Casino operator SkyCity could be stung with a $38.4m bill after losing a tax dispute

SkyCity will be on the hook for as much as $38.4m after losing a dispute with the South Australian government over the taxation of loyalty points.

SkyCity will be hit with a large bill after losing a dispute over taxation.

SkyCity will be hit with a bill of up to $38.4m after losing an appeal over a taxation dispute with the South Australian government.

The casino operator will have to pay at least $13.1m after the High Court of Australia dismissed its appeal against an earlier decision, which ruled in favour of the SA government’s interpretation of how rewards points generated by the Adelaide Casino’s loyalty program should be taxed.

The State Government, following an investigation by the State Commissioner of Taxation in 2016, argued that given that loyalty points could be converted to gaming credits and then used for further gambling, they should be assessed as gambling revenue.

SkyCity sought to have the matter clarified by the South Australian Supreme Court and last year sought declarations from the court that rewards credits don’t constitute gambling revenue and therefore it should not have to pay duty on them.

The Supreme Court ruled against the gambling company’s interpretation of the relevant legislation, with that decision upheld in the High Court on Wednesday.

SkyCity told the ASX it had made provisions for $13.1m of back taxes it would now be liable to pay.

The company could be liable for a further $25.3m in penalty interest on the outstanding tax payments, with that matter yet to be ruled on.

“The question of the amount of interest payable on outstanding duty remains to be determined by a single judge of the Supreme Court of South Australia at a later date,’’ the company said in a statement.

SkyCity chief executive Jason Wallbridge said the company was looking forward to the resolution of what had been a long-running and complex matter.

In June this year the SA government’s casino regulator restarted a review into SkyCity’s suitability to hold the licence for the Adelaide Casino, after the company accepted a $67m penalty for failing to meet its obligations on a number of fronts under anti-money laundering and counter terrorism financing (AML/CTF) laws.

Financial crimes regulator Austrac brought the claim against SkyCity, saying its failures included allowing “high-risk customers to move millions of dollars through the casino, in ways that made the source and ownership of the funds unclear’’.

“SkyCity also provided services through high-risk channels and to high-risk customers without appropriate risk-based controls,” Austrac said.

“It failed to carry out required checks on 121 customers, including where SkyCity knew customers were the subject of law enforcement interest, or where there were indications that some posed a higher risk of money laundering.

“The casino also failed to establish an appropriate framework to ensure adequate board and senior management oversight of its AML/CTF programs.’’

SkyCity has suspended dividend payouts until 2026 to ensure “headroom” to pay the Austrac fine and other debt arrangements as it warned of lower earnings this year and a bleak outlook for 2025.

SkyCity shares were 2.2 per cent lower at $1.29.

Originally published as Casino operator SkyCity could be stung with a $38.4m bill after losing a tax dispute