On June 19, the New South Wales (NSW) state government announced that it will defer the implementation of a controversial casino tax hike until August at the earliest, following months of protest from Star Entertainment; the operator’s flagship property, Star Sydney, faces substantial difficulties from the increase.
State Treasurer Daniel Mookhey confirmed that the tax hike, which was originally set to take effect July 1, will now be pushed back to allow for more discussions between Star and NSW officials.
The proposed increase would bring the current state tax rate for electronic gaming machines (EGMs) from 32 percent all the way up past 60 percent. When first introduced late last year, then-treasurer Matt Kean posited that the extra taxes would generate over $300 million in state revenue over the course of the next three years, more than doubling the current average.
Although it has been presented as a statewide casino tax, the other biggest property in the region, Crown Sydney, does not operate any EGMs, meaning Star is essentially the lone victim. It should be noted, however, that the operator entered into a previous agreement with the NSW government for the right to be the only casino operator to offer the games.
Additionally, the tax is for casinos only, not the thousands of bars and clubs throughout NSW that also operate EGMs. Their tax rate will stay consistent at 37.5 percent, which has created much animosity between the casino and club industries in recent months.
“The government has been having discussions with the casinos about implementing these new tax arrangements,” said Mookhey, as reported by the Sydney Morning Herald. “To permit these conversations to continue, the government plans to pursue the legislation following the forthcoming parliamentary winter recess.”
Due to the fact that the increase had already been written into the future budget by the previous government before March’s state elections, Mookhey and others have said that it will be difficult to eradicate the hike altogether. Instead, it is believed that the two sides will come to some sort of compromise or alternative compensation.
For example, a recent report in the Australian Financial Review suggested that the company is exploring options as far as rebates for future development and investment.
Also included in the AFR report were Treasury documents showing that Star would also have a higher tax rate than that of Crown Melbourne in Victoria—the documents note that “no consultation was undertaken with the casinos” prior to announcing the increases.
“The advice I have received has led me to conclude that the policy wasn’t properly developed,” said Mookhey, per AFR. “And equally, Star wasn’t given the opportunity to explain what the impact would be on their business.”
In addition to the tax uncertainty, the embattled operator is also dealing with a slew of regulatory sanctions and fines.
Last year, Star was deemed unsuitable for casino licensure in separate inquiries in Queensland and NSW, and is currently undertaking numerous remediation efforts to reinstate the licenses unconditionally.
The company also faces hundreds of millions in fines and other penalties, mostly for violations of anti-money laundering and harm minimization regulations. In order to combat the mounting financial pressures, Star has cut 500 jobs from its workflow and has put a freeze on bonuses and non-EBA salaries.
Additionally, the company also announced on June 20 that the $168.7 million sale of its Treasury Casino and Hotel Brisbane property to Charter Hall Group, first announced all the way back in late 2021, is now null and void.
“The Star has been advised that Charter Hall no longer intends to proceed with the proposed transaction,” Star said in its filing to the Australian Securities Exchange (ASX).
“The basis for this is that the conditions have not been satisfied by the relevant date under the terms of the contracts,” the company added. “Charter Hall declined to extend the dates for satisfaction of the conditions.”
