The New South Wales will issue a temporary tax reprieve to cash-strapped Star Entertainment Group, just ahead of the unveiling of the casino's full-year results. NSW Treasurer Daniel Mookhey will defer the full implementation of poker machine duty rates in casinos until the end of the decade.
After months of deliberation over a controversial tax increase that the government inherited from the Coalition, Mookhey on Friday announced a revised, “transitional” arrangement for the planned duty rate increase on poker machine profits, reports Sydney Morning Herald.
The initial plan, proposed by former Liberal Treasurer Matt Kean, called for a tax rate increase to a staggering 60.7%, aiming to generate an additional $364 million in revenue over the next three years. The current tax leveraged from the group’s poker machine profits is less than half this amount.
The revised plan involves a staged transition to give the flailing operator more time to stabilize its operation and avoid further job losses. The negotiated arrangement will legally require Star to maintain more than 3000 jobs between now and 2030; while the casino will participate in the state’s cashless gaming trial, with 50 poker machines and eight tables in high-volume areas to go cashless from October this year.
Treasurer Daniel Mookhey
As per the cited source, the transitional tax arrangement on gambling machines will apply until the new rate begins in July 2030. The transitional rates are expected to generate AUD 2.7 billion ($1.7 billion) over 10 years from Star, more than half a billion more than they would under the previous rate. The levy will be pegged to The Star’s financial performance, with the government collecting more tax under adjusted rates if the casino outperforms forecasts.
Although The Star has less than 2% of the total number of poker machines in NSW, Chief Executive Robbie Cooke had warned the embattled business wouldn't have been able to wear the increase without significant job losses. The group has already made 500 roles redundant across its Sydney and Queensland casinos from its 8000-strong workforce.
Cooke said the new arrangement was more sustainable despite an uplift in overall duties. “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. The expected additional duty payable in FY24 is circa $10 million,” Cooke told the Australian Securities Exchange on Friday.
The lifeline comes at a critical time for The Star, as its share price has plummeted by over 60% this year, and its market capitalization has halved to AUD 11.7 billion ($7.6 billion). This decline follows the revocation of casino licenses in both NSW and Queensland, accompanied by significant fines, following a 2021 investigation that exposed the casino's links to suspected money laundering, organized crime, and foreign interference.
The Star announced an emergency capital raise earlier this year. The company is now exploring various debt refinancing options, with key shareholders Washington H Soul Pattison and 9.97% shareholder Bruce Mathieson expected to play a crucial role.