Negotiations between Star Entertainment and the NSW Government have resulted in a compromise agreement that significantly reduces proposed levy increases. The initial proposal from the state government sought to impose substantial increases in duties on electronic gaming machines at the Sydney casino, with the potential to reach over 60% of average poker machine revenue. Star Entertainment strongly opposed this proposal, citing concerns about sustainability and the lack of prior consultation.
In August, an in-principle arrangement was made between Star Entertainment and the NSW government to provide certainty for both parties. Despite this, the operator expressed firm opposition to the rapid levy increase, emphasizing its potential to jeopardize thousands of jobs in NSW. However, constructive engagement with the government led to a reduction in the planned levy raise, providing Star Entertainment with much-needed breathing room.
According to Robbie Cooke, the managing director and CEO of Star Entertainment Group, the formalization of these arrangements protects jobs and enables the company to work towards regaining the trust of stakeholders. Despite the improved conditions, Star Entertainment continues to face challenges as it seeks to stabilize its business. The company reported a full-year loss of $1.6 million for FY 2022/23, and its venues are underperforming due to the low flow of overseas tourists following the pandemic.
While the negotiated agreement offers more favorable conditions, Star Entertainment will still incur additional costs of approximately AUD 10 million in 2024 due to tax rate hikes. The tax on poker machines will incrementally rise to 21.91% by 2024 and further increase to 22.91% by 2027. Additionally, tax rates will progressively ascend from 2030 based on average poker machine revenues, and other modifications include increased duty rates on rebate play and table games.
In response to the increased tax burden, Star Entertainment has taken measures such as selling its Sheraton Grand Mirage Resort Gold Coast property. However, the company continues to face challenges and inefficiencies, similar to its primary competitor, Crown Resorts. Despite these obstacles, Star Entertainment remains optimistic about its ability to reorganize its business and return to profitability.