By Amelia McGuire and Alexandra Smith
The NSW government has pushed back the introduction of a controversial tax hike on Star Entertainment Group as it weighs the implications for the company’s embattled Pyrmont casino.
Treasurer Daniel Mookhey revealed on Monday evening the government would delay legislation for the duty rate increase – which would have been imposed on the profits from poker machine and table game earnings from July 1 – until at least August to allow discussions with the cash-strapped casino giant to continue.
The Star in Pyrmont is under financial pressure.Credit: Steven Siewert
Former Liberal treasurer Matt Kean in December proposed profits from The Star’s poker machines be taxed at a top rate of 60.7 per cent to generate $364 million extra revenue over the next three years. The current tax leveraged from the group’s poker machine profits is less than half this amount.
The Star’s share price has plummeted by more than 50 per cent this year to $1.10 and its market capitalisation has halved. Kean’s public announcement blindsided Star Entertainment’s leadership, who were not consulted about the proposal ahead of time.
The tax increase was due to begin within a fortnight. However, the change was never legislated, even though it was written into the budget.
“The government has been having discussions with the casinos about implementing these new tax arrangements,” Mookhey said on Monday. “To permit these conversations to continue, the government plans to pursue the legislation following the forthcoming parliamentary winter recess.”
“Discussions with the casinos”: NSW Treasurer Daniel Mookhey.Credit: James Alcock
The parliament is due to return in early August, giving both sides the chance to negotiate changes to the tax increase to protect jobs.
Mookhey’s statement suggests the government is committed to legislating the tax but may settle on several changes. One option would be to delay the hike by several years to allow the financially strained casino giant to stabilise its short-term position free from the pressure of a higher tax burden on its Pyrmont operation.
Comment has been sought from The Star.
Two independent inquiries stripped the gaming giant of its licences in NSW and Queensland last year following an investigation by the Herald in October 2021. The inquiries found the casino operator had enabled suspected money laundering, large-scale fraud, organised crime and foreign interference in its Australian casinos.
The Star has exclusive rights to operate poker machines in casinos in NSW but has just 1.8 per cent of the state’s machines – with the rest in the state’s pubs and clubs.
The casino’s leadership has claimed the tax rate will have devastating consequences for the business, which is already struggling to shore up its profits, weighed down by more than $1.1 billion in debt as of December.
Star Entertainment chief executive Robbie Cooke has flagged the tax increase will force him to slash $100 million from the Pyrmont casino’s $450 million cost base. The group has already made 500 roles redundant across the Sydney and Queensland casinos from its 8000-strong workforce.
“There is no business that can sustain a doubling of the tax rate,” Cooke told this masthead in February.
“At its bluntest, we would need to extract $100 million from our operations, and that is extremely hard when we’re dealing with a cost base of $450 million in Sydney.”
Mookhey said in April he did not think Kean’s proposal had been properly developed and called out the former deputy NSW Liberal leader for failing to consult the group on the financial ramifications.
However, the new treasurer also said it was difficult to unwind the tax now it had been written into the budget.
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