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The NSW government will issue a temporary reprieve to cash-strapped Star Entertainment Group less than two weeks before the casino giant unveils its full-year results, after months of deliberation over a controversial tax increase it inherited from the former Liberal government.
The Herald can reveal Treasurer Daniel Mookhey will in coming days announce a revised arrangement for the planned duty rate increase on poker machine profits.
NSW Treasurer Daniel Mookhey has being weighing up what to do about a controverisal tax increase devised by the former government that would raise $364 million over a three-year period.Credit: Dion Georgopoulos
Multiple sources unauthorised to speak publicly about the matter suggested the deal will most likely involve a staged transition plan to give the flailing operator more time to stabilise its operation and avoid further job losses.
Two months ago, Mookhey delayed legislation for the duty rate increase that would have been imposed on the profits from poker machines and table game earnings in the casino from July.
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.
A Treasury spokesperson did not respond when asked about the likely outcome after the two-month deliberation but said the NSW government was “currently considering the next steps in relation to casino tax rates”.
Star Entertainment has been under financial strain amid the proposed NSW tax increase.Credit: Edwina Pickles
Although The Star has less than 2 per cent of the total number of poker machines in NSW, chief executive Robbie Cooke has warned the embattled business cannot wear the increase without significant job losses. This is because it would be forced to come up with $100 million from a cost base of $450 million.
The group has already made 500 roles redundant across its Sydney and Queensland casinos from its 8000-strong workforce.
“There is no business that can sustain a doubling of the tax rate,” Cooke told the Herald in February.
One option Treasury has considered is a staggered introduction of the duty rate increase, which would mean The Star would have a longer period to contribute the $364 million, so it can stabilise its short-term position free from the pressure of a higher tax burden.
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. The duty rate increase was written into the budget by the former government but is yet to be legislated.
The Star’s share price has plummeted by more than 60 per cent this year to 97¢ and its market capitalisation has halved to $11.7 billion. Kean’s public announcement blindsided Star Entertainment’s leadership, who were not consulted about the proposal ahead of time.
Star Entertainment’s financial distress started after two damning state inquiries revoked its casino licences in NSW and Queensland and issued multimillion-dollar fines, after a 2021 investigation by this masthead exposed it had enabled suspected money laundering, organised crime, large-scale fraud and foreign interference in its Australian casinos for years.
The group is also facing four shareholder class actions and is in the midst of a very expensive path to remediation. It’s also bracing for what is expected to be one of the biggest financial penalties ever issued by the corporate regulator AUSTRAC.
The Star announced an $800 million emergency capital raise in February following a bleak half-year result for the December half. It’s now considering a myriad debt refinancing options, with Washington H Soul Pattison and 9.97 per cent shareholder Bruce Mathieson expected to play a big role.
When the head of the NSW casino regulator Philip Crawford suspended The Star’s casino licence in October, he stressed the only reason the group wasn’t shut down entirely was to protect the jobs of its 4000 Sydney employees.
Under the direction of the NSW Independent Casino Commission, the group will operate with a suspended licence under the watchful eye of independent manager Nick Weeks until at least 2024.
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