The Canberra Labor Club group made a $770,000 loss in the last financial year on the back of a $2.5 million donation to the Labor Party investment vehicle, the 1973 Foundation.
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The loss is disclosed in the party's annual report for 2013-14 and compares to a profit the year before of $2.95 million.
It is unclear why the club made a $2.5 million donation to the foundation, instead of simply sending its profits to the ACT branch at the end of the financial year. It is also unclear why the club group went into the red to make the donation.
While six of the nine Labor Club board members are appointed by the Labor Party, the party insists they are not there to do its bidding and their responsibility is only to the club and its members.
The club group chairman Tony Luchetti and chief executive Arthur Roufogalis did not respond to a call and email on the subject.
The club group was set up to support the ACT branch of the Labor Party and its articles of association require any profits to be paid to the branch.
The 1973 Foundation was set up to put some distance between the party and the club group and invest in property to provide an income for the party.
The Labor Party's ownership of the Labor club group has been controversial for some years, with a failed attempt to sell the group in 2009 and renewed calls from former leader Jon Stanhope this year for the party to sell the clubs and put an end to its reliance on gambling profits.
His calls have not been supported by the party, which has refused to discuss the issue publicly.
The club group is one of the biggest owners of poker machines in Canberra and its annual report makes the extent of its reliance on its 488 poker machines clear.
The annual report discloses revenue for the year of $33.3 million.
Of that, $29 million, or 85 per cent, is from poker machines.
The ACT Electoral Commission is investigating whether the $2.5 million donation from the club group was properly disclosed by the 1973 Foundation, which listed it as a capital deposit rather than a gift in its annual return.
Asked in December about donations from the clubs, Labor party secretary Matt Byrne said he did not believe the clubs would be giving any more money to the 1973 Foundation and he did not expect large-scale donations from the clubs to the party.
Asked where the Labor Club's money would go if not to the foundation or the Labor Party, he said that was a matter for the club.
The club's rules are clear any profits not needed by the club must go to the Labor Party's ACT branch.
The issue has also come to the fore as the government rolls out a series of changes to poker machine law, with a new trading scheme expected to be introduced in May, allowing clubs to buy and sell machines between them.
The government has abandoned its target of no more than 4000 poker machines across the city in favour of a new target of one machine for 15,000 adults – a ratio expected to allow about 4785 machines when it begins, compared with 4974 machines now.
A new tax regime is also due to take effect on July 1, if accepted by the Assembly, which will deliver a tax cut to most clubs, paid for by the biggest clubs. The Labor Club group faces a hike in its tax bill of about $97,000 a year under the change.
