the TOJV is liable for the cost of rectifying the defect and any resultant damages suffered by Transurban. In this latter category, Transurban lost approximately $1.9 million in toll revenue and incurred $0.6 million in consulting costs. These amounts will be claimed from the TOJV. interactive voice response technology were successfully introduced, but the introduction of natural language speech recognition technology and modifications to the Central Toll Computer System (‘CTCS’) software to automate certain customer service processes which are presently being performed manually was delayed. Extensive investigations of the entire tanked section of tunnel were undertaken subsequent to the failure. As a consequence of these investigations, the TOJV has recommended the installation of a physical restraint at the arch floor joint throughout the tanked section of the tunnel. The purpose of this restraint is to provide a high degree of certainty that no further movements of the joint will occur. The TOJV will meet the cost of this work. Subsequent review has validated annualised savings of $11.2 million, of which a minimum of $7.5 million will be realised in the 2001-2 year. The target for customer service costs for 2001-2 year is $33 million. The previously- established long term target level of $2.2 million per month is expected to be achieved in 2002-03 following changes to CTCS software (see below). As at 30 June 2001 aggregate payments to the TOJV under the C&C Contract remained unchanged for the year at $1,176 million. Further claims of $2 million have been deferred bringing the total claims deferred as a consequence of late delivery to $24 million. The aggregate of paid and deferred claims is equivalent to 99.5 per cent of the contract value. Transurban has advice from Senior Counsel that the concession fees are immediately deductible expenditure. The Company Accounts have been prepared on this basis (see note 4). Deductions in respect of concession fees account for $509.3 million of the Company’s carried forward taxable loss of $809.2 million at 30 June 2001. The Australian Taxation Office (ATO) and Transurban have been unable to agree on the treatment to be applied to concession fees and as a consequence the ATO issued an assessment in respect of the Company’s income tax return for the year ended 30 June 1998. Transurban lodged an objection to this assessment on  16 August 2000 and on 17 November 2000 the ATO disallowed the objection. On 21 December 2000, Transurban lodged an appeal in the Federal Court against the ATO decision to disallow the objection. The appeal is still progressing through directions and discovery processes and no date is set down for hearing of the matter. If the ATO’s position on deductibility of the Concession Notes is confirmed, the after tax internal rate of return for an investor subject to the corporate tax rate will be reduced to approximately 85 per cent of the return which would have been achieved if the Concession Fees were immediately deductible. Following certification on 21 December 2000 of the completion of the Burnley Tunnel and the introduction of full tolls on all sections of the CityLink, the focus of the Company moved to operations and the Company’s ongoing This failure is a defect in the works undertaken by TOJV and under the contract between Transurban and the TOJV, On 19 February 2001, a structural failure in an arch section of the Burnley Tunnel resulted in a full closure of the Burnley Tunnel for nine days. Subsequently, one lane was closed over half the length of the tunnel to allow repair of the failed section. Full three-lane operation was restored on 17 June 2001. Completion of the Southern Link was certified on 21 December 2000, 331 days after the contractual Date for Completion of 26 January 2000. As part of the certification of completion, certain works related to groundwater monitoring and CTCS software were nominated for subsequent certification (Certifiable Works) and a total amount of $4 million was deposited with the State to secure the completion of these works. At 30 June 2001, two items of Certifiable Works remained outstanding and $2.7 million remained on deposit in respect of these items. These items are expected to be completed by 24 August 2001. 27 (a) Commencement of Full Operations (d) Income Tax (c) Construction on the Financial Report of Transurban City Link Limited and Controlled Entity. directors’ report Schedule Burnley Tunnel Failure SIGNIFICANT CHANGES IN THE STATE  OF AFFAIRS Payments