Queensland says no to Star Entertainment’s tax relief request

Lea Hogg September 26, 2024

The Queensland government has firmly rejected Star Entertainment’s request for tax deferral, citing the company’s refusal to curb executive bonuses as the breaking point in negotiations. This decision comes just hours after Star secured a multimillion-dollar financial lifeline from its lenders, adding fuel to the growing controversy surrounding the embattled casino operator.

Queensland Premier Steven Miles made it clear that the state would not entertain any form of tax relief while Star’s executives continue to reward themselves with hefty bonuses. “We won’t be returning to the negotiating table,” Miles asserted in a press conference. His comments signal a tough stance from the government, especially as it prepares to enter caretaker mode ahead of the upcoming state election on October 26.

Behind the Collapse: Bonuses in Focus

At the heart of this fallout is Star’s insistence on maintaining executive performance bonuses, a decision that Miles described as “astounding” given the company’s current financial woes. The proposed deal, which was expected to defer approximately $60 million in taxes, was reportedly close to being finalized earlier in the week. However, the state government walked away after it became clear that Star had no intention of reducing or eliminating its executive compensation packages. Miles expressed his frustration, saying, “It’s astonishing that a company asking for tax deferrals continues to reward executives with bonuses worth tens of millions. We were reasonable in considering their request, but their unwillingness to make sacrifices has made further discussions impossible.” This announcement comes at a critical time for both Star and the Queensland government. Star, which operates high-profile casinos in Sydney, Brisbane, and the Gold Coast, has been under increasing pressure as it battles financial instability, regulatory scrutiny, and ongoing controversies about its business practices. The Queensland government, on the other hand, faces its own challenges ahead of a pivotal election, with its relationship with Star coming under scrutiny. The state’s opposition, the Liberal National Party (LNP), has been particularly vocal, accusing the government of being too close to Star Entertainment. They’ve promised to release a secret report that allegedly links Star’s business partners to criminal activities if elected. This adds further tension to an already complex relationship between the state and one of its largest entertainment companies.

Star’s Financial Troubles Continue

Despite the government’s decision, Star has managed to secure critical financing from its lenders. Late on Wednesday, the company confirmed a deal that includes a two-tranche extension to its existing loans. The first tranche will provide an immediate $100 million injection, which Star plans to use for urgent cost overruns at its flagship Queen’s Wharf development in Brisbane. A second tranche, also worth around $100 million, is available but comes with the condition that the company raises at least $150 million from other sources.

Rescue plan for Star’s financial struggles

This financial arrangement is part of Star’s broader five-point rescue plan, reported by The Australian Financial Review last week. Under the leadership of newly appointed CEO Steve McCann, Star has been in emergency talks with investors, lenders, and state governments over the past month, seeking to stabilize its finances amidst mounting challenges. The funding, while crucial, underscores the fragility of Star’s financial position as it continues to grapple with high debt levels, rising costs, and a tarnished public image.

Star Entertainment’s stock has struggled as a result, with shares dropping by 2.17 percent on the day of the Queensland government’s announcement. Investors remain cautious about the company’s long-term prospects, given its ongoing regulatory issues and the uncertainty surrounding its future operations.

Political implications

The timing of Queensland’s decision to walk away from Star’s tax relief request has raised eyebrows, especially with the state election just weeks away. Miles’ government is under heavy scrutiny, and the opposition has seized the moment to criticize its handling of the Star situation. The LNP’s promise to release the secret report could sway public opinion, making Star a focal point in the election campaign. While the Queensland government has drawn a clear line in the sand, Star’s financial woes and public controversies are far from over. With elections on the horizon and the casino operator’s credibility in tatters, the weeks ahead will be critical for both Star and the state government. This unfolding saga serves as a reminder of the often uneasy relationship between governments and major corporations, particularly when financial aid is on the table. For now, Queensland has made its position clear: no relief for Star while bonuses remain untouched.