In terms of the Government's Financial Distribution Policy (August 1992), The Treasury recently issued a policy paper on a Tax Equivalent Regime (TER) for New South Wales' Government Trading Enterprises (GTEs). The TER is to apply from 1 July 1994. Under the TER, GTEs will pay the equivalent of Commonwealth taxes (income and sales) to the State.

There are two issues arising from the TER which potentially could affect the costing of SES packages for GTE staff. These relate to the deductibility for FBT payments as is now allowed under the Income Tax Assessment Act from 1 April 1994 and the possible inclusion of sales tax equivalents in the costing of cars provided as part of SES packages.

To ensure that the integrity of the Senior Executive Service is maintained across the whole of the Public Sector, it has been determined that, while GTEs subject to the TER are allowed full deductibility of both fringe benefits and FBT payments, any resulting "savings" are not available to be passed on to SES personnel.

In addition, GTEs are to continue to determine the appropriate sales tax rate on SES vehicles (to determine the FBT liability) on an individual vehicle basis. It is not appropriate for GTEs in the TER to apply sales tax equivalent payments to the costing of cars provided as part of SES packages.

It would be appreciated if you would bring this information to the attention of appropriate staff within your administration.

C. Gellatly,
Director General.

Issued: SES Unit
Contact Officer: Mr Darrel Cummings
Telephone: (02) 228 5520
Date: 27th July 1994