We use a 5-step top-down method to estimate the fuel excise tax gap.
Step 1: Estimate the total volume available
We estimate the excisable volume available in this order:
- Estimate the volume imported.
- Add the volume produced in Australia.
- Remove the volume exported from Australia.
- Add the volume held in inventory at the end of the previous financial year.
- Remove the volume held in inventory at the end of the current financial year.
- Remove the volume not subject to excise.
Step 2: Estimate average excise rates each year
Next, we estimate the average excise rates by dividing actual revenue by actual volumes, after ensuring that there is no double-counting in the volume data.
Step 3: Estimate theoretical excise liability amounts
We multiply the total volume available by the average excise rate to calculate the total theoretical excise liability.
Step 4: Calculate the fuel excise tax net gap
We subtract ATO fuel excise revenue on an accrual basis using an economic transaction method (ETM) from the total theoretical excise liability to yield the net gap.
Step 5: Calculate the fuel excise tax gross gap
We calculate the tax gross gap by adding our compliance results to the net gap. We calculate the compliance outcomes by taking our compliance case results and allocating them to specific financial years on an accrual basis.
The total excise compliance outcomes are apportioned using the percentage of total excise revenue attributable to:
- petrol
- diesel
- ethanol
- biodiesel
- associated blends.
Summary of the estimation process
Table 2 shows the:
- methodology and dollar amounts for the steps used to estimate the tax gap
- percentage figures for the gross and net gaps.
|
Step |
Description |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
|---|---|---|---|---|---|---|---|
|
1 to 3 |
Total theoretical excise liability ($m) |
17,982 |
18,966 |
19,035 |
19,322 |
19,952 |
17,661 |
|
4.1 |
Less actual excise reported ($m) |
17,538 |
18,716 |
18,769 |
18,705 |
19,461 |
17,363 |
|
4.2 |
Equals fuel excise tax net gap ($m) |
444 |
250 |
266 |
618 |
492 |
297 |
|
5.1 |
Add compliance outcomes and taxpayer adjustments ($m) |
0 |
1 |
0 |
0 |
0 |
0 |
|
5.2 |
Equals fuel excise tax gross gap ($m) |
444 |
251 |
266 |
618 |
492 |
297 |
|
5.3 |
Gross gap (%) |
2.5 |
1.3 |
1.4 |
3.2 |
2.5 |
1.7 |
|
5.4 |
Net gap (%) |
2.5 |
1.3 |
1.4 |
3.2 |
2.5 |
1.7 |
Find more about our overall research methodology, data sources and analysis for How we measure tax gaps.
Limitations
Although the gap methodology is reliable, it does not account for variations due to:
- temperature correction
- timing
- certain adjustments.
There could be errors stemming from non-standard measurement practices for the volumes of fuel products. Given that the volumes of fuel products would vary with temperature, they should always be measured at 15 degrees Celsius to maintain a consistent benchmark. However, Australian Petroleum Statistics volumes may be measured at different temperatures. Survey respondents are not given instructions to correct fuel volumes to 15 degrees Celsius.
A timing difference could arise between when product sales data are reported for compilation in the Australian Petroleum Statistics and when excise data enters our systems.
Assumptions around related volumetric calculations may also have an impact.
Updates and revisions to previous estimates
Each year we refresh our estimates in line with the annual report. Changes from previously published estimates occur for a variety of reasons, including:
- improvements in methodology
- revisions to data
- additional information becoming available.
Figure 2: Current and previous published net fuel excise tax gap estimates, 2010–11 to 2021–22
The changes are set out in Table 3 and shown as a percentage.
Table 3: Current and previous published net fuel excise tax gap estimates (percentage), 2011–12 to 2021–22
|
|
2011–12 |
2012–13 |
2013–14 |
2014–15 |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021-22 |
|---|---|---|---|---|---|---|---|---|---|---|---|
|
2023 program |
n/a |
n/a |
n/a |
n/a |
n/a |
2.5 |
1.3 |
1.4 |
3.2 |
2.5 |
1.7 |
|
2022 program |
n/a |
n/a |
n/a |
n/a |
2.8 |
2.5 |
1.3 |
1.4 |
3.2 |
2.4 |
n/a |
|
2021 program |
n/a |
n/a |
n/a |
1.0 |
1.9 |
1.8 |
1.4 |
0.5 |
2.0 |
n/a |
n/a |
|
2020 program |
n/a |
n/a |
2.1 |
1.0 |
1.9 |
1.9 |
1.3 |
0.5 |
n/a |
n/a |
n/a |
|
2019 program |
n/a |
2.5 |
2.1 |
1.0 |
1.9 |
1.9 |
1.3 |
n/a |
n/a |
n/a |
n/a |
|
2018 program |
0.6 |
2.5 |
2.1 |
1.0 |
1.9 |
1.9 |
n/a |
n/a |
n/a |
n/a |
n/a |
|
2017 program |
0.6 |
2.5 |
2.1 |
1.1 |
1.9 |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
|
2016 program |
0.5 |
2.4 |
2.2 |
0.8 |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |