Fuel Schemes Stakeholder Group key messages 11 August 2022

Welcome and introductions

Tony Poulakis welcomed members to the annual meeting of the Fuel Schemes Stakeholder Group (FSSG).

No conflicts of interest raised by members.

Minutes of the previous meeting of 15 September 2021 had been published on ato.gov.au and action items had been finalised.

Compliance focus areas

Results from 2021–22, Craig Powell

The 2020–21 outlay for fuel tax credits (FTC) was approximately $7.5 billion.2021–22 figures had not yet been released but were expected to reduce due to the temporary reduction in the fuel excise rate. The FTC population had slightly increased, trending in line with previous years. Excise Centre continued to monitor the development of electric vehicles and alternative fuel technologies for potential impacts on the fuel tax credit scheme. The year had been impacted by natural disasters and COVID-19.

The overall compliance risk for fuel tax credits was considered to be low, despite some issues relating to GPS-based technology claims discussed at the 2021 FSSG meeting. Excise Centre was working with clients regarding the use of methodologies and increased assurance evidence. Issues around supporting documentation for on/off road apportionment for road transport operators, particularly in relation to GPS/telematics-based claims continued. These issues relate to lack of corroborating evidence to support claims made, sample testing not adequately reflecting fleet composition (for example, different makes of vehicle) or business records not supporting GPS-based data.

There had been an increase in FTC fraudulent claims aligned with the ATO’s Operation Protego which related to opportunistic claims on various labels of the business activity statement (BAS). These claims continue to be stopped prior to processing. ATO action to date has included adjustments to claims, penalties and criminal investigations.

Analysis of closed compliance cases suggested that 20% of errors related to the use of incorrect rates and calculation errors. The ATO would continue to address these issues through awareness and communications.

The ATO had previously advised that a new methodology for calculating the fuel tax credit tax gap was being developed; however due to data issues, the current tax gap would be formulated using the current methodology. Current indications are that the tax gap will remain low. Tony Poulakis noted that the fuel tax credit tax gap, although relatively small, comprised both overclaims and underclaims. The ATO provided calculators and safe harbours to assist clients in making correct claims to address underclaiming. The recent taxpayer alert and work on promoting the use of product and class rulings was designed to reduce overclaims.

Focus areas for 2022–23, Mark Arnold

At the 2021 FSSG meeting, the ATO advised that fuel tax credit web content would be streamlined and updated. This work has been delayed and was now scheduled for early 2023. Minor updates would continue to be made as required.

The ATO continued to explore potential safe harbours and the expansion of the Basic Method for Heavy Vehicles (BHVM) to larger claimants. This work had been paused due to the impact of the temporary fuel excise rate reduction but will be resumed in the coming months. A targeted mailout to back-claimants that appear to have relied on GPS data (potentially with insufficient checks and evidence) had also been deferred and would likely occur toward the end of 2022.

To promote greater certainty, the ATO continues to encourage early engagement by agents, technology providers and assurance providers through Product or Class Rulings to obtain assurance on methodologies where GPS or telematics are used.

It was noted that at the 2021 FSSG meeting, members had discussed the publication of Practical Compliance Guideline PCG 2021/2 Fuel tax credits – basic method for heavy vehicles and feedback that the ATO needed to consider adjustment to the thresholds of $10,000. As a follow up to that discussion, Richard Calver queried whether any further analysis had been undertaken by the ATO on the take up rate Michael Hughes advised that it was difficult to measure take up of safe harbours as claims made on a BAS only referred to a single amount – how the client arrived at that amount was not known. The ATO had carried out some preliminary research ahead of publication of the PCG to establish a benchmark of client claiming methodologies, as well as client willingness, to consider applying the PCG safe harbour. Feedback received from clients consulted indicated an interest in utilising the safe harbour. The ATO was considering follow up calls to measure actual take up but were also progressing with previous feedback in relation to increasing the threshold of $10,000 and also potentially embedding the safe harbour calculation in the fuel tax calculator.

Members discussed difficulties in changing embedded practices by clients (such as relying solely on the FTC calculator) and noted that the ATO would seek to include safe harbours and processes into calculators. Members noted issues around diversity of operations creating challenges in striking a balance between protection of revenue and benefits to clients. Tony Poulakis encouraged members to provide feedback and suggestions for any improvements to assist clients in calculating their claims.

ATO focus topic – Fuel excise reduction

Michael Hughes noted that the temporary reduction in fuel excise rates affected all members and advisers and had been implemented at short notice and applied immediately. He acknowledged industry concerns regarding the impact and disruption caused by the changes on all stakeholders.

The 50% reduction on fuel excise rates across all petroleum products, other than aviation fuel, would cease on 29 September 2022, when rates would return to the full excise rate and would incorporate indexation of excise rates during the 6 month reduction period. He noted that the key messaging at commencement of the rate reduction was that for clients claiming only off-road use, the FTC rate was effectively halved; however for those travelling on public roads, heavy vehicles, the fuel tax credit rate reduced to zero. A transitional issue occurred at implementation for those clients acquiring fuel which reflected the full excise duty rate but then only able to claim fuel tax credits at the reduced rate. The ATO had introduced a concession for clients impacted by this aspect of the change to defer payment of any arising BAS debt until the end of the temporary reduction, where rates would have the reverse cashflow effect, that is, claiming at the full FTC rate but potentially acquiring fuel which reflected the lower fuel excise rate.

Bill McKinley had requested an update of the take-up of this concession, both in relation to the fuel tax credit / fuel excise rate issue and by fuel tax credit claimants more generally. Michael advised that only one client had been identified who had applied for the specific concession relating to fuel tax credit / excise rate disparity. Work was also being carried out to identify the number of fuel tax credit claimants who had applied for payment arrangements generally, that is, not solely due to the transitional impact of the fuel excise reduction at commencement. The ATO was unable to provide the statistics prior to the meeting, mainly due to the final due date for most quarterly BAS lodgments occurring after the meeting date. Tony Poulakis noted that more granular data, when available, would assist in understanding which products had contributed to debt to obtain insights into the impact of the higher fuel prices on industry.

Bill McKinley had also sought advice on whether the payment deferral concession could be made available, and communicated as being available, to any business having trouble paying its BAS due to the fuel tax credit issue, not just those impacted by the transitional arrangements. He noted that the principal issue for trucking organisations was the inability to change contract prices, specifically where rate adjustments were determined by the terminal gate price of fuel. Tony Poulakis noted that the concession provided by the ATO was made in accordance with existing payment deferral policy. This concession related to the unique circumstances where claimants have been specifically impacted during the transition to reduced fuel excise rates. He noted that this concession could not be provided more generally across industry but that all taxpayers can enter into payment arrangements where they are having difficulty paying their debts.

Michael Hughes noted that analysis to date on the number of clients taking up concessional arrangements had focused on road transport operators. The ATO would look at the rules and filters being applied to ascertain whether a broader set of industries could be included but noted that the initial information may relate only to road transport operators. He noted that figures provided in the week of 15 August 2022 may not include all those who had lodged within the previous seven days but would undertake to provide a supplementary set of figures within a month of the FSSG meeting which would provide a fuller set of data.

The ATO had a communications strategy for the end of September when the fuel excise rate reduction ceases. Michael Hughes advised that there would be early engagement and that web content would be updated. A direct email / letter campaign for those clients claiming fuel tax credits, paying fuel excise, or engaged in the Product Stewardship for Oil Program would be undertaken to put those clients on notice of the change.

The FTC calculator would be updated and messaging would occur on social media channels. The Marketing and Communications team were keen to engage with industry to provide industry-specific articles. The ATO would be consulting with FSSG members as the messaging was formulated and encourage the promotion of messaging through industry forums and bulletins.

Richard Calver queried whether calculations would deal with a potential increase in the Road User Charge. Michael Hughes advised that the ATO has not been advised or held discussions with the relevant department at this stage.

Bill McKinley and Richard Calver emphasised the impact of the introduction of the reduction in the fuel excise rate on Australian Trucking Association and NatRoad clients, noting that this had been the most significant issue their associations had dealt with in recent months. They noted that the reduction in the fuel excise rates had reduced the amount of fuel tax credits that could be claimed for on-road travel to nil.

Focus topic –Transport Certification Australia

New member, Transport Certification Australia (TCA), John Gordon and Gavin Hill

John Gordon and Gavin Hill provided an overview of the work of TCA. Gavin advised that TCA was an independent not-for-profit entity with government oversight and ownership through Austroads. It was responsible for the administration of the National Telematics Framework and provided assurance services to underpin telematics applications and associated information and data services.

The Framework involved the roles of TCA, government agencies and other parties that use digital technologies and data, providers of digital technologies and associated services and operators who use digital technologies recognised through the Framework.

The overriding objective of TCA was to recognise technology providers that meet standard that are recognised by industry and government to ensure innovative performance-based approach to technology. They noted that not all providers elected to be certified – it was an open market with voluntary arrangements. Transport operators and providers are moving to a better assurance mechanism around GPS positional data for the purposes of fuel tax credit claims.

The TCA was introducing use of a new service – Telematics Positional Accuracy Assurance to assess and verify positional accuracy of telematics devices, oversight the in-service performance of those devices and manage data collected from telematics devised by certified Application Service Providers. This would provide a way to deliver stronger assurances in the use of positional data for FTC calculations and may be accepted for ATO rulings purposes. Members wishing to learn more about TCA’s offerings were encouraged to contact the TCA for further discussions.

Member comments

Andy Larmour of KPMG advised of an increase in the number of organisations approaching KPMG to get improved governance in the fuel tax credit space. He noted that the publishing of the Taxpayer Alert may have provided extra emphasis.

Simon Whyte of EY queried whether there were any plans for the introduction of quotas approaching the end of September when the fuel excise rate reduction would cease. Tony Poulakis advised that an initial risk assessment had been carried out and quotas were not likely at this stage. Where quotas were being introduced, the ATO would provide ample notice.

Peter Quattrocchi of Pitcher Partners queried whether the treatment for BAS claims following Operation Protego would impact on refunds for legitimate clients. Tony Poulakis advised that the ATO built risk models and flags in the system to hold up refunds considered as high risk. As a result of Operation Protego, those risk models were being updated however he noted that this was unlikely to impact on legitimate claims.

Richard Calver of NatRoad advised that there were significant issues for industry related to the fuel excise rate reduction and noted that there were major industry exits due to cash flow. Communications from the ATO regarding the fuel excise rate being reintroduced need to be well in advance of the reduction ceasing.

Edmund de Wet of NatRoad advised he had been liaising with owner/operator companies finding it difficult to recover costs associated with the fuel excise rate reduction.

Darryl Daisley of AMEC provided an update of issues in the mining industry, noting that industry was seeing a high fuel price particularly in remote regional areas. He noted a positive sense in the industry generally however there was concern about the impact of global interest rates which may dampen investment in the short to medium term. Diversity was a current topic in mining. A big issue for the industry was concerns around skills shortages and lack of personnel, with approximately 30,000 to 40,000 personnel short across the mining industry. AMEC would be keen to publicise the return to the full fuel excise rate widely and noted that common errors were around claiming the correct rate aligning to the acquisition of fuel.

Melwyn Noronha of Shipping Australia Limited asked for an update about the excise deregulation measures particularly relating to bunker fuels. Tony Poulakis advised that the excise deregulation measures had been announced by the previous government in the March Budget. These were now considered to be 'announced but unenacted measures', which were being considered by government. The ATO is awaiting any further announcements by the government.

Shahana McKenzie of Bioenergy Australia advised that the Bioenergy Road Map was released by former Minister Angus Taylor in October 2021. This provided a long-range view across three pathways. She noted that renewable diesel was getting traction, with the first shipment taking place in previous weeks with a crane company now using renewable diesel. This meant a 100% drop in diesel, so it did not need blending as with biodiesels. Bioenergy Australia was working with the Department of Climate Change, Energy, the Environment and Water on fuel standards as a standalone for renewable diesel. Large construction firms were also adopting renewable fuels.

Other business

Richard Calver referred to a recent Productivity Commission report – Trade and Assistance Review 2020–21External Link which advised:

• Given that Australia’s FTC system is consistent with Australia’s general non-taxation of inputs to production, is available to all industries, does not reduce the price of fossil fuels below their supply price (but simply reduces the degree to which tax raises the price of fossil fuels above their supply price), and does not provide a relative price advantage to liquid fossil fuels over alternative fuels, the Commission does not regard FTCs as a form of industry assistance.

He noted that this reflected the view of NatRoad in relation to the fuel tax credit scheme.

Meeting close

Tony Poulakis thanked members for their assistance and contributions throughout the year and their participation at the meeting.

The meeting closed at 4:00pm.

Action items

Action item	11082022-2-1
Due date	30 October 2022
Responsibility	Mark Arnold, ATO
Action item details	The ATO to provide a tax gap time series including the fuel tax credits tax gap being published in 2022, as well as a breakdown of the gap between estimated underclaims and overclaims.

 

Action item	11082022-2-2
Due date	15 September 2022
Responsibility	FSSG members
Action item details	The ATO to convene a meeting with a sub-group of FSSG members to explore opportunities to expand the application of the PCG 2021/2, particularly for road transport operators in the hire and reward industry. FSSG members to advise the ATO of interest in being part of this group.

 

Action item	11082022-3-1
Due date	19 August 2022
Responsibility	Anthony Barnard
Action item details	ATO to provide to FSSG members: the number of FTC clients that had taken up the specific ATO concession relating to the fuel tax credit / fuel excise rate transitional issue; and the number of FTC clients seeking deferral of BAS debts generally.

Attendees

Attendees list

Organisation	Attendees
ATO	Tony Poulakis (Chair), Excise Centre, Private Wealth
ATO	Craig Powell, Excise Centre, Private Wealth
ATO	Mark Arnold, Excise Centre, Private Wealth
ATO	Michael Hughes, Excise Centre, Private Wealth
ATO	Michelle Scott, Excise Centre, Private Wealth
ATO	Rowena Troth (Secretariat), Excise Centre, Private Wealth
AMEC	Darryl Daisley
Ampol Australia Petroleum Pty Ltd	Jenny Park
Australian Petroleum Production and Exploration Association	Simon Staples
Australian Trucking Association	Bill McKinley
Bioenergy Australia	Shahana McKenzie
Bus Industry Confederation	Madonna Woodhead
Civil Contractors Federation	Duncan Sheppard
Deloitte	Laura O'Brien
EY	Simon Whyte
KPMG	Andy Larmour
Minerals Council of Australia	Ross Lyon
National Farmers' Federation	Ash Salardini
NatRoad Limited	Edmund de Wet
NatRoad Limited	Richard Calver
Pitcher Partners Advisory Pty Ltd	Peter Quattrocchi
Shipping Australian Ltd	Melwyn Noronha
Transport Certification Australia	Gavin Hill
Transport Certification Australia	John Gordon
Treasury	Evan Moriatis
Treasury	Tracy Richards

Apologies

Apologies list

Organisation	Members
ATO	Anthony Barnard, Excise Centre, Private Wealth
ATO	Claudia Bianco, ATO Corporate
Australian Institute of Petroleum	Paul Barrett
BAS Agent	Cate Kemp
Commonwealth Fisheries Association	Andrew Sullivan
Maritime Industry Australia Ltd	Teresa Lloyd
PwC	Gary Dutton
PwC	Paul Cornick
Ryan Financial Services	Chris Sant

Summary of key topics discussed at the Fuel Schemes Stakeholder Group meeting 11 August 2022.