Star Entertainment Group and NSW Government Negotiate New Casino Duty Rates

Talks between the beleaguered operator and the NSW Government concluded in a compromise, significantly reducing the originally envisioned levy increases. However, the planned duty rate hikes will further strain Star Entertainment’s efforts to recover from the wake of its money laundering scandals and regain the trust of consumers and regulators.

The Operator Is Yet to Regain Its Footing

The newly inked agreement follows a proposal from the prior state government to significantly increase the duties imposed on electronic gaming machines at the Sydney casino, reaching over 60% of average poker machine revenue. Star Entertainment Group had vehemently opposed this drastic raise, labeling it unsustainable and flawed due to its implementation without prior consultation.

Star Entertainment and the NSW government made an in-principle arrangement in August to provide enhanced certainty for both parties. However, the operator stood firmly against the envisioned rapid levy increase, noting that such measures could jeopardize thousands of jobs in NSW. Constructive engagement with the NSW Government significantly reduced the planned raise, giving Star Entertainment much-needed breathing room.

The formalization of these arrangements protects our Sydney team’s jobs and enables us to continue the important ongoing work required to… earn back the trust of our stakeholders.

Robbie Cooke, Star Entertainment Group managing director and CEO

Despite securing better conditions, Star Entertainment is yet to stabilize its business. A temporary tax relief deal solved some of the operator’s short-term issues. However, its venues continue to underperform as the flow of overseas tourists remains significantly below pre-pandemic levels. The company’s FY 2022/23 results reported an unpleasant full-year loss of $1.6 million, and it is yet to reverse this trend.

Most Rates Will See Gradual Increases

Although The Star negotiated more favorable conditions, the tax rate hikes will impose additional costs of roughly AUD 10 million ($6.58 million) in 2024. Star will maintain its payment of 20.91% tax on poker machines, excluding Goods and Services Tax (GST), within the current financial year. This rate will rise incrementally to 21.91% starting from 1 July 2024, followed by an increase to 22.91% from 1 July 2027.

1 July 2030 will see tax rates ascend progressively, depending on average poker machine revenues. Other modifications, effective 1 July 2023, include increased duty rates on rebate play from 10.0% to 12.5% and table games from 17.91% to 20.25%. Furthermore, Star Sydney must pay an extra levy equivalent to 35% of all gaming revenue exceeding AUD 1.125 billion ($733 million) each financial year.

Star Entertainment has already taken measures to counteract this increased tax burden, like selling its Sheraton Grand Mirage Resort Gold Coast property. However, many problems and inefficiencies pose an ongoing challenge, similar to its primary competitor, Crown Resorts. The Star’s slow return to compliance will take substantial time and resources, but the company can still reorganize its business and return to profitability.