New Poker Machine (EGM) rates about to hit

With effect from 1 April 2014 (just less than two months away), the amount of tax payable on gambling revenue generated by pubs and clubs with poker machines / electronic gaming machines (EGMs) in Victoria is due to increase by 4.2%. This increase in taxation will be, in part, offset by the cost of gambling to the general public by the reduction in the minimum return to player from 87% to 85%. This 85% return is equivalent to those received by gamblers in New South Wales and Queensland.

At the bottom of this thread is a comparision between the existing rates and those soon to come into effect.

The increase in this tax should not be a surprise to anyone and I speculate that this is likely to be a function of the State’s desire to increase revenue (more generally) and an attempt to recover some of the money that the State should have received in the first instance from the less that successful auction of the EGM licences. (Almost by way of footnote is that I read both Tatts and Tabcorp are seeking damanges from the Victorian government collectively of $1.2bn as a result of their loss several years ago of the poker machine duopoly)

Whilst many gaming operators will be able to take this hit to bottom line in their stride, there will be those operators who may struggle due to a variety of factors. One of these is likely to be that, notwithstanding that many operators purchased licences very cheaply in the EGM auction, some overpaid for these very same licences. Another is that often a venue will increase its expenditure following a sustained period of revenue growth and that upon a reduction of that income, find it difficult to curb that expenditure to which it has now committed.

Those operators sailing close to the wind or who may be under the microscope by the financiers ought to ensure that their future forecasts have adjusted for this increase in taxation and modify the activities of their venues accordingly. Based upon my experience from undertaking financial and operation reviews of these operations in the past, many will fail to forecast at all whilst others will fail to act on these forecasts appropriately.

Current EGM tax rates
Club venue operators
Tax is a function of monthly average-per-EGM player loss.
For that part of the monthly average player loss which:
• Does not exceed $2 666, the tax rate is 0.00%.
• Exceeds $2 666 but does not exceed $12 500, the tax rate is 42.5%.
• Exceeds $12 500, the tax rate is 50.00%.

Hotel venue operators
Tax is a function of monthly average-per-EGM player loss.
For that part of the monthly average player loss which:
• Does not exceed $2 666, the tax rate is 8.33%.
• Exceeds $2 666 but does not exceed $12 500, the tax rate is 50.83%.
• Exceeds $12 500, the tax rate is 58.33%.

New EGM tax rates
Club venue operators
Tax is a function of monthly average-per-EGM player loss.
For that part of the monthly average player loss which:
• Does not exceed $2 666, the tax rate is 0.00%.
• Exceeds $2 666 but does not exceed $12 500, the tax rate is 46.7%.
• Exceeds $12 500, the tax rate is 54.20%.

Hotel venue operators
Tax is a function of monthly average-per-EGM player loss.
For that part of the monthly average player loss which:
• Does not exceed $2 666, the tax rate is 8.33%.
• Exceeds $2 666 but does not exceed $12 500, the tax rate is 55.03%.
• Exceeds $12 500, the tax rate is 62.53%.

Advertisement