Diversifying Revenue and Assets for Clubs

Earlier this year the ACT Government announced financial and non-financial incentives for gaming machine licensees that take up the option to voluntarily surrender Gaming Machine Authorisations and Authorisation Certificates.  These incentives are offered to support clubs’ ongoing operations and to assist in reducing clubs’ reliance on Gaming Machine revenue. The ACT Government wanted to reduce the number of machines in the territory to 4000 by 2020. As part of the voluntary surrender regime in January and February this year ACT clubs and hotels had voluntarily surrendered 934 machine authorisations, leading to a total of 4012 machine authorisations left in the territory.

Given the numbers, it is clear that most (if not all) Clubs took part in that voluntary surrender regime and have received a range of benefits including cash incentives and offset amounts for fees, charges and other amounts that are usually imposed by the ACT Government. Offset amounts can be claimed to reduce or eliminate fees owing for Lease Variation Charges, deconcessionalisation payout amounts, and other Government land, lease and planning and development fees and charges; these offsets can be claimed anytime up to 31 March 2026.

It is these offset amounts that present a significant opportunity for clubs to repurpose and redevelop their land; allowing clubs to create a strong, sustainable, and diverse income streams (and one which is not heavily reliant on gaming machine revenue).

Land redevelopment presents a great opportunity for clubs to fully maximise the potential of their assets and better engage with current community needs. While the development application and consequent use of the offset would still be contingent on normal Government planning approval processes being completed, with the offset amounts clubs now have new strategies available to them to create a strong community focused sector.

The windfall granted to many clubs who surrendered licences, in the form of either direct financial incentives or future offsets, may allow them to pursue redevelopment on their own account, rather than through ground leases to third party developers. Obtaining financing represents an (often insurmountable) hurdle for many clubs, which may become more difficult still in light of the more stringent lending policies being pursued by financial institutions in light of last year’s Banking Royal Commission. This may be ameliorated to some extent by the significant planning offsets granted to licence-forfeiting clubs over the coming years, as well as the immediate incentive payments.

Not only would such redevelopment generate new and ongoing revenue for clubs shifting away from a reliance on gaming, it may allow those who have retained gaming machines to more easily meet their obligations under the revised Gaming Machine Regulation 2004, due to come into force on 1 July 2019. The amended Regulations make clear that clubs can fulfil their compulsory ‘community purpose contributions’ through the maintenance of recreation and sporting facilities available to the public.

Of course, there’s no one size fits all approach to land redevelopment, nor is it going to be feasible or appropriate for all clubs. Clubs should think carefully and seek proper financial and legal advice before jumping headlong into what can be a very significant undertaking. However, given the opportunity presented by the incentives provided to the clubs by the ACT Government, as well as a renewed emphasis on the principles underpinning the community-based gaming model, it is certainly worth considering whether now might be the right time to pursue a new direction.

If you or your club are thinking about pursuing development of its assets or want to know more about current developments in the regulation of the gaming industry, please feel free to get in contact with the Business team.