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Back in June, the New South Wales (NSW) government announced plans to increase taxes on Star Entertainment. The proposed plan would have dramatically raised taxes on the casino, and the casino argued that jobs would be lost.
Fortunately, the NSW treasurer was open to negotiation on the tax rates. On Friday, news broke on a new tax proposal that will see an increase in taxes on Star, but in a much more sustainable way. The new plan will eventually get rates close to what the government envisioned but at a slower rate of increase.
On Friday, various sources reported that Star Entertainment group had reached an in-principle deal with the NSW government over taxes. In June, the government announced a new tax scheme that would have dramatically increased overall taxes to the casino operator.
Initially, non-rebated duty rates would have rose to 20.25% from 17.95%. Rebate duty rates would have risen to 12.50% from 10%. The most substantial increase would have been on pokies. Presently, all games have a flat rate of 20.91%. The government proposed a tiered rate starting at 0% for machines making under $2,666 monthly and up to 60.67% for games with over $12k monthly income.
The revised scheme will see non-rebated and rebated games rise per the original agreement. However, there is a significant change in the pokies rate. Instead of a tiered rate, pokies will continue at a flat rate until 30 June 2030. However, the rates will increase over time.
On 1 July 2024, the rate increases from 20.91% to 21.91%. An increase to 22.91% will occur on 1 July 2027. Then, starting on 30 June 2023, a tiered system will be applied to pokies. Games that bring in under $2,666 monthly will be tax-free. Games with revenues from $2,666 to $6,667 will pay a 37.6% tax. Pokies generating $6,667 to $12,500 will be taxed at 42.1%. Games with revenue above $12.500 will be taxed at 51.6%.
Furthermore, Star will pay a levy of 35% of Star Sydney gaming revenue on all income above $1.13bn in each financial year. This levy goes into effect on 1 July this year and continues until 30 June 2030. The casino can also request a review of tax rates and tiers from 1 July 2030 to 30 September 2030.
Star CEO Robbie Cooke spoke on the deal and its impact on business. He praised that it will help Star Sydney remain viable and thus protect jobs. According to Cooke, “While the in-principle agreement will result in an uplift in duties payable to the state, it has due regard to the circumstances of our Sydney business.
And as such helps to create a sustainable path forward for Star Sydney. The expected additional duty payable in FY24 is circa $10.0m. It is also designed to provide employment certainty for team members in arrangements agreed with the United Workers Union.
“The arrangements enable us to continue working at pace to implement the significant reforms required to restore Star Sydney to suitability, earn back the trust of the community and ensure we remain a valuable contributor to the NSW economy.”
This new tax agreement is undoubtedly good news for the embattled casino. Star is currently engaging in cost and restructuring initiatives to help bring the casino to profitability. Current economic conditions, combined with the region’s present operating environment, have made things difficult.
The new agreement will give the casino some breathing room as it hopes to get back in the good graces of both the public and regulators.