Following publication of Circular 2002-61 questions have been raised regarding the savings provided by salary packaging of annual public transport tickets, or loans for bus/rail ticket loans. This circular is issued by way of clarification.

Agencies would be aware that employees paying less than the top marginal tax rate (47% plus 1.5% Medicare Levy) are unlikely to gain any advantage from sacrificing salary to pay for annual public transport tickets, because the cost of the annual tickets would be subject to Fringe Benefits Tax of 48.5%.

Unless there are overriding reasons for making annual public transport tickets available by way of salary sacrifice, agencies are therefore strongly encouraged to consider direct purchase of such tickets for employees who require them, with employees repaying agencies for the cost of the tickets by way of regular deductions from after-tax pay.

Premier's Department has been advised that, under the direct purchase arrangement, agencies would not be liable for Fringe Benefits Tax, because the Australian Taxation Office considers such annual tickets to be an “expense payment fringe benefit” whose value is reduced to nil because employees repay the cost of the ticket out of after-tax income. The residual interest attributable to the advance or loan made by agencies when purchasing the annual tickets is considered to be a minor benefit not subject to Fringe Benefits Tax, as the notional interest on the advance would generally be less than $100.

Currently annual public transport tickets provide significant savings compared with peak hour daily tickets (up to 57% in some cases). Annual tickets (including Travel Passes) for all bus, rail and ferry transport can be purchased from the CityRail Season Ticket Office located at Wynyard station.

It has been a long-standing New South Wales Government goal to encourage more people to use the State's public transport system and agencies are urged to give consideration to introducing a direct purchase scheme for annual tickets as outlined above. Further information on purchase arrangements and pricing is available from the Season Ticket Office Manager at State Rail.

Contact details are:

• telephone (02) 9224-3652
• facsimile (02)9224-2703, or
• email [email protected]

C. Gellatly
Director-General

Issued(Branch): Employee Relations
File no: PSM/00361
Date: 12 May 2003

This circular has not superseded any other Memorandum/Circular