By Amelia McGuire and Lucy Cormack
The future of Star Entertainment Group’s flagship Sydney casino remains in doubt as NSW Treasury prepares to unveil its pre-election budget outlook confirming a “paralysing” proposed tax increase on the venue’s poker machines.
Treasurer Matt Kean unveiled a new duty rate proposal in December which would see The Star’s poker machine profits taxed at a top rate of 60.7 per cent from July, generating $364 million over the next three years for disaster-stricken areas.
The Star flagged in February that it faces a hit of up to $1.6 billion if the proposal is legislated in its current form, and said it would be forced to review the Sydney casino’s operations should the increase be enacted.
Star says it will take a $1.6 billion hit if the increase is enacted.Credit: Oscar Colman
Despite some speculation that the government may tweak the policy before the pre-election caretaker period commenced on March 3, the tax hike is expected to remain in a major budget outlook to be released by NSW Treasury Secretary Paul Grimes on Wednesday.
The budget outlook is required to be delivered by law in the final weeks before a state election.
NSW Labor, which public polling suggests may form a minority or majority government at the March 25 election, has not taken a public position on whether it would keep, amend or abandon the casino tax hike.
Opposition treasury spokesman Daniel Mookhey described the situation as “a mess of Matt Kean’s making”.
“We are waiting for the pre-election budget outlook to see if he’s cleaned it up,” he said.
But Kean challenged Labor to tell the public whether it would lower taxes on the gambling industry.
“[Labor leader Chris] Minns and Mookhey have already adopted the gambling industry pokies policy by rejecting the Crime Commission’s cashless gaming recommendation,” he said.
“Labor should come clean if it is going to lower taxes on the gambling industry.”
In the past six months, The Star’s share price has shed more than 65 per cent in value to $1.46, and its market capitalisation has plummeted from $4 billion in 2021 to $1.4 billion. The group recently unveiled a net loss of $1.3 billion for the December half.
Its financial turmoil began when a 2021 investigation by this masthead resulted in two independent inquiries into Star Entertainment Group’s operations in NSW and Queensland. The inquiries found The Star had enabled suspected money laundering, large-scale fraud, organised crime and foreign interference in its Australian casinos.
The Star is in the midst of a capital raising which seeks to raise $800 million to manage its debt and pay multiple regulatory fines which are expected to tally hundreds of millions of dollars. It has so far secured $595 million from institutional investors. A retail offer of $205 million in shares remains open to retail investors until March 13.
Star Entertainment has poker machine exclusivity in the state’s casinos but owns just 1.8 per cent of machines, with about 75 per cent across NSW clubs and the remainder in NSW pubs.
Chief executive Robbie Cooke said in February the tax hike would be “paralysing” for the group and would require the business to extract $100 million from its Sydney operations from a cost base of just $450 million.
“There is no business that can sustain a doubling of the tax rate … I’m confident common sense will prevail over time,” Cooke said last month.
Star CEO Robbie Cooke.Credit: Louie Douvis
Although Kean has not spoken publicly on the matter since the December announcement, Perrottet said last month the government’s focus was on making sure The Star’s 4000 Sydney employees retain their jobs.
A Kean spokesperson said in February that the extent of The Star’s financial difficulties were not visible at the time he announced the proposal, and the treasurer remained in discussions with the group.
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