The Department of Internal Affairs

Te Tari Taiwhenua | Department of Internal Affairs

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Services › Casino and Non-Casino Gaming › Venue Payments System

Overview of regulations
Frequently Asked Questions

The Government has agreed to a new payments system for venues hosting pokie machines in bars and pubs.

The new system will come into force on Monday 3 October 2016. The Department will be reporting back to Cabinet with proposed regulations in August.

In the lead up to 3 October, the Department is working on the implementation of the new system to ensure a smooth transition process.

Guidelines on the implementation of Gambling (Venue Payments) Regulations 2016

These guidelines are intended to provide information to assist Class 4 societies to implement commission-based payments and comply with the regulations. Representatives of the Class 4 gambling sector worked with the Department in developing the policy framework for commission-based payments and this sector guidance.

Overview of regulations

R1-4 preliminary provisions.

R2 provides that the regulations come into force at 2am on 3 October 2016. The commencement time has been set to coincide with the weekly banking calculations and EMS requirements.

R5 provides that societies may only pay venues in accordance with the regulations. No other payments are permitted. Societies and venues can agree between themselves matters such as whether payments are made, and the amount (up to the maximum of 1.28% of weekly turnover), time and frequency of payments. You would normally do this by way of your venue agreements.

R6 provides that a society must not pay a venue more than 1.28% of weekly turnover for any given week. Weekly turnover is as reported by EMS. If EMS is unavailable or is unreliable because of a fault, a society may calculate turnover using another reliable method. If you do this you must keep a record of the calculation.

R7 provides that a society must not pay a venue more than 16% of GMP (exclusive of GST) in a financial year. This cap is in addition to the weekly cap of 1.28% of turnover. Note that the regulations refer to “turnover (exclusive of prizes and GST)” this is the same as GMP exclusive of GST.

Note that the 16% cap is per venue, it does not apply across all of the society’s venues as it does now. No venue can receive more than 16% of GMP (ex GST) in any financial year.

R8 applies to situations where a venue leaves a society part way through a financial year (e.g. it transfers to another society or closes down). In these situations, a society must not pay more than 16% of GMP (ex GST) for the period of that financial year that the venue was with the society.

R9 provides that venue managers are required to bank all gaming machine profits in accordance with the Act and regulations. The new payment system does not impact on the current banking practice, i.e. venues must not deduct the amount of their weekly payment before banking the rest.

The transitional provision makes it clear that any costs incurred under a venue costs schedule before the commencement of the new system may be reimbursed despite the new regulations. This means that if a venue has incurred costs under its venue costs schedule in the week before 3 October, but they have not yet been reimbursed, they can still be paid even though the new system has come into effect.

Frequently Asked Questions – updated 2 September 2016

The following FAQs are designed to provide information that we can currently confirm about the new system and what the sector needs to be aware of.

These will be updated as we prepare for implementation and updates will be provided through Gambits.

How does this work?

Societies will need to agree a payment regime with their venues. The current system of venue costs schedules will no longer apply.

Societies must ensure that no venue is paid more than 16% of GMP (ex GST) in a financial year. This effectively operates as an annual cap on venue payments.

Why is the weekly commission rate based on turnover and not GMP?

The decision to use weekly turnover instead of GMP is partly because turnover is less volatile week by week and partly because turnover is less likely to be manipulated by altering the return to player. This means that turnover better reflects the level of play at a venue making it fairer, more transparent and a better reflection of the actual workload at the venue.

How do the two limits work?

The two limits work together to provide a maximum weekly payment coupled with an annual cap. You cannot pay a venue more than 1.28% of turnover for any given week. In addition, you cannot pay more than 16% of GMP (ex GST) per venue in any financial year.

Modelling suggests that for many venues 1.28% of turnover will come out very close to 16% of GMP (ex GST) on an annual basis. However, it is possible that you could pay a venue 1.28% of turnover every week and at end of the year be over the annual cap of 16% of GMP (ex GST). This would be a breach of the regulations.

This sounds complicated – how do I manage both caps?

We will be working with the Class 4 Working Group to develop guidance for societies on how best to manage the two caps. In the meantime please send in your questions so we can make sure that guidance covers the right areas.

Ultimately, societies are responsible for managing the venue payments in accordance with the regulations and ensuring that they do not breach either of the limits.

What if I’ve paid 1.28% turnover every week and at the end of the year I am under 16% GMP? Can I make a top-up payment to bring it up to the 16%?

You must not exceed either limit. If you have been paying a venue the maximum weekly amount throughout the year you cannot pay that venue any more at the end of the year even if the total payments are less than 16% of GMP (ex GST).

However, if you have been paying a venue less than 1.28% throughout the year and your annual total is less than 16% GMP (ex GST) you can make a final top-up payment so long as it doesn’t exceed either 1.28% of total turnover or 16% of GMP (ex GST).

What information will I get to calculate the payments?

An EMS report will be provided that will include a calculation of 1.28% of turnover and 16% of GMP (ex GST) each week. This will give you the maximum allowed payment for the week.

Do I have to pay 1.28% of turnover each week?

No. The figure of 1.28% is a maximum; it is not mandatory. You can agree a lower weekly rate with your venues if you wish. You can also agree with your venues a different basis of payment (e.g. a weekly flat rate) provided the payment for any given week does not exceed 1.28% of turnover for that week.

What does this mean for my payments? Will I get the same amount as before?

Our modelling suggests that many venues will receive roughly the same annual totals as under the current ARN scheme but some venues will receive more and some will receive less. The amount a particular venue receives in a year will depend on its annual turnover and GMP. Venues may want to talk to their society about the likely impact of the change.

How does GST apply?

To calculate how much you should pay a venue for a given week you need to take the weekly turnover and calculate the agreed percentage commission. You then add GST to the calculated payment amount.

At the end of the financial year the Department will check the annual total of the payments (exclusive of GST) against the limits of 1.28% of turnover and 16% of GMP (ex GST).

How will venue transfers/closures work?

The regulations provide for part-year calculations. If a venue closes or transfers to another society part-way through a financial year, the society must ensure that any payments that have been made for the period do not exceed 16% of GMP (exclusive of GST) for the relevant period. If the venue has transferred to another society, each society must ensure that they do not exceed 16% of GMP (ex GST) for the period that the venue is with the society.

For example:
A venue is with Society A from 1 January to 31 May and then transfers to society B from 1 June to 31 December. Both societies have a financial year from 1 January to 31 December.

Society A must calculate GMP for 1 Jan – 31 May and ensure that it has not paid the venue more than 16% of GMP (ex GST) for that period. Society B must calculate GMP for the period 1 Jun-31 Dec and ensure that it does not pay the venue more than 16% of that figure.

Both societies must also ensure that they do not pay more than 1.28% of turnover for any week.

How does this affect our harm minimisation requirements?

It doesn’t. The change to the new payment system has no effect on venues’ obligations in terms of harm minimisation. Harm minimisation will continue to be a focus of the Department’s compliance effort. We expect operators to act in good faith and in the best interests of harm minimisation at all times.

Will there be more information about how to implement this?

Yes. We will be providing more information between now and 3 October, including more detailed guidance on how to operate the new venue payment system.

What do I need to do about this?

Nothing right now. The new payments system will come into force in early October. Between now and then we will be working with societies to identify any transitional issues and develop some resources to help you with implementation.

Will we get any help to implement the new system? How will I calculate the payments to venues?

We will be working with societies to help them with implementation and work out what information they need in advance of the new system. In the meantime please send us your questions so we know what information and help you need.

Do I have to change all the venue agreements?

Not immediately. The Act provides that when the new system comes into force existing venue agreements (so long as they are current and have not expired) will be deemed to comply with the new regulations. You can change your venue agreements as licences come up for renewal or you can do them earlier if you prefer.

When do I have to start paying under the new system?

The regulations will come into force on 3 October 2016. From 3 October you will need to start paying under the new system.

What happens to any venue expenses that haven’t been paid when the new system starts? Will there be a transition period?

The regulations have a transitional provision that says that a society may reimburse costs incurred by a venue operator before the regulations come into force as if the regulations were not in force. This means that you can still pay your venues for expenses incurred but not reimbursed as at 3 October (for example, expenses for the week beginning 26 September).

What about DEM costs that haven’t been fully reimbursed?

The transitional provision also applies to outstanding DEM reimbursements.
DEM reimbursements can continue after 3 October, but only in situations where the outstanding DEM costs have been approved and incurred before 3 October.
Because the existing weekly Gazette notice limits will no longer apply from 3 October, societies will be able to repay any remaining DEM costs in a lump sum or continue their existing repayment arrangements as agreed with the venue.
Note that any DEM costs incurred between now and 3 October remain subject to the requirement that they be actual, reasonable and necessary. We will continue to assess venue cost schedules and DEM costs to ensure that they meet that test.

What is the situation with air conditioning? I’ve heard that the position has changed.

The Department agrees that air conditioning is a necessary part of the gambling space and the purchase of air conditioning units for the gambling space is a society administrative cost. Note that societies can pay only for air conditioning for the venue’s gambling space; air conditioning for the rest of the venue is the responsibility of the venue operator.

How does the new system affect clubs?

The new system does not affect clubs that have machines on their own premises.

Although the regulations do not explicitly say that clubs are excluded, R5(1) says:
      Corporate societies may make payments to venue operators for any matters only in accordance with the Act and these regulations.

The term venue operators is defined in the Gambling Act as:
      The occupier of a Class 4 venue for which the licence application was required under section 65(3) to be accompanied by a Class 4 venue agreement where the occupier owns the primary business at the venue.
Section 65(3) provides that a venue agreement is required unless the Secretary is satisfied that:
      The applicant is a club that intends to operate gambling equipment at a non-commercial Class 4 venue that—
      • It owns or leases; and
      • Is mainly for the use of club members.
All of these sections together make it clear that the venue payment regulations do not apply to clubs that have gaming machines on their premises as they do not operate under a venue agreement.

However, if a club has gaming machines in a commercial venue and they have a venue agreement with that venue operator, the regulations do apply in respect of that venue and the club must make sure that any payments made to the venue operator comply with the regulations.

Where do I get more information?

Information will be issued in Gambits updates as we work through various issues. You can also contact us with specific questions that you would like answered.

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