This report, commissioned by One Foundation Limited and authored by David Moore, Ashley Milkop and Rohan Trill, analyses regulatory changes affecting Class 4 gaming machine trusts in New Zealand. Currently, gaming trusts may acquire machines using retained earnings. Under the Gambling (Class 4 Net Proceeds) Regulations 2004 (regulations 10 & 11), they must distribute at least 40 per cent of gross proceeds each financial year and apply or distribute net proceeds quarterly (or within three months of year-end). Gross proceeds include turnover (less prizes), interest/investment income, and asset gains; net proceeds are gross proceeds minus operating, compliance, depreciation and disposal costs.
The Department of Internal Affairs new interpretation will require trusts to fund machine purchases via debt rather than retained earnings. Under the debt‑based model, principal repayments must occur per the debt terms, often via mortgage-style mechanisms. The report compares modelling under a retained‑earnings approach versus a fully debt-funded model to assess present value of grants to community organisations. It highlights that borrowing increases financial costs and may reduce the total grants available over time.
Overall, the report advises that the debt model could lower community funding, alter cash flow timing, increase financial risk, and reduce flexibility for Class 4 operators.