It was shortly after the Gippsland woman Libby Mitchell spent 52 hours inside a dark room full of brightly lit poker machines that she realised she was in the grip of a “made-in-hell addiction”. For many years, Mitchell drove home after a marathon session on the pokies with less than a dollar left in her account.
Her addiction became so bad she contemplated suicide and checked herself into hospital. Eventually she moved to Western Australia, where there are no pokies in community clubs. She needed an escape.
The mother of two no longer gambles. But when she recalls the countless hours she spent at the pokies, she remembers being told her money was going back into the community. She and “the girls” would meet at the club and “all pretend to each other that we were supporting the community”.
Mitchell realised the clubs taking her money are, overwhelmingly, spending gambling profits on themselves while claiming the expense as “a community benefit” to help secure a tax cut.
It is part of a scheme that the anti-gambling campaigner Tim Costello says is Australia’s most shameless rort.
“When I learned what was going on, I felt really, really angry,” Mitchell says. “Pokies, to put it bluntly, have got people committing suicide. It’s led to divorces. It’s got people on welfare and food bank parcels. And yet, it’s able to present itself as a community benefit. From my point of view, it was totally misleading.”
The origin of ‘a broken system’
Decades ago, state governments decided to give clubs a tax cut if they returned a set amount of gambling profits into the communities they were extracted from. It was designed to reward charity. But as one Victorian councillor put it, it was based on “an egregious loophole”.
Clubs can count the millions of dollars they spend on themselves or their affiliates as part the money returned to the community. That includes money spent on new kitchens, fridges, television and Keno subscriptions, lifts, bar stools, lawn mowers and even golf carts and upgrades to the golf course.
In Victoria clubs can claim their own operating costs. This means keeping the lights on at a club with pokies is a “community benefit”, counting towards a tax cut. So too is paying wages, superannuation, cleaning costs, training courses, rent, security services, staff uniforms, insurance fees, pest control, undisclosed entertainment and utility bills.
Some of the gifts given to the community include discounted room hire or meals at their own venues, which encourages people to visit the clubs that host poker machines. One Melbourne council alleges that sponsorship deals with local sporting clubs sometimes come with conditions that the venue’s logo is promoted.
Overwhelmingly Victorian clubs spend the vast amount of money claimed under the scheme on themselves. A 2019 study by Monash University academics found 82% of community benefit deductions were spent on operational expenses. Eight venues owned by AFL clubs claimed $8.6m of operating costs under the scheme last year, with some spending nothing on “philanthropic or benevolent” causes.
“That venues can write off operating costs as a community benefit to secure tax breaks is a sign of a broken system,” says Mike Read, the president of the No Pokies at Essendon group, which wants the AFL club to divest its machines.
‘Feathering their own nests’
The Canterbury Leagues Club in western Sydney is a giant, sprawling venue with a rainforest atrium, marble floors, water features that glow at night and a “magnificently appointed” restaurant with a bamboo curtain roof and a watercourse. It also has more than 600 poker machines.
The club has legally used the state’s tax minimisation scheme, known as ClubGrants, to its own advantage. Over eight years it shifted more than $26m in gambling profits to its parent company – a professional NRL club with million-dollar revenues – while claiming the payments as a community benefit for a tax cut.
The payments, which are legal and within the rules, are listed as “community development and support initiatives”. But money sent to the affiliated NRL club, the Canterbury-Bankstown Bulldogs, was significantly more than what was spent on non-affiliated community groups.
It is payments like these that led to one the scheme’s early advocates, the New South Wales Council of Social Service, to become its biggest critic. Its former chief executive Joanna Quilty said clubs were using the scheme to “feather their own nests” and compared it to pork barelling.
“We found so many initiatives that were funded through a club grants process that were not about improving living standards for low-income and disadvantaged people – from orchid appreciation societies to kennel clubs, fixing up the bowling green, or the club’s own women’s auxiliary lunch,” Quilty told Guardian Australia shortly before leaving the council.
The charity group Wesley Mission believes the scheme never worked to begin with. Its chief executive, Stu Cameron, wants it scrapped immediately. He is part of an independent panel advising the NSW government on gambling reforms.
“It was a cynical attempt by the clubs gambling industry to create the perception they were giving something back to the community, but it was all smoke and mirrors,” Cameron says.
Costello is an anti-gambling campaigner who has the ear of the prime minister and premiers across the country and has previously described the schemes as “the most shameless rort in Australia”.
Change ‘a decade overdue, at least’
For many years, local politicians have been urging their state counterparts to ensure money claimed under the schemes is actually going to community groups. In Victoria, some have outlined their concerns directly to ministers and feel ignored.
“We are frustrated by that because we know that every year that passes with this loophole in place, clubs are able to continue to not deliver on what should be positive investments into the community,” the Hume city mayor, Joseph Haweil, said earlier this year.
But some government backbenchers are now agitating for change. A Labor-led parliamentary inquiry in Victoria is next week expected to call for an overhaul of the community benefits scheme.
The NSW government has announced a review into its separate scheme to be led by Treasury next year. The gaming minister, David Harris, has admitted the scheme is “tired” and that “people were pushing the parameters”.
ClubsNSW, which has a record of lobbying the state government on poker machine reforms, is welcoming the review. It points to the ClubGrants scheme awarding more than $1bn in grants since 1998 and has told Guardian Australia there are “stricter controls” in NSW.
“ClubsNSW acknowledges that there is always room for improvement in any large grant program that manages tens of thousands of applications for funding,” a spokesperson said.
Most critics do not expect either state to scrap the schemes entirely. The more likely scenario is governments, rather than clubs or affiliates, enforcing how much money clubs spent on community groups.
Ranka Rasic, the mayor of Brimbank council in Melbourne, which claims to have the biggest share of gambling harm in Victoria, suggests real change will not come until state governments walk away from billions of dollars in gambling tax revenue.
“The state government needs to acknowledge its own addiction and its reliance on gambling venues as income,” Rasic says. “I think when they do that, that’s when the problem will be resolved.”
Mitchell, who has transformed herself from gambling addict to anti-gambling campaigner, welcomes the renewed focus on the schemes but says change was “a decade overdue, at least”.
“You can no longer hide this. Things have become too serious and they’ve got to step in and do something,” Mitchell says. “But without being too cynical, I would applaud the fact they’re starting to do something about it.
“These clubs have been playing us for years.”
• In Australia, Gambling Help Online is available on 1800 858 858. The National Debt Helpline is at 1800 007 007. The crisis support service Lifeline is 13 11 14. In the UK, support for problem gambling can be found via the NHS National Problem Gambling Clinic on 020 7381 7722, or GamCare on 0808 8020 133. In the US, call the National Council on Problem Gambling at 800-GAMBLER or text 800GAM.
