The Department of Internal Affairs

The Department of Internal Affairs

Te Tari Taiwhenua

Building a safe, prosperous and respected nation

 

Gambling Act rules: How much should pubs be paid to host gaming machines?


2/9/2004
Limits on how much pubs can be paid to host gaming machines were announced today.

The Director of the Department of Internal Affairs’ Gaming and Censorship Regulation Group, Keith Manch, said that the limits set under the Gambling Act are considerably more sophisticated than the licence conditions the Department used under the now repealed Gaming and Lotteries Act.

The new system allows different venues to be paid different amounts to reflect their true costs and includes four parts:

  • hourly operating costs of up to 60 cents per machine per hour
  • weekly operating costs of up to $75 per machine per week
  • venue operating costs of up to $800 per venue per week
  • a cap of 16% on the total amount that each gaming machine society can pay in expenses to its venues (societies’ own costs are additional to the 16%).

    The 16% cap is the most significant change from the previous system, which had no total limit. Based on estimates of 2004 gaming machine profits, the 16% limit would have reduced what pubs were paid to host the country’s 22,000 gaming machines to no more than $130 million that year.

    “During consultation, some gambling operators strongly opposed limits on venue expenses claiming that if they could not pay pubs as much as they wanted, then pubs would no longer host gaming machines,” Mr Manch said.
    “At the same time, some community groups were extremely concerned that many millions of dollars raised for the community were, instead, going to pub owners.

    “The new system is informed by submissions from the sector and the community and an independent accounting report we commissioned on the sector’s operating costs. It recognises that pubs incur costs for hosting gaming machines, will ensure that pubs will get fair payment for their work, and allows them to make some profit.

    “However, the total payment will be lower than before, and the proportion of gaming machine profits going to pubs will be reduced from about 20% to no more than 16%.”

    The limits on hourly, weekly and venue costs will be in force from December 1 this year. The 16% limit on payments to pubs will be in force from 1 December 2005.

    Summary of the gaming machine sector

    Gaming machines in pubs and clubs are licensed as a form of community fund raising only. The licences can only be held by what the Act calls “corporate societies”.

    Clubs can own their own machines at their own clubrooms and keep the profits. In contrast, machines in pubs are generally owned by non-club corporate societies, which return the profit from the machines to the wider community. Non-club corporate societies must:
  • maximise their returns to the community (if a society returns less than 33% the Department can cancel or suspend its licence)
  • pay 33% in taxes and levies
  • pay their own and the pubs’ expenses related to operating gaming machines.

    Gambling operators’ approximate gross profits from gaming machines in pubs and clubs to June 30:
  • 2002, $777 million (pubs $622 million, clubs $155 million)
  • 2003, $941 million (pubs $753 million, clubs $188 million)
  • 2004, estimated more than $1 billion (pubs $800 million, clubs $200 million)

    Venue expenses paid to pubs increased from 15.2% ($44 million) of gross profit in 1999 to 19.7% ($148 million) of gross profit in 2003

    Copies of limits available on www.dia.govt.nz
    Full text copies of the limits were published in the New Zealand Gazette today and are available here on the Department’s website: Venue Expenses

    This media release is a summary of the limits only and gambling sector organisations are advised to read the Gazette notice and accompanying material in full. This media release is not a substitute for independent, professional legal or financial advice.

    Media contacts:

    Keith Manch
    Director Gaming and Censorship Regulation Phone 04 495 9449, Cellular 027 445 6420

    Savaia Stevenson

    Communications Coordinator Phone 04 495 9337, Cellular 027 290 4954