R2K comment - St.George cut appears excessive
18 September 2007
After four successive gaming tax increases between 2004 and 2007, it is understandable that the St.George Leagues Club has decided to adopt a policy of reducing the grant it allocates to the St.George Illawarra Football Club.
Since the formation of the Dragons’ Joint Venture in 1999, the St.George Leagues Club has contributed significant funding to ensure the stability of its NRL team.
For example, when the St.George Leagues Club achieved an operating profit of $9,460,065 for the 2005 financial year, the Dragons received a $5.6 million grant.
In 2006, the Dragons gained $4.5 million after the St.George Leagues Club achieved an operating profit of $8,084,743.
However, it is a concern to see the annual grant to the Dragons reduce by over 44% to just $2.5 million, particularly after a calamitous 2007 season.
While the maximum gaming tax rate of 39.99% has been introduced for the period between 2007 and 2012, and represents a 3.2% increase from 2006, the reduction in the Dragons’ grant appears to be disproportionate.
Illawarra Steelers’ Chairman and St.George Illawarra Director Peter Newell previously hailed the March 2006 poker machine compromise as an agreement that provided clubs with a level of financial security:
“I am confident that the agreed rates of tax will put an end to the job losses as well as the cuts in sporting and community support that have been occurring at clubs during the past eighteen months. The revised tax increases afford clubs a degree of financial security which allows them to continue providing and supporting the community as they have always done.”
However, ClubsNSW outlines that the introduction of indoor smoking bans has hurt Leagues Clubs since 1 July:
“Despite some gains in food and beverage, overall club revenue has fallen by between 8 and 9% in clubs across the state, representing an overall turnaround of up to 15% in club income.”
According to the Sunday Telegraph, the St.George Leagues Club expects to cut $100,000 next year on its spending under the Community Development & Support Expenditure (CDSE) scheme.
St.George Leagues Club provides funding to a number of sporting groups including St.George Cricket, but according to St.George Leagues General Manager Danny Robinson this funding could be in jeopardy:
“We’ve already put some of them on notice and have told them that we’ve experienced a downturn in revenue and may not be able to fund their club.”
While the St.George Leagues Club is being faced with additional challenges, the reduction in the Dragons’ grant and spending relating to the CDSE scheme should only be temporary while the industry stabilises and the long-term impact of the smoking regulations is gauged.
With the guarantee of no additional gaming tax increases until after 2011/2012, the Club should have a degree of certainty and can therefore continue to redesign its business so it can rely on additional income streams outside of gaming revenue.
Ultimately, the St.George Leagues Club owes its existence to the success of the St.George Dragons and the Club must continue to ensure that the Dragons can be successful in the long-term by providing an appropriate level of funding.
The following table from ClubsNSW outlines the tax rates that apply to club gaming machine activity under the current gaming machine taxation regime. The rates exclude GST of 9.09% and are shown before CDSE scheme tax rate reduction:
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