Review of the Registered Clubs Industry in NSW - Clubs NSW

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2 The registered clubs industry in NSW These elements reflect, in part, the historical development of the clubs industry, as discussed in section 2.1. IPART notes that the extent to which clubs pursue these functions has contributed to a wide range of clubs operating within the industry. At one end of the spectrum are small, volunteer-run clubs, with little or no revenue from gaming machines. These clubs are often centred on specifically pursuing a particular social purpose, such as providing sporting facilities or a meeting place for members sharing a common cultural link. At the other end are large, more commercially-run enterprises, with a large number of gaming machines, many members and a significant number of visitors, as well as diversified business segments. While these clubs still exist to pursue social outcomes, differentiation from for-profit commercial businesses is more difficult. IPART notes the argument made by ClubsNSW that registering a club provides a means of entrenching the essential rules that underpin the democratic, not-for-profit operation of clubs and also the strict probity requirement that ensures member interests are protected. 21 These rules are captured through the requirements in section 10 of the Registered Clubs Act and must be met before the certificate of registration is issued and also on an ongoing basis to ensure that the club is not deregistered or another penalty imposed. The following elements serve these purposes: The club must be conducted in good faith as a club. It must demonstrate, typically through its articles of association/club constitution, that it is a body or association of persons that pursue a common purpose (social, literary, political, sporting or athletic purposes or for any other lawful purposes). Clubs must be incorporated under the Corporations Act. No member of the club is permitted to receive any profit, benefit or advantage from the club that is not offered fully to every other member of the club. While the club is allowed to provide liquor to its members, this must be done in a safe, controlled environment. Additionally, no employee or director of the club is allowed to receive payment based on the amount of liquor sold or by any reference to the operation of gaming machines by the club. The club must keep correct accounts and books in respect of the financial affairs of the club. These must be available to members such that they can monitor the performance of the club in a similar way to that of shareholders in a publicly listed company. Senior employees and directors of clubs must comply with a strict set of accountability requirements. These requirements ensure that the club is operated with the best interests of the club members in mind. The club must have premises of which it is the bona fide occupier for the purposes of the club and which are provided and maintained from the funds of the club. 21 ClubsNSW submission, 31 July 2007, p 21. 36 IPART Review of the Registered Clubs Industry in NSW
2 The registered clubs industry in NSW Further information on the process for establishing a registered club is contained in Chapter 12. 2.4.2 Democratic entities Another distinguishing feature of registered clubs is their democratic nature. Registered clubs are controlled by a Board of Directors that sets the strategy and direction of the club. These directors are elected from the members and, under the Corporations Act, have duties of care, diligence and good faith to act in the best interests of their club. In many clubs the directors may also seek advice on matters of club operation from specific committees and sub-committees. These committees often include representatives from many sub-clubs that operate within the broader club (for example, a bowls, tennis or golf sub-club within a sporting club). 2.4.3 Not-for-profit mutual entities Registered clubs operate as not-for-profit mutual entities. Under the mutuality principle, members contribute to a common fund created and controlled by them for a common purpose. As these contributing members are essentially the same as those who participate in the fund, the member contributions and receipts from member dealings are not treated as taxable income. 22 This principle effectively exempts membership subscriptions and other revenues derived from dealings with members from a club’s taxable income. In addition, some clubs are classified as exempt institutions under the Income Tax Assessment Act 1997 as their main purpose is to encourage sport, music, literature, a game (for example chess, bridge) or art. Interestingly, while 81 per cent of people are aware that clubs contribute revenue to local community projects, 37 per cent were not aware that they operate as not-forprofit entities. 23 In addition to their income tax status, registered clubs enjoy certain advantages over their competitors by virtue of statutes such as the Registered Clubs Act and the Gaming Machines Act. These include the ability to operate more gaming machines per premise and lower rates of taxation on gaming machines compared to hotels. Other features of registered clubs that differentiate them from for-profit businesses include: Registered clubs are not focused on maximising profit in the same way as a commercial enterprise. Club members only benefit from the profitability of the club to the extent that ongoing profitability contributes to the continuation of the club as a going concern and improvement of facilities, goods and services offered by the club to its members. 22 Australian Taxation Office; available from: www.law.ato.gov.au. 23 ClubsNSW submission, 31 July 2007, p 25. Review of the Registered Clubs Industry in NSW IPART 37
Page 1: Independent Pricing and Regulatory
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Page 6 and 7: Contents 6 Strengthening the financ
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10 Helping clubs better understand
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11 Making it easier for clubs to am
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12 Making it easier for new clubs t
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13 Removing unnecessary regulatory
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14 A framework for a management pla
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A Terms of reference A Terms of ref
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A Terms of reference The proc
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B Terms of reference checklist Term
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C List of submitters, roundtable pa
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D Gambling expenditure and problem
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E IPART’s methodology for recordi
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F ACG’s approach to measuring the
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G ClubsNSW - steps to establishing
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Glossary and Abbreviations Glossary
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Review of the Registered Clubs Industry in NSW - Clubs NSW

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