SkyCity Loses Fight over $10M SkyCity Adelaide Tax Bill

This decision, delivered on October 16, upholds a previous judgment by the Court of Appeal through which SkyCity tried to fight the tax bill. It effectively resolves a long-standing disagreement over the inclusion of loyalty-based gaming credits in revenue calculations.

Related: SkyCity Faces Fine of Tens of Millions over AML Failures at Adelaide Casino

The legal battle originated from a disagreement over the Casino Duty Agreement, signed between SkyCity Adelaide and the Treasurer of South Australia in October 1999. The casino operator contended that credits on gaming machines, when played by customers after converting loyalty points, should not be treated as taxable revenue.

However, the South Australian Court of Appeal disagreed, ruling that these gaming credits must be counted as part of the casino’s revenue. The High Court’s latest decision supports that earlier judgment, confirming that loyalty points converted into gaming credits fall under the scope of taxable revenue under the Casino Duty Agreement.

As a result of the High Court’s ruling, SkyCity Adelaide is now obligated to pay the additional amount in casino duties covering the period until January 2024. The company had previously acknowledged that it would also need to pay AUD2.8 million (US$1.87 million) in extra casino duties stemming from the Court of Appeal's earlier ruling. This portion of the judgment was not appealed by SkyCity and is also now payable.

The dispute over the interpretation of the Casino Duty Agreement and how casino revenues should be calculated had been a point of contention for several years. Both SkyCity Adelaide and the South Australian government had agreed to seek a formal ruling on the issue from the courts.

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Preparing for the Worst

The legal matter involved complex interpretations of how loyalty points, which are awarded to frequent customers and can be converted into gaming credits, should be classified under the rules governing casino tax liabilities. SkyCity had argued that these points did not constitute direct revenue, but the courts ruled otherwise.

SkyCity has already made provisions in its financial results for the fiscal year 2024 to cover the additional liabilities. The company disclosed that it recognized a provision of AUD13.1 million (US$8.76 million) to account for the anticipated outcome of the legal dispute.

However, there remains a further unresolved issue relating to the interest payable on the outstanding casino duties. The total amount of interest owed will be determined by a judge in the South Australian Supreme Court, with SkyCity warning that the penalty interest could potentially reach AUD25.3 million (US$16.92 million).

The ruling represents a significant financial setback for SkyCity Adelaide, as it not only faces immediate payments of AUD13.1 million but also the possibility of substantial interest liabilities. While the final determination on the interest is still pending, the company’s acknowledgment of the worst-case scenario of AUD25.3 million suggests the total financial impact could be much higher than initially expected.

SkyCity Adelaide is one of the key players in the Australian casino market, operating under strict regulatory frameworks that govern its tax obligations and revenue reporting. The High Court's decision will likely set a precedent for how loyalty points and other non-traditional revenue streams are treated under similar agreements in the future, not just in South Australia but potentially across other Australian jurisdictions.

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