Key messages from the Fuel Schemes Stakeholder Group meeting 25 July 2023
Welcome and introductions
Tony Poulakis opened the meeting with an Acknowledgment of Country, welcomed members and called for conflicts of interest, noting that Fuel Schemes Stakeholder Group (FSSG) discussions were not of a confidential nature, with key messages from meetings published on the ATO website. No conflicts of interest were declared.
The FSSG 11 August 2022 meeting key messages have been published on ato.gov.au
There are no outstanding action items from previous meetings.]
2022–23 Results and 202-24 Focus areas
Mark Arnold advised that the overall trends for the 2022–23 financial year are in line with expected outcomes. The temporary excise rate reduction which concluded in September 2022 did have an impact on fuel tax credits (FTC) claims. Prior to the rate reduction, and since the conclusion, claims were trending as per previous years, noting that the mining industry is the largest industry participant in the FTC scheme.
The FTC population is considered relatively stable and consistent. The current state of electric vehicle (EV) take-up and EV technology generally is being monitored given potential impacts on the FTC scheme.
In 2022–23, the overall FTC risk remained low but will continue to be monitored for potential impacts relating to GPS technology claims, unsubstantiated methodologies, incorrect assumptions being made, and where there is a lack of testing to support assumptions.
The FTC label on the business activity statement (BAS) has also been used for fraudulent claims as part of BAS–level fraud identified by the ATO. The ATO continues to work on improving risk models and detection to stop this behaviour.
There has been an increase in label 7c adjustments in the BAS, as a result of clients identifying overclaims made in previous BAS, usually in relation to the excise rate reduction.
Despite some clients self-correcting overclaims, compliance casework in 2022–23 included identification of FTC overclaims during the period of the excise rate reduction, resulting in a high level of voluntary disclosures. The ATO identified instances where contracts that included the provision of fuel were not clear as to which party should be claiming FTCs. Communications were issued to clients to advise of errors made suggesting adjustments be done where appropriate.
The ATO continues to identify issues relating to on and off-road apportionment with the use of incorrect rates, not reconciling litres calculated by the apportionment methodology to litres acquired, not conducting suitable testing to determine burn rates, and using other entity’s apportionment methods without testing to confirm similarity in use. There were issues in relation to claims for battery powered sleeper cabins, differences in eligibility to claim depending on whether a client used cash or accrual accounting and some instances of clients claiming for AdBlue. Audits and reviews carried out have assisted clients with information and education about correct reporting.
The FTC Tax Gap methodology is being reviewed and an updated Tax Gap will be published in the ATO’s Annual Report published in October 2023.
A major component of the FTC risk strategy has been the continuation of early engagement with advisors and the publication of Product and Class Rulings relating to the use of GPS technology and telematics products used in the calculation of FTCs. To date, 2 Product Rulings and 3 Class Rulings have been published on ato.gov.au
The ATO previously advised members of plans to review and update FTC content on the ATO website. Content relating to heavy vehicles was updated in February 2023, however other updates have been paused due to a freeze on publishing pending a release of a new ATO website. FTC content will be reviewed in early 2024 and FSSG members will be consulted as part of that review.
The ATO previously advised of a planned targeted mailout to clients who may have utilised GPS based systems to calculate FTC claims to highlight common issues with those systems, however due to delays caused by COVID-19 lockdowns and weather events the mailout was delayed and the strategy is being reviewed before any further action.
A small survey of businesses and tax agents was undertaken to ascertain interest in expanding eligibility for the current Practical Compliance Guide (PCG) 2021/2 (Fuel tax credits – basic method for heavy vehicles). It was found that clients either used the ATO’s FTC Calculator or their own method and were not interested in changing. The ATO will be following up with agents who expressed interest in the current PCG to build further awareness.
Initial modelling of the temporary excise rate reduction showed some clients had continued to claim at the full rate. A sample set of cases identified a lack of awareness of changes as a key contributor to the use of incorrect rates. The ATO undertook a range of communications activities to remind claimants of the change in FTC rates. Some issues around use of the apportionment method and backclaiming have been identified and these have been included in the risk treatment strategy for 2023–/24.
The 2023–24 plan will continue to support most claimants who claim correct amounts. The ATO will continue to liaise with agents and GPS providers for ongoing assurance of governance and consider strategies to further educate clients.
Other issues identified in relation to the misuse of public guidance included:
- Where agents and entities claim they are using ATO-accepted burn rates which have been approved for other entities. Mark reminded members that unless the PCG 2021/2 was being used, fuel burn rates used to support FTC apportionment methodologies should be supported by an entity’s own evidence and testing.
- The use of ATO simplified methods such as the total cost of fuel being divided by the average price per litre being applied by clients who were ineligible, with those methods only relating to clients who claim less than $10,000 of FTCs annually.
- Incorrect application of PCG 2016/11 Fuel tax credits – apportioning taxable fuel used in a heavy vehicle with auxiliary equipment. This included incorrectly combining an apportionment methodology plus the safe harbour for a vehicle; claiming 5% for battery powered sleeper cabin air-conditioning units where there is no entitlement and failing to limit claims to 10% in relation to refrigerated trailers (even if a vehicle may be moving multiple trailers).
The ATO is noting an increase in the use of hybrid vehicles and will be monitoring that to determine the potential impact on apportionment in relation to data captured by GPS telematics.
Darryl Daisley advised that the ATO had previously issued a 'common errors in calculating and claiming FTCs'. Industry supported a revised version of this type of information which was found to be valuable for members.
Anthony Harmer noted the increase in costs for clients to access raw data for telematics-based calculations. At times that cost far outweighs the additional benefits of apportioning for off-road use. Various industries are looking at possible solutions, for example, installation of low-cost devices in fleets to access data more cost-effectively.
Action item |
25072023-3-1 |
Due date |
October 2023 |
Responsibility |
Rowena Troth, FSSG secretariat |
Action item details |
Following the release of the updated FTC Tax Gap in October 2023, ATO are to arrange an out of session meeting for interested FSSG members to discuss the updated tax gap methodology. |
Action item |
25072023-4-2 |
Due date |
September 2023 |
Responsibility |
Mark Arnold, ATO |
Action item details |
The ATO to work with Marketing and Communications staff to develop an updated 'common errors in calculating and claiming FTCs' for distribution to FSSG members. |
Industry updates – Roundtable
Gary Dutton, PwC noted that some clients are continuing to rely on burn rates established some years ago. It is important to ensure that clients are aware that those burn rates can continue to be relied on while considered to be fair and reasonable, however there is a requirement for burn rates to be revalidated within 5 years.
Andy Larmour, KPMG noted that while the capture of data becomes more sophisticated, calculation can be less sophisticated. He observed that technology is advancing and assisting with claims. In relation to processing governance, Andy referred to selected organisations completing combined assurance reviews for GST and income tax. Consideration should be given to ultimately incorporating FTC in future assurance approaches. FTC could also be included to provide similar manuals and workflows to assist staff new to FTC calculation and claiming. KPMG has also noted errors in relation to claims for AdBlue that appear to be caused by clients not reviewing data prior to completing claims.
Simon Whyte, EY supported earlier comments about the expense of obtaining GPS data. He noted that it would be useful for the FSSG to include more telematics providers as EY find clients are being advised by providers that the GPS records are sufficient for FTC claims.
Samuel Marks, NatRoad noted impacts caused by the sudden reduction in rate changes in 2022.
Darryl Daisley, Association of Mining and Exploration (AMEC) noted the increase of activity in the critical minerals area. AMEC has increased in membership, with a core membership in small to medium explorers and producers. Diesel fuel remained critical to the explorers and FTCs were still valuable to these entities. As producers moved to being operational, fuel consumption has increased. Darryl noted sensitivities in contracts as to which entity was entitled to claim FTCs. Members discussed awareness in the market of the ability to claim FTCs and noted that those who are new to the industry not maximising claims. Tony Poulakis offered assistance from ATO Marketing and Communications to assist associations with messaging to share with their members to increase awareness.
Nikki Hannaford, BAS Agent representative raised the issue of indexation rate changes not aligning with regular BAS reporting periods. Anthony Barnard advised that indexation was introduced in 1983 and related to the date fuel excise was indexed. This predated the current FTC scheme. Members noted that tax policy is the responsibility of the Treasury and transport policy, including the Road User Charge, is the responsibility of the Department of Infrastructure, Transport, Regional Development, Communication and the Arts. Michelle Scott advised that safe harbour arrangements are available for those claiming less than $10,000 in FTCs per year, where rates used are those at the end of BAS period. Nikki advised that some business software includes an FTC calculator which is automatically updated when rates changed.
Gavin Hill, Transport Certification Australia (TCA) advised members of the assurance and certification services provided to telematics providers and noted that telematics are becoming more sophisticated. TCA are seeing a shift not just from GPS-based records but including an amalgam of different data types being collected from vehicles. He noted that there may be opportunities in the future to use different data types to overcome some of the issues discussed by FSSG members.
Other Business
William Reid reminded members of the draft legislative instrument and supporting explanatory statement for LI 2023/D14 which was distributed to FSSG members on 19 July 2023 and is available for comments to be provided by 5 August 2023.
Claudia Bianco reminded members that the new FTC rates (because of indexation) will be updated on 26 July 2023 to take effect from 1 August 2023. The ATO will provide the updated rates to FSSG members.
Rowena Troth advised FSSG members that a draft Charter is being finalised for the FSSG and will be distributed to members for consideration and endorsement out of session.
Meeting close
Tony Poulakis thanked members for their participation and their ongoing engagement throughout the year.
Attendees
Organisation |
Attendees |
|---|---|
ATO |
Tony Poulakis (Chair), Small Business, Excise Centre |
ATO |
Anthony Barnard, Small Business, Excise Centre |
ATO |
Claudia Bianco, ATO Corporate |
ATO |
Mark Arnold, Small Business, Excise Centre |
ATO |
Michael Hughes, Small Business, Excise Centre |
ATO |
Michelle Scott, Small Business, Excise Centre |
ATO |
Rowena Troth (Secretariat), Small Business, Excise Centre |
ATO |
William Reid, Small Business, Excise Centre |
Association of Mining and Exploration Companies |
Darryl Daisley |
Australian Trucking Association |
Christopher Wren |
BAS Agent Representative |
Nikki Hannaford |
Deloitte |
Nick Boland |
EY |
Simon Whyte |
KPMG |
Andy Larmour |
KPMG |
Anthony Harmer |
Minerals Council of Australia |
Ross Lyons |
National Road Transport Association |
Samuel Marks |
Pitcher Partners |
Peter Quattrocchi |
PwC |
Gary Dutton |
Ryan |
Jordan LoRusso |
Shipping Australia Limited |
Jim Wilson |
Transport Certification Australia |
Gavin Hill |
Apologies
Organisation |
Member |
|---|---|
Ampol |
Megan Kirkby |
Australian Institute of Petroleum |
Nathan Dickens |
Australian Petroleum Production and Exploration Association |
Simon Staples |
Australia Trucking Association |
Bill McKinley |
Bioenergy Australia |
Shahana McKenzie |
Bus Industry Confederation |
Roz Chivers |
Civil Contractors Federation |
Duncan Sheppard |
Commonwealth Fisheries Association |
Andrew Sullivan |
EY |
Kylie Norman |
Maritime Industry Australia Limited |
Suzannah Rowley |
National Road Transport Association |
Edmund de Wet |
Ryan |
Chris Sant |
Shipping Australia Limited |
Melwyn Noronha |
Transport Certification Australia |
John Gordon |
Treasury |
Joshua Toohey |