Respite for Star Casino as Australian Government Delays Casino Tax Increase

Plans to increase casino tax rates have been put on hold by the Australian New South Wales local government, a great reprieve to Star Entertainment Group based in the region. The plans included a stiped to set the tax rates at 60% for profits generated from electronic gambling machines, up from 32%. An enormous impact that far surpasses the tax levied against other categories of leisure businesses in New South Wales. But following stiff resistance and appeals to the plans, there have been several delays whilst lawmakers review all sides of the case.

Slot machines in casino.

Star Entertainment has been granted a reprieve following a contentious decision to delay a proposed hike in tax rates on profits generated from electronic gambling machines. The casino group remains staunchly opposed to the plans.
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A temporary wave of relief is experienced by Australia’s Star Entertainment Group as the New South Wales governing body decides to halt the implementation of an anticipated rise in casino tax rates. The decision has been taken by the finance ministry, suggesting that the escalation should be put on hold.

Sydney’s main casino residents, The Star Entertainment Group, and Crown Resorts, are currently engaged in deliberations with the government about the impending tax increase. The decision has been made to postpone any legislative actions related to this matter until the winter parliamentary break is over.

The significant tax increase was proposed to take effect from July 2023. It’s worth noting that although the proposed tax was intended to be imposed on all New South Wales casinos, Crown Resorts, a key competitor of The Star in Sydney, doesn’t operate any poker machines. This implies that the electronic gaming machine tax would primarily affect The Star, leaving them disastrously exposed in terms of financial performance and competitiveness.

Casino Tax Increases Long-Term Objective of Australia’s Government

The tax increase proposal was first introduced by the previous administration in December 2022. While it did not become law, it was incorporated into the budget and remained an official objective that was inherited by the current administration after their March election victory.

The proposal, however, has been contentious, particularly for The Star Sydney, which is already contending with significant operational challenges that recently led to the dismissal of 500 employees to reduce its cost base. Additionally, The Star hinted at the possibility of further job losses if the proposed tax increase is actualized. In a recent Australian stock exchange filing, Star reiterated its objection to the proposed tax increase, characterizing it as untenable and poorly conceived.

Robbie Cooke, CEO and Managing Director of The Star, criticized the proposal, suggesting that it was hastily proposed by the previous finance minister without prior consultation or consideration of the financial capabilities of their Sydney operation. According to Cooke, if the proposed duty increase is implemented as initially suggested, it would severely undermine the economic sustainability of their Sydney business and could potentially endanger the jobs of up to 4,000 employees.

The Star Continues to Lobby Against the Increases

Despite the challenging circumstances, The Star has pledged to continue collaborating with the new New South Wales government to protect its employees’ jobs while undertaking significant reforms needed to restore The Star’s viability and ensure its continued contribution to the New South Wales economy.

The Star also expressed concerns that the ongoing uncertainty and potential for increased casino taxes could impede the company’s ability to successfully renegotiate its existing debt obligations; these refinance mechanisms will become much more strenuous in an environment of reduced cash flow.

The government’s attacks on the casino industry in Australia have been gathering momentum in recent years, and what started with a public scandal against Crown and Star, has spilled over into a restructuring of the operating model utilized by the entire industry. It remains to be seen.

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