The Bank of Queensland last week wrote to tens of thousands of customers warning them about its dispute with the Queensland Government's Office of State Revenue.

The dispute is over the levying of Bank Accounts Debits Tax in savings accounts that include a cheque facility.

Until now, the Bank of Queensland had been levying the tax only for cheque withdrawals, but the Office had told the bank to apply the tax to all withdrawals -- including EFTPOS transactions and cash withdrawals.

BADT tax was a major political issue in 1993 after budget papers revealed the state government was about to increase the tax by 10 cents per transaction, and broaden it to include non-cheque withdrawals. The changes were introduced in January 1994.

At the time, Treasurer Keith De Lacy claimed the tax change was revenue neutral, and that the increase had been offset by the abolition of stamp duty on cheques. He said Queensland had not introduced a financial institutions duty similar to other states.

But figures released last week by Shadow Treasurer Joan Sheldon show the tax is a major source of state revenue -- in 1992-93 it collected $72.2 million, in 1993-94 $108.2 million, and she estimates $116 million in 1995-96.

Yesterday a spokesman for Mr De Lacy said these changes had not affected Bank of Queensland savings accounts with cheque facilities because the bank had structured its trading and savings bank arms as separate companies.

He said to rectify this, in September last year the state government, on advice from the Australian Taxation Office, passed The Bank Integration - Bank of Queensland Act to ensure its debit transactions were exposed to BADT tax.

The government believed it was only fair the tax applied equally to all banks and all bank customers, the spokesman said.

But the bank's Chief Executive, Mr Graham Hart, said he had received written confirmation from the Office of State Revenue in May this year that the tax still did not apply. This was after the legislation had been enacted.

Mr Hart said the Office then changed its mind (in September), and told the bank to collect the tax.

He said the bank had challenged the Office's ruling in the Supreme Court -- an outcome was expected soon. In the meantime, the bank owed over $300,000 in BADT tax for November and December which had not been passed on to clients.

In its letter, the bank invited customers to avoid the tax altogether by cancelling the cheque facility on their savings account.

Otherwise customers would be levied the extra tax from December 30th.

Mr Hart said the Bank of Queensland would continue to provide fee free accounts for over the counter transactions and for transactions at the bank's own automatic teller machines.