‘Simply no justification’: Richest clubs get the biggest tax breaks

A few dozen casino-style clubs received nearly $500 million in gambling tax concessions last year that the government might otherwise have spent on hospitals, schools and transport, budget papers reveal.

Budget papers handed down on Tuesday showed for the first time that the top 5 per cent of NSW clubs received the lion’s share of $1 billion in gambling tax concessions given to clubs in 2022-23, in what is expected to precipitate a shake-up of their lenient tax rates.

Some clubs derive up to 80 per cent of their revenue from poker machines.Credit: Jason South

NSW Treasurer Daniel Mookhey declined to comment on the analysis, or the decision to include it in the budget papers. The government is currently reviewing taxation arrangements for clubs as part of its inquiry into the ClubGRANTS program.

NSW residents forewent $964 million in taxes in the 2023-24 financial year as a result of the gambling concession granted to clubs, and are expected to miss out on just over a billion dollars in 2024-25.

Former Treasury official Betty Con Walker said the cost to the government of the tax concession to clubs now exceeded the amount of tax collected from them.

“It is no surprise that the club industry is now dominated by casino-sized clubs, unrecognisable from the original mutual clubs,” said Con Walker, whose 2009 book Casino Clubs NSW tracked the evolution of giant clubs as a result of favourable government policies.

NSW Treasurer Daniel Mookhey handed down the state budget this week.Credit: Dominic Lorrimer

The concession was originally introduced to recognise the clubs’ status as “mutuals”, which were run by volunteers to benefit the community. But small, genuinely mutual clubs paid no tax and this rationale no longer applied, she said.

“There is now simply no justification for such a loss of revenue of over $1 billion per year from the state budget.”

Clubs do not pay any tax on annual gambling profits under $1 million, whereas hotels start paying tax when their profits hit $200,000. The maximum tax rate for clubs is 28.4 per cent on gambling profits over $20 million, while hotels pay 50 per cent on gambling profits over $5 million.

The budget analysis showed that the five per cent of clubs that made more than $20 million in profit last year enjoyed 50 per cent of the gambling tax benefit, or about $485 million in concessions. The next 15 per cent of clubs pocketed 30 per cent of the benefit.

About half of all clubs shared less than 5 per cent of the value of the concession. The analysis did not include the breakdown for previous years.

The budget documents did not name the clubs.

Liquor and Gaming NSW previously identified the top 10 clubs by gaming machine net profit in the second half of 2023 as Mounties in Liverpool, Bankstown Sports Club, Wentworthville Leagues Club, Dooleys Lidcombe Catholic Club, Canterbury League Club, Cabra-Vale Ex-Active Serviceman’s Club, WestsHQ in Rooty Hill, Liverpool Catholic Club, Revesby Workers Club and Western Suburbs Leagues Club in Campbelltown.

Mounties said in a statement that as the state’s largest club group, it was one of the largest contributors to gambling taxation.

Poker machines at Bankstown Sports Club.Credit: Janie Barrett

“We pay more tax than casinos, with profits being reinvested into the local community as opposed to shareholders, proprietors or foreign-owned entities.”

Registered clubs can also get a tax rebate if they direct a proportion of their gambling profits to community groups, under the ClubGRANTS scheme. The value of this concession will hit $77 million in 2024-25.

Independent MP Alex Greenwich said the ClubGRANTS scheme gave clubs a “dodgy” tax offset that could be used to benefit the clubs themselves, and tax reform was needed.

“Any efforts to further tax the profits raised on the back of causing gambling harm and redirect them to harm minimisation are very welcome,” he said.

Mounties in Liverpool, Bankstown Sports Club, Wentworthville Leagues Club and Dooleys Lidcombe. Credit: Google Street View

Peak body ClubsNSW said in a statement that 40 clubs in NSW had a higher tax rate than the casinos since Star was granted its latest tax relief. But unlike other hospitality venues, they were owned by the community with profits going back to the community or towards the upgrade of members’ facilities.

“As such, the tax concession for clubs is entirely appropriate,” the statement said.

Gambling tax revenue from clubs and hotels combined is forecast to be $3.5 billion in 2023-24, and it is growing faster than expected due to increased gaming activity. The government revised its forecast gambling revenue over the four years to 2027-28 upwards by $359.2 million in the budget papers.

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