Star Entertainment Group, an Australian gambling and entertainment company, announced on November 21 that it has officially entered into a binding contract with the New South Wales government regarding the casino duty rates it will have to pay over the next 7 years.
The binding contract follows an in-principle agreement signed between Star and the NSW government in August of this year, but the current contract provides better security for the future. This agreement stemmed from a proposal by the previous government, which involved a significant increase in the duties imposed on electronic gaming machines at the Star Sydney to over 60% of the average poker machine income.
The proposal, which was submitted without prior discussion with The Star, was criticized by the company as being unsustainable and flawed in its design. The company claimed that implementing the proposal as originally suggested would pose a significant threat to the economic viability of The Star’s Sydney business and put the jobs of thousands of NSW team members in jeopardy.
However, CEO and Managing Director of The Star, Robbie Cooke, commented on the binding contract, stating that it protects the jobs of the Sydney team and enables the important ongoing work required to restore The Star Sydney to suitability and earn back the trust of stakeholders.
Under the binding contract, the ongoing 20.91% tax that the firm is required to pay on poker machines, net of VAT, will remain in place until the end of the financial year 2023. The tax will then increase to 21.91% from July 1 next year and to 22.91% from July 1, 2027. Starting on July 1, 2030, the tax will be paid on an increasing scale, with rates ranging from 37.6% to 51.6% for income from average poker machines exceeding certain thresholds.
The firm may also request a “good faith” consideration of the duty rate for poker machines based on trading circumstances and EBIT for the Sydney casino from July 1, 2020, to June 30, 2030.
Other modifications in the contract include an increase in the customs duty on table games and a new tax on Star Sydney gaming income above a certain threshold. The company expects the new duty rates to cost an additional AU$10 million in 2024.
Overall, the binding contract provides clarity and stability for The Star Entertainment Group in terms of its casino duty rates for the next 7 years.