This article originally appeared in Club Insight magazine, Issue Four – August September 2018
There are many differences between the Operating Authority and Gaming Entitlement regime for hotels and clubs, and these differences create a number of benefits for club owners in helping to provide a first-class gaming operation for members.
Tender process – Operating Authorities
Hotel licensees can only sell or buy Operating Authorities for hotels by participating in the tender conducted by the Public Trustee. These tenders generally occur three to four times a year, and the parties who are eligible to bid are invited to tender by the Public Trustee for specific numbers of Operating Authorities that exist within the South-East, Coastal, and Western geographic pools in Queensland.
The latest tender has recently been called by the Public Trustee, and with the average price of operating authorities in the South-East pool increasing from $87,058 in August 2015 to $160,085 in April 2018 while the Coastal and Western pools have stayed relatively constant, it will be interesting to see how this tender unfolds.
Tender process – Gaming Entitlements
While a competitive tender is also run for Gaming Entitlements by the Public Trustee, this process differs from that for Operating Authorities in that the Gaming Entitlements sold are those of the State. In Gaming Entitlement tenders, the State receives all proceeds from the sales, rather than for Operating Authorities, which are sold on behalf of the entities which have surrendered these to the pool, who then pay a percentage of 33% of the sale price back to the State.
In comparing the results of the different tenders, we’ve seen that there are different market forces at play, and while the average price for Gaming Entitlements has also increased over recent tenders, it remains significantly below the prices for Operating Authorities, at an average price of $5,363 at the September 2017 tender.
This substantial price difference makes it easier for clubs to increase their gaming operation at a lower price to their hotel counterparts, and combined with the higher cap on Gaming Entitlements for community club licences compared to commercial hotel licences, there is a tangible advantage for clubs in this space.
Transfer of Gaming Entitlements between clubs
In addition to the tender process, clubs may also transfer Gaming Entitlements between themselves on either a temporary or permanent basis, provided that the approved number of entitlements for a club is not exceeded.
For a temporary transfer, each club must hold a current gaming machine licence, and the transferring club must have no more than 30 approved gaming machines, and may only transfer entitlements provided that it has been at least three years since the grant of its gaming machine licence or any approvals for additional entitlements. A club may receive temporary transfers of Gaming Entitlements from multiple transferors at the same time, however a transferring club may only be a party to one such agreement at a time. These transfers may be made for a term of between one and eight years.
Additionally, clubs may transfer Gaming Entitlements to another club on a permanent basis for monetary consideration agreed between the parties, provided that this consideration does not represent a direct or indirect share in any revenue generated from gaming activities.
Should you be considering the purchase of Gaming Entitlements for your club through any of these avenues, it is important to ensure your club has the appropriate approvals from the Office of Liquor and Gaming Regulation, and that you have also considered your transfer duty position in relation to these purchases.
We have assisted many clients with this process and are happy to guide you through the steps required, so if you would like to discuss your club’s gaming options, please contact our team.