Tabcorp and NSW government’s delicate dance as Gill hunts the trifecta

When NSW treasurer Daniel Mookhey delivers his third state budget on Tuesday, there is unlikely to be any mention of a rise in Point of Consumption Tax (POCT) or the ongoing review of Tabcorp’s deal in the state.

This time last year, speculation was rife that Mookhey would look to lift the NSW POCT rate from 15 to 20 per cent, much to the chagrin of racing administrators, wagering executives and professional punters.

However, a week out from the 2024 budget, the treasurer announced a review into Tabcorp’s licensing agreements in NSW after receiving a proposal from the wagering giant to create what it calls a ‘level playing field’ – although its rivals beg to differ.

Put simply, it wanted a similar deal to what it had achieved in Victoria and Queensland and was willing to pay a considerable fee – said to be around $700 million  – to buy out of its current exclusivity deal which runs until 2033.

As had happened in Victoria and Queensland, it was expected that such an agreement would also result in a rise in the rate of POCT collected by the government. But the timing of the Tabcorp review had kicked the debate over that rise further down the road.

A year down the line, Tabcorp no longer supports this tax rise, while a new management, headed by CEO Gillon McLachlan, has placed the reform of its NSW deal down the list of priorities, with a view that it can be tied into the broader goal of a national tote.

At the time the Tabcorp review was announced last year, both Mookhey and Gaming and Racing Minister David Harris spoke strongly of the need to assess any new agreement in the context of the greater public interest.

“The NSW government will apply strict scrutiny to Tabcorp’s proposal. Change will happen if it is clear that the public will be better off,” Mookhey said. “Gambling companies should always be paying their fair share.”

The lack of urgency to review the deal, from both the government and Tabcorp, indicates that the Minns government is taking a hands-off approach to this reform.

Given the political fallout of the Rosehill inquiry, it would not be surprising to see Mookhey and Harris keen to remain at arm’s length from anything to do with racing politics, and The Straight believes the racing industry has been encouraged to foster its own solution to what any new Tabcorp deal may look like.

The working relationship between Racing NSW CEO Peter V’landys and McLachlan is said to be strong, with a sense of common purpose on these particular challenges.

McLachlan has made the establishment of a national tote a key target of his reform of the company and would be able to leverage the political heft of V’landys to achieve that aim – an initiative that the Racing NSW CEO has previously supported.

Key to realising the value of a national tote would be to utilise the tote derivative products used by Tabcorp’s rivals to aid its liquidity. It is understood that Tabcorp is exploring incentives, “carrots and sticks” as one source put it, to try to make this become a reality.

Also playing a role in negotiations between Tabcorp and the NSW government are the restrictions applied to Tabcorp shareholdings under the NSW Totalizator Act.

NSW dodges Point Of Consumption tax rise, for now

New South Wales treasurer Daniel Mookhey has not included an increase in Point Of Consumption Tax in his 2024/25 state budget, with a decision on any new tax regime delayed until after the review of the state’s deal with Tabcorp.

The StraightBren O’Brien

Under a key aspect of the Act, initially implemented in 1997 to stop the then-Victorian TAB buying out NSW, and then re-implemented after the Tabcorp takeover in 2004, no person can have voting power in the company above 10 per cent without obtaining the written consent of the relevant government minister in NSW.

Tabcorp acknowledged last year that this was acting as an impediment to investment in its company.

Were McLachlan to achieve the trifecta of a revamped NSW deal, a national tote and the lifting of the shareholder cap, it would be a lucrative result. It would be especially important considering it attributed a substantial chunk of a $1.38 billion impairment in the last financial year to challenges in its NSW business.       

Critics of the possible POCT rise feel they may have dodged a bullet last year, but this year have been outspoken in their insistence that a further rise would be an almost fatal blow to wagering and racing funding. They have plenty of evidence to lean on.

Victorian wagering is down 5 per cent year-on-year after POCT rose to 15 per cent on July 1, 2024. That is the exact percentage that wagering industry insiders predicted it would fall under the new tax regime. It’s almost like these people do predictive analytics for a living!

Over the past two years, all state governments have had to temper their forward estimates of POCT revenue, as rising margins passed on by bookmakers have disincentivised turnover.

Tabcorp NSW deal under review as it plots ‘level playing field’

The funding of racing in NSW is set to undergo a considerable shake-up with State treasurer Daniel Mookhey revealing that he is reviewing the long-term exclusivity agreement with Tabcorp, set to expire in 2033.

The StraightBren O’Brien

So that’s why when Mookhey rises to speak in NSW parliament, a POCT hike won’t be on the agenda. While the government’s desire for a solution to the Tabcorp issue to be found between the parties will ensure it won’t ask the Tabcorp licence question until it knows the answer.

Where that leaves the rest of the wagering industry, battling falling turnover and challenging business conditions, in terms of the New South Wales market, is yet to be seen.

But with a rising share price, and the wind at his back, McLachlan could be set for a bonanza.