NSW Registered Clubs and full Hotel Licences – Gaming and the Local Impact Assessment Scheme

Clubs and hotels are subject to an individual threshold on how many gaming machines they can lawfully operate pursuant to either gaming machine entitlements (GMEs) or, in the case of a hotel, GMEs and/or poker machine permits (PMPs). This is commonly referred to as their Gaming Machine Threshold (GMT) against which they can buy or lease GMEs or PMPs from other venues.

This means that each hotel or club in NSW has a GMT, and that for each gaming machine operated the venue must have a GME or PMP (in the case of a hotel).  A hotel’s GMT cannot exceed 30.

The 2001 Gaming Machines Act (GM Act) is the principal statute in NSW that regulates the gaming industry.  Its objectives are to:

  • minimise harm associated with the misuse and abuse of gambling activities,
  • foster responsible conduct in relation to gambling,
  • facilitate the balanced development, in the public interest, of the gaming industry,
  • ensure the integrity of the gaming industry,
  • provide for an on-going reduction in the number of gaming machines by means of the tradeable GME

The objectives are reached through the requirements set out in the GM Act and in the 2010 Gaming Machines Regulation. 

The requirements of a GMT increase application vary in different circumstances. The venue may or may not be required to complete a Local Impact Assessment (LIA) when applying for the GMT increase. The circumstances vary depending on the classification of the area (SA2) where the club/hotel is located, whether the GMT increase application will be accompanied by a simultaneous GME transfer application, and if so, where the additional GMEs are being acquired from. 

Where a LIA is required, there are two different classes which must be completed in different circumstances – Class 1 and Class 2.  For a Class 1 LIA to be approved, the applicant must demonstrate that the proposed increase to the GMT will provide a positive contribution to the local community, whereas a Class 2 LIA must demonstrate that the proposed increase to the GMT will have an overall positive impact on the local community.

For further details regarding what applies to your circumstances, please click on the link to the Liquor and Gaming’s flowchart. To further understand the process of a GMT increase application where a Class 1 LIA applies, look at this document also prepared by Liquor and Gaming. Full details of the recent reforms can also be found here.

For a hotel or club to increase its GMT it must submit a threshold increase application to Liquor and Gaming NSW. If a LIA is required, then it is also required to be lodged. The LIA will outline whether approving the application to increase a venue’s GMT will provide either a positive contribution to the local community or an overall positive impact on the local community (as the case may be).  

It is a new requirement that a licensee applying for a GMT increase must contribute to the Responsible Gambling Fund (a centralised fund for community contributions provided by venues seeking a GMT increase).  Liquor and Gaming advises that this contribution “makes the process more transparent and ensures donations provide the most worthwhile and effective harm minimisation benefits to local communities”.  The industry formula for establishing the contribution to the Responsible Gambling Fund is “15% of average profit of existing gaming machines before tax X GMT increase X 5 years”.   Where a venue does not have any trading history then Liquor and Gaming can be approached for an alternate method of determining the contribution.

Applicants should be aware that the NSW Government is committed to reducing the number of GMEs or PMPs. Therefore, it is not creating any new GMEs or PMPs. A licensee can buy them from another venue (i.e. a hotel licensee can purchase them from another hotel licensee and a club can purchase them from another club – a broker can be approached in the first instance). In certain circumstances, a lease arrangement can be formed. Transfer applications can attract compulsory forfeitures and therefore if you are considering purchasing any GMEs then it is imperative that you obtain sound legal advice. There is no forfeiture for the transfer of PMPs between hotels.

With respect to leasing requirements, small hotels and clubs (i.e. clubs with a GMT of up to 30, and hotels with a GMT of up to 10) can lease their machines. During the lease, the GMEs remain the property of the lessor venue but the lessee venue retains all revenue from their use. All leased GMEs are subject to the same requirements under the LIA scheme for the movement of GMEs. Venues can enter into leases for a fixed term of up to five years, with payments negotiated and agreed between the venues. The lessee remains responsible for paying all taxes and fees associated with operating the GME.  Further details of the scheme can be found here.

Back Schwartz Vaughan has extensive experience in gaming related matters and in preparing local impact assessments.  If you require our assistance with your application, then please do not hesitate to contact our office.

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