signage advising players that payment will not be made to non-members who are not correctly signed in. If no such signage exists, payment must be made.
How many of the club’s staff need to have undertaken problem gambling awareness training?
Clubs must provide problem gambling awareness training to the venue manager and venue personnel. Venue personnel is defined as the persons who work at the club and whose work involves dealing with gambling equipment, gamblers, or the proceeds of gambling.
There must at all times be at least one person at the club who has undertaken harm minimisation training when the gaming machines are available for play.