We are now in the closing quarter of the Queensland Government's 12-month trial of the reduced fee on sale (for sellers) on the sale of gaming machine authorities. In this article, we look back on the initiative and provide an update on the trial.
What are the government's trial initiatives?
From 1 July 2022 to 30 June 2023, the government has reduced the percentage of sale proceeds to be paid to the consolidated fund, from 33 per cent to 15 per cent, by way of an amendment to the Gaming Machine Regulation 2002. This reduction could make a significant difference to a selling licensee, particularly where the licensee sells multiple operating authorities in a tender sale. The government has stated in its explanatory memorandum that the intention of the reduction is to incentivise commercial hotel licensees to offer unwanted operating authorities into the tender process.
As part of this initiative, the government has also introduced a minimum acceptable price (calculated by the government) for tendered operating authorities. This minimum acceptable price will fluctuate across the year as they are based on the weighted average of previous tender results. However, the position remains that the successful tenderer(s) will always be those that offer the highest sum. Publication of the minimum acceptable price will provide certainty for licensees who are considering selling operating authorities.
What are the current requirements?
To operate gaming (poker) machines in a hotel, the licensee must have a statutory 'operating authority' attached to its Gaming Machine Licence for every gaming machine on the floor of its gaming room. The maximum number of operating authorities a commercial licensee (pub) may hold is 45. In other words, no pub in Queensland can have more than 45 operating gaming machines.
If a licensee wants to reduce the number of its operating authorities, it must apply to sell the desired number at a government-run competitive tender sale conducted by the Public Trustee. These tender sales typically occur three to four times per year. Each tenderer must nominate a single price it is willing to pay per operating authority and the number of operating authorities that it is seeking.
Currently, a licensee cannot sell privately operating authorities on the open market – they must only be sold via the government's tender sale. A licensee also cannot 'transfer' operating authorities to other premises owned by the licensee.
There might be several reasons why a licensee would want to reduce its number of operating authorities. First, the returns earned from the gaming aspect of the business might no longer justify the number of machines. Second, the licensee might want to liquidate some operating authorities to fund capital works to the premises or provide new types of facilities. For example, in the tender sale conducted in January 2023, the average sale price achieved for operating authorities in the southeast region was $384,057.14 (i.e. the average price for a single operating authority). Therefore, the proceeds from the sale of any number of operating authorities will be a significant cash injection for any business.
However, upon sale, the government collects a portion of the sale proceeds and pays them into the consolidated fund. For many years, the percentage of the sale proceeds taken by the government has been set at 33 per cent under the Gaming Machine Regulation.
Where to from here?
When the trial period (on 30 June 2023) ends, Queensland Treasury will undertake an internal evaluation of the effect of the reduced rate on the sale of operating authorities. While the result of that review cannot be predicted, if the trial achieves the government's intention of incentivising the sale of unwanted operating authorities so that they can be used more optimally elsewhere, then it might be the case that a reduction in the portion of the fee on sale (either to the trial rate of 15 per cent or another rate) becomes permanent.
The final tender for this financial year will occur in mid-April. Overall sales results for the year can then be assessed.
How can we help?
If you are a licensee unfamiliar with the tender process and wish to sell or purchase operating authorities, we can assist you in preparing the necessary tender documents.
Additionally, we have considerable experience in acting for clients in transactions involving the purchase and sale of licensed premises in Queensland, and in providing advice on the complex workings of Queensland's liquor and gaming legislation.
If you are an existing licensee or are from interstate and are considering entering the Queensland market, please contact us below so we can discuss how we can assist you.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
