17.  Accounting and taxation issues

Agencies must assess the likely accounting treatment to be used for privately financed projects. A statement of accounting treatment must be prepared, showing balance sheet, operating statement and statement of cash flows.

NSW Treasury is responsible for accounting policy guidelines and should be consulted by agencies when the most appropriate accounting treatment is being considered for a particular PPP transaction.

An updated statement of accounting treatment must be submitted to NSW Treasury after negotiations have been finalised. Before the contract is executed, the agency should obtain a NSW Treasury determination on the accounting treatment and should advise the Auditor-General of the proposed accounting treatment.

Depending on the degree to which government (a tax-exempt entity) is deemed to have assumed commercial risk and control, Commonwealth taxation legislation may adversely affect PPPs. Tax risk is the responsibility of the private party, and NSW Government will not assume or underwrite risk associated with the denial of tax deductions.

For those tax risks that can threaten the viability of a project, agencies may require the private party to obtain a binding ruling from the ATO as a condition precedent to the contract becoming effective.