Under the deal with the NSW government, casino pokies duties will rise to 21.91 per cent in July 2024, but a marginal rate regime used in Victoria will not come in for seven years.
The Star will be required to pay more tax as its revenue increases, Treasurer Daniel Mookhey said on Friday.
In return for the reprieve, the gaming venue has agreed to guarantee 3000 jobs for the seven-year period.
The previous Perrottet government announced a move to institute Victoria's scheme by July 1, levying duties of up to 60 per cent to bring casino taxes into line with those at hotels and clubs.
But Mr Mookhey said casino data and independent assessment showed the policy would have shuttered the casino.
"You can't collect tax from a dead business," he told reporters.
"We have carefully designed this arrangement to collect every dollar of available tax that Star can afford to pay."
The casino's owner, Star Entertainment Group, has faced regulatory issues and fines exceeding $200 million in recent years after inquiries in NSW and Queensland exposed illegal behaviour.
In April, the ASX-listed company said it would sack hundreds of employees and freeze salaries after raising $800 million at a deep discount to boost its balance sheet.
The United Workers Union said delaying the higher levy would help protect jobs at the casino.
"This in-principle agreement is a win for our members and all workers at the casino because it has created a much-needed level of certainty that wasn't there yesterday," UWU deputy director Imogen Beynon said in a statement.
"Jobs at The Star Sydney are good, stable, union jobs which have a level of security, dignity and fair wage rates and conditions not seen in the wider hospitality industry."
Negotiations with NSW's other casino operator, Crown, are ongoing.
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