What are the requirements for gaming machine threshold increase applications?
When clubs and pubs wish to increase the number of gaming machines at their venues, they will usually need to apply for a gaming machine threshold increase.
Section 35 of the Gaming Machines Act sets out the requirements for gaming machine threshold increase applications and it specifies the circumstances in which a Local Impact Assessment (LIA) must be lodged with an application to increase the gaming machine threshold of a venue.
In general terms, a LIA is a report prepared by applicant clubs and pubs which assists the Independent Liquor & Gaming Authority (the Authority) in determining whether or not the granting of the application will provide a positive contribution to the local community (in the case of a Class 1 LIA) or have an overall positive impact on the local community (in the case of a Class 2 LIA).
The LIA process can involve applicant clubs and pubs incurring significant costs (time, effort and financial costs) and there is no guarantee that a LIA and gaming machine threshold increase application will be approved (particularly if one or more key stakeholders oppose the application).
A critical factor in determining whether or not a LIA is required to be lodged with a gaming machine threshold increase application is the banding of the local statistical area (LSA) in which the venue is located.
How does the banding work?
The Authority classifies LSAs into three (3) bands (Band 1, Band 2 and Band 3) based on the relative level of gaming risk in each LSA.
Band 1 LSAs are considered ‘low risk areas’, Band 2 LSAs are considered ‘medium risk areas’ and Band 3 LSAs are considered ‘high risk areas’.
As a general rule, it is easier to transfer gaming machine entitlements into venues located in Band 1 LSAs compared to Band 2 or 3 LSAs.
On 30 October 2023, the Authority updated the bandings of the LSAs and it has also stated that it will review and update the banding of the LSAs annually, commencing from October 2024.
How can I determine the banding of my venues?
On 4 November 2023, Liquor & Gaming NSW released an updated premises list for November 2023 on its website which sets out all of the clubs and pubs in New South Wales, their LSAs and whether or not they are located in Band 1, 2 or 3 LSAs.
Given the recent changes to the bandings of the LSAs, we recommend that clubs and pubs review the November 2023 premises list to determine the current banding of their venues and whether or not their venues are located in the same or different bands.
Although the bandings have been updated, the legislative framework for gaming machine threshold increase applications remains unchanged.
However, if the banding of a venue’s LSA has changed, the requirements which must be satisfied when applying for a gaming machine threshold increase may now be different.
What should clubs and pubs do if the banding of their venue’s LSA has changed?
The impact of the changes to the bandings will be different for each club and pub.
If the banding of a venue’s LSA has reduced (from example, the LSA has moved from a Band 2 LSA to a Band 1 LSA), it would now generally be easier to transfer gaming machine entitlements into the venue and the venue may not need to lodge a LIA to do so.
However, if there has been an increase to the banding of a venue’s LSA (for example, the LSA has moved from a Band 1 LSA to a Band 2 LSA), it would now generally be more difficult to transfer gaming machine entitlements into the venue.
For example, venues which have moved from being in a Band 1 LSA to a Band 2 LSA will no longer be able to apply for and obtain a gaming machine threshold of twenty (20) each year without having a LIA approved (unless an exemption applies).
For venues which are no longer situated in Band 3 LSAs, they will no longer be subject to ‘area caps’ which, in many cases, have restricted them from increasing the number of gaming machine entitlements at their venues.
Therefore, these changes may present opportunities for those venues to expand their gaming offering by acquiring additional gaming machine entitlements.
However, for venues which are now located in Band 3 LSAs, they may now be subject to ‘area caps’ and if this is the case, they will be unable to increase their gaming machine thresholds (unless an exemption applies).
For club and pub groups, the changes to the bandings may impact their venues differently.
Accordingly, those groups should review the changes to the bandings (including the effects on all of their venues) and then determine how the group’s gaming machine entitlements can be best allocated across the group’s venues.
In this regard, the changes to the bandings may make it easier for gaming machine entitlements to be transferred from poorer performing venues to better performing venues.
The changes to the bandings may also present greater opportunities for clubs and pubs to sell and purchase gaming machine entitlements.
For example, clubs and pubs located in Band 1 LSAs may wish to consider purchasing gaming machine entitlements in the next twelve (12) months, especially if they will not need to lodge a LIA with their gaming machine threshold increase application.
This is because Liquor & Gaming NSW will now review and update the bandings of the LSAs annually and as a result of this, there is a possible risk that the banding of their venue’s LSA could be reclassified as a Band 2 LSA in the future. If the venue is reclassified as a Band 2 LSA in the future, a LIA would need to be lodged with their gaming machine threshold increase application.
Furthermore, the recent changes to the bandings of the LSA may result in venues becoming more attractive to third parties from a hotel acquisition or club amalgamation perspective.
Gaming machine entitlements are important business assets and the changes to the bandings will affect all pubs and clubs differently. It is important that clubs and pubs obtain advice on these changes which is relevant to, and addresses, their individual circumstances.
Our team advises clubs and pubs on a broad range of gaming matters and we can assist clubs and pubs with determining the bandings of their venues, analysing the effects of the changes on their venues and developing strategies which best address the challenges and opportunities presented by these changes.
Our team can also assist with the sale and purchase of gaming machine entitlements, including the preparation of the necessary contracts, application forms, LIAs and gaming plans of management as well as managing the application process generally.
This article was written by Brendon Noney, Partner and Michael McCluskey, Special Counsel.