Taxation Paid FY 2016 – The Star Entertainment Group

Taxes Paid In The 2016 Financial Year

The Star Entertainment Group is a leading owner and operator of integrated resorts in Australia paying a considerable amount in taxes in Australia, both at a state and federal level. Broadly, taxes paid can be split into two categories, those borne by The Star Entertainment Group on its own behalf which contribute to public finances and those collected by The Star Entertainment Group and remitted to the government on behalf of employees or suppliers.

The table below shows the total of all taxes paid by The Star Entertainment Group in the financial year ending 30 June 2016 (FY2016) in Australia. The Star Entertainment Group’s activity in other countries is not material to its business (less than 1% of accounting profit). Foreign subsidiaries are either dormant or providing marketing services. The Star Entertainment Group’s strategic focus is on domestic growth rather than international expansion. The distribution of taxes paid reflects the geographical spread of The Star Entertainment Group’s businesses.

The effective rate of taxes paid borne by The Star Entertainment Group for the year ended 30 June 2016 is approximately 72% (being corporate and gaming taxes paid divided by accounting profit before these taxes).

Taxes Paid In FY2016 - Contributions

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	Contributions $m
Level of Government	Corporate Income Tax	Net Gaming taxes and duties	Employer payroll taxes	Other taxes	Total tax payments borne
Australian federal	100.8		1.5		102.3
Queensland		102.5	9.5	4.0	116.1
New South Wales		255.9	17.2	6.7	279.7
Other states			0.1		0.1
Australian Total	100.8	358.4	28.3	10.7	498.2

Corporate Income Tax

Corporate income tax is payable in instalments throughout the financial year and the ultimate liability is reflected in the income tax return lodged with the ATO or other international tax authorities. The timing of all payments of income tax (instalments and final payments/refunds) in respect of a financial year does not take place within the financial year they relate to. A portion of the tax is paid in the first half of the following financial year. Tax paid in a financial year will therefore include an additional payment or refund in respect of the previous year (see Note F2(iv) of The Star Entertainment Group’s 2016 Annual Report, extract below).

Gaming Taxes

The Star Entertainment Group pays gaming taxes and levies in respect of its casino operations in both New South Wales and Queensland. A percentage of gaming taxes paid by The Star Entertainment Group are directed to community benefit funds. These funds are allocated by the relevant state governments to projects benefiting the community such as grants to non-profit community organisations, the provision of problem gambling counselling services and initiatives designed to reduce problem gambling behaviour in communities. A portion of the taxes is also directed to National Gambling Help Line services.

The amounts disclosed in the Taxes paid in FY2016 – Contributions table are net of GST deductions/offsets. For completeness, gross gaming tax amounts are reported where appropriate in other forums including publications and presentations.

Employer Payroll Taxes

With a workforce of more than 8,000 employees across New South Wales and Queensland, payroll and employer taxes paid in respect of employees are significant. This includes taxes such as payroll tax and fringe benefits tax.

Other Taxes

The Star Entertainment Group pays other taxes such as property taxes and car parking levies.

Taxes paid in FY2016 – Collections

	Collections $m
Level of Government	Employee Paroll taxes	GST
Australian federal	152.2	124.4
Queensland
New South Wales
Other states
Australian Total	152.2	124.4

Employee Payroll Taxes

The Star Entertainment Group withholds taxes and superannuation guarantee levy from salaries and wages, these taxes are collected and remitted to federal government and third party superannuation funds.

GST

This is the net amount of goods and services tax collected on sales and purchases from suppliers. These monies are collected and remitted monthly to the government.

ATO Public Disclosure

In late 2017, the Commission of Taxation will publicly disclose the following details in respect of The Star Entertainment Group’s income tax return for the year ended 30 June 2016 (the ITR).

Total Income¹	$2,269,694,543
Taxable Income²	$268,020,371
Income tax payable	$77,877,594

Total Income

Total income reported in the ITR represents gross income for accounting purposes (i.e. Australian sourced income before expenses are taken into account) plus other income and finance income. Total income is not an indicator of the accounting or taxable profits of an organisation. A table which reconciles The Star Entertainment Group’s total income to accounting profit for the year ended 30 June 2016 illustrates this (right).

Offshore income is subtracted as it is taxed offshore. Offshore profit is subsequently included in taxable income as an assessable income adjustment (ie. Included in the $2.1m Assessable income adjustment in the reconciliation of profit to taxable income below).

Revenue³	$2,268,080,583
Other Income	$822,068
Finance Income⁵	$1,347,109
Offshore Income	($555,218)
Total Income (per ITR)	$2,269,694,543
Less: Total expenses	($1,990,603,149)
Accounting profit⁶	$279,091,394

Reconciliation of profit to taxable income

A reconciliation of The Star Entertainment Group’s accounting profit to taxable income for the year ended 30 June 2016, as reported in the ITR, is set out below:

It is not uncommon for Companies to have an effective rate of tax paid lower than the Australian corporate tax rate of 30%. There are a number of valid reasons this arises and does not imply that tax minimisation strategies are being employed. In The Star Entertainment Group’s case, there are a number of legitimate reasons why The Star Entertainment Group’s effective rate of tax paid is lower than the Australian corporate rate.

Research & Development (R&D) tax incentive

The Government is trying to encourage companies to undertake R&D activities for the benefit of the Australian economy. This is done through a non-refundable offset. As part of its business strategy The Star Entertainment Group engages in a significant amount in R&D, of which some is entitled to the R&D tax incentive. The offset reduces the tax payable by The Star Entertainment Group and the R&D expenditure is then non-deductible. This provides a permanent benefit of 10% of the eligible R&D expenditure (ie. Amount offset exceeds the company tax rate) and a timing benefit.

Accounting profit	$279,091,394
Add:
Accounting depreciation	153,670,597
Assessable income	2,079,312
Subtract:
Tax depreciation	137,080,360
Other deductible items₇	29,740,572
Taxable income	268,020,371
Tax on taxable income	80,406,112
R&D offset	(2,528,518)
Tax payable	77,877,594
The effective rate of Australian income tax paid by The Star Entertainment Group for the year ended 30 June 2016 is approximately 28% (being tax paid divided by accounting profit).

Difference between timing for accounting and tax

The tax law prescribes when certain amounts are taxable and deductible. Although the amounts are the same for accounting and tax, the timing for tax purposes often differs to that recognised for accounting purposes. This gives rise to timing differences.

‘Assessable income’ are amounts taxable on a receipts basis for tax purposes which are recognised over a period of time for accounting purposes.
The difference in depreciation expense for accounting and deduction for tax predominantly relates to depreciation rates.
Other deductible expenses are a net amount that includes non-deductible items such as entertainment, and the difference in timing of liabilities for expenses (eg. provisions and accruals).

Effective rate of tax paid

The effective rate of Australian income tax paid by The Star Entertainment Group for the year ended 30 June 2016 is approximately 36% (being net tax paid during the year divided by accounting profit). However, as discussed above at Corporate income tax, the timing of all payments of income tax (instalments and final payments/refunds) in respect of a financial year does not take place within the financial year to which they relate. In reality, total tax paid for the 2016 Australian income tax return is $77.9m, or 27.9% of accounting profit.

This is due to a portion of the tax being paid in the first half of the following financial year. Note F2(iv) of our 2017 Annual Report (see extract below), shows where the amount of tax payable at 30 June 2016 was $20.8m, which was net of $59.6m instalments paid in the 2016 financial year. In the first half of FY2016 a further $18.2m of tax was paid which related to the FY2016 financial year, being the last instalment and the final balancing payment, in accordance with the ATO’s tax payment due dates.

Reconciliation to statutory accounts

Taxable Corporate Taxpayers are required to lodge their tax returns six and a half months after their year-end and The Star Entertainment Group generally releases its Statutory Accounts two months after year end. Consequently, while the tax calculation performed for the Statutory Accounts is materially correct based on enacted tax law at the time it is not same as the lodged tax return. For this reason, a true up adjustment is required for the difference between the tax provision at Statutory Accounts and the tax return (as illustrated in the table right).

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Current tax per statutory accounts	$80,219,312
Current tax per ITR	$77,877,594
(Under)/over	$2,341,718

¹ As reported at Item 6(S) of the FY2016 ITR
² As reported at Item 7(T) of the FY2016 ITR
³ Refer to Note A2 page 80 of The Star Entertainment Group’s 2016 Annual Report
⁴ Refer to Note A3 page 80 of The Star Entertainment Group’s 2016 Annual Report
⁵ Refer to Note A5 page 81 of The Star Entertainment Group’s 2016 Annual Report
⁶ Refer to page 74 of The Star Entertainment Group’s 2016 Annual Report, adjusted for profit and losses relating to overseas entities.
⁷ Sum of amounts reported at Item 7(W), (Z) and (X) of the 2016 ITR, reduced for accounting depreciation shown separately.

Taxes Paid In The 2016 Financial Year

Taxes Paid In FY2016 - Contributions

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