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The Star Entertainment Group’s Star casino in Sydney has dodged a tax bullet amid its ongoing regulatory nightmare, with the New South Wales (NSW) government deferring a hefty increase in slot machine duty until at least the end of the decade.
NSW Treasurer Daniel Mookhey on Friday (August 11) announced that the Labor government and Star Entertainment had reached an in-principle agreement for duty rates on rebate play and table games to increase while deferring a much more punishing slots rate hike.
The government will also impose an additional 35 percent levy on gambling revenue exceeding A$1.125bn ($737,000) per financial year, Mookhey said.
Treasury advice had warned that the slots rate hike would have made The Star “unviable”, he said.
He added that the previous conservative government’s tax arrangements were “unrealistic, poorly developed and put thousands of jobs at risk.
“It was announced without consultation or consideration for the viability of the business and the thousands of workers they employ,” he said.
Mookhey added that The Star will be required to retain at least 3,000 jobs over the period of the tax deferral.
In a statement on Friday, Star Entertainment said its jobs commitment maintains its NSW "headcount at specified levels subject to certain permitted adjustments, and force majeure material change events".
However, binding agreements between the government and the company are in the drafting process, potentially leaving wiggle room for both parties.
“While the in-principle agreement will result in an uplift in duties payable to the [government], it has due regard to the circumstances of our Sydney business and as such helps to create a sustainable path forward for The Star Sydney,” company CEO and managing director Robbie Cooke said.
“The expected additional duty payable in the financial year 2024 [July 2023-June 2024] is circa A$10m.”
Cooke said the agreement also includes The Star’s introduction of a cashless gaming trial on 50 electronic gaming machines and eight gaming tables.
The arrangements announced on Friday allow The Star to avoid a maximum levy of 60.7 percent on slot machine revenue that would have doubled the tax on this segment, and which threatened to stymie the casino’s recovery from years of regulatory mayhem and sliding revenue.
The Star remains under the oversight of an independent manager and the NSW Independent Casino Commission following the suspension of its casino licence over a litany of regulatory failures and breaches.
Still, the government is set to increase its tax haul from the casino with a jump in the rebate play duty rate from 10 percent to 12. 5 percent, and a rise in the table game duty rate from 17.91 percent to 20.25 percent. Both rates came into effect on July 1.
The unchanged slots duty rate of 20.91 percent will increase instead to 21.91 percent on July 1 next year, then to 22.91 percent on July 1, 2027, exclusive of the state’s goods and services tax.
The deferred rates, if not amended by a subsequent government, will come into force on July 1, 2030, and be graded according to slot segment revenue, with the rate ranging from 37.6 percent to 51.6 percent as average revenue increases.
The NSW government’s concession to Star Entertainment is a rare bit of good news for the company after hefty regulator fines, and investors on Friday smiled over the negotiations, lifting the stock on the Australian Securities Exchange by 17.9 percent to A$1.15 at the close of trading.
But Star Entertainment remains in the cross-hairs of national money laundering watchdog AUSTRAC, which is likely to fine the company hundreds of millions of dollars for “innumerable” compliance breaches.
The company also suffered a $140,000 local court fine in Queensland state on August 2 over customer use of credit cards and illegal marketing.
