In News & Releases by Clyde Mooney

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Liquor & Gaming NSW has announced approval of the “most significant changes to gambling regulation for a decade” bringing lease options to small venues, and tighter LIA controls to communities.

Following extensive community and industry consultation, the NSW Government introduced changes to liquor and gaming legislation, through Bills passed by Parliament on 15 March.

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The new legislation includes reforms to the Local Impact Assessment (LIA) scheme, which regulates the movement of gaming machines, and caps their numbers in local communities deemed higher-risk; the regulator reports around 20 per cent of NSW can no longer receive additional machines.

LIA assessments will now be more focused, using the smaller ABS statistical zones known as SA2s, ranked according to the likely risk of gambling-related harm in the community. The smaller boundaries allow the Independent Liquor & Gaming Authority (ILGA) to more accurately understand the impact of additional gaming machines on communities.

The LIA process will now incorporate longer periods of community consultation, and the mandated community contributions will be channelled through the ‘Responsible Gambling Fund’ (RGF), to be spent locally.

Another change with broad potential impact is the introduction of a scheme allowing small hotels and clubs to lease gaming machines to other (in kind) venues, as an alternative to selling them.

Under the leasing scheme, leases can be for fixed terms up to five years. While payment terms are negotiated and agreed between the venues, the cost of the lease must be fixed. It cannot be a portion of revenue.

The gaming machine entitlements (GMEs) remain the property of the lessor venue, but the lessee venue gets all revenue from their use and pays all taxes and fees associated with operation.

The scheme is limited to small venues – up to 10 GMEs for hotels, and up to 30 for clubs – and all potential leases will be subject to LIA conditions. Lessees in high-risk areas cannot lease entitlements from venues in lower risk areas.

And all lessee venues will be required to contribute an additional levy of five per cent of lease payments to the RGF.

The leasing scheme follows another recent change to the system, allowing regional pubs to sell blocks of GMEs to metro areas without the traditional one-in-three forfeiture, although divesting the entitlements does mean the loss of underlying value in the business.

Pub specialist Manenti Quinlan report considerable interest from regional pubs in selling entitlements outright, when each year they can now get around a million dollars selling off the two blocks allowed.

“When they’re only making fifty grand a year on their pokies, it would take them 20 years to get that, so they say ‘may as well get rid of my pokies’,” says MQ’s Leonard Bongiovanni.

At the other end of the transaction, the recent reassessment of LGAs has made a number of metro areas formerly under the highest restriction of Band 3 classification, into Band 2 and 1 areas, providing a strong market for the regional venues.

By contrast, any market for the leasing scheme will need to establish a sustainable cost for each lease, based on the as-yet unestablished value of renting an entitlement versus buying one, and considering that the lessee must also spend around $30k on a machine.

“People have been saying 10-15 per cent of the entitlement value, but when you get to a certain level, you might as well have bought it,” offers Bongiovanni.

Liquor & Gaming also announced the passing of a tenfold increase in fines for wagering operators offering illegal inducements, and “modernised regulation” for casinos that is consistent between The Star and Crown Sydney.

And in the newly gentrified Kings Cross, venues are still required to operate ID scanners, but will now be able to share information collected with each other.