Star Entertainment Group, a famous casino from Australia, must pay A$1.6 billion, or US$1.11 billion. The casino was warned on Monday, and the charge refers to New South Wales’ first-half revenue from a casino duty hike. The company’s shares fell over 22%, making it the lowest-ever revenue of Star Entertainment Group.

An expected tax reform:

The impact of proposed tax rate hikes will have a great impact on the New South Wales casinos. However, the underlying reason is completely understandable since the acquired money will be used to help communities that have survived bushfires and floods in recent years.

The state announced the tax reform at the end of the last year, which might begin in July this year. 

The Star’s operations in Sydney will be greatly affected by these changes, as the Group claimed. Half of the company’s revenue came from the Sydney casinos during the last fiscal year, so the worry is reasonable when it comes to this company.

Jefferies Financial Group Inc. said: “The A$400 million to A$1.6 billion range for the non-cash impairment charge to NSW Casino highlights the uncertainty around duty rates for Sydney.”

Star wants to review the assets and operating model of its Sydney casinos. If the government proceeds with the changes, some changes will have to be made in these casinos.

Star Entertainment Group is the second-largest casino operator in the country. With that in mind, it’s surprising that its shares already fell by 21.9%. This led to breaking a dreadful record of A$1.465. The whole market was weaker, but the fall wasn’t as significant as the Star’s.

One of the main points of discussion in the elections in March will be the new tax reform proposal. The elections in New South Wales will be held on March 25th, so the answer will be known soon.

More changes will possibly follow the elections – the conservative government wants to introduce mandatory cashless poker machines during the following five years. It will be a step towards regulating money laundering. However, the Labor opposition would like to try a limited trial during which cashless machines would be the only ones allowed. 

The significant loss for the Star:

The Star thinks this would lead to a loss of about A$20 million during six months. This means a lot for Star since the company is still trying to regain its recently lost licenses due to many issues in the company’s casinos.

The recent crisis, which followed the COVID-19 pandemic, led to the fall of the company’s share prices, as well as to a significant net loss. 

The company predicts the underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow from A$330 million to A$360 million by the end of June. During the last year, the reported EBITDA was A$237. This is a lot lower than it’s expected when we think of the Factset consensus, which is A$446 million.