Methodology

The PSO has 2 sides:

• a levy on producers of new oils and synthetic equivalents that helps fund the program
• a benefit paid to recyclers of used oils and synthetic equivalents.

There is a separate gap analysis for each one. The results are then combined to form a total program compliance gap.

Step 1: Estimate the PSO levy gap

For the levy, we use a bottom-up illustrative method. This extrapolates the compliance levels found in the fuel excise tax gap analysis to the PSO levy, as the populations share key producers.

We estimate the PSO levies hypothetically due using reference to industry-wide compliance results revealed through the fuel excise gap. We use a 3-year average to smooth the variation observed in the fuel excise gap.

Step 2: Estimate the PSO benefit gap

The PSO benefit analysis uses our industry compliance results to inform the program benefit gap. We apply a small uplift to allow for non-detection for oil recyclers that are not subject to compliance activity in a given year. This analysis covers overclaims and missed claims by taxpayers.

Step 3: Combine steps 1 and 2 to estimate the program level gap

We total the results of the PSO levy and benefit gap analyses to arrive at a program level compliance view. This is summarised in Table 2.

Table 2: Summary of estimation process – PSO program gap

Step	Description	2016–17	2017–18	2018–19	2019–20	2020–21	2021–22
1	Estimate the PSO levy gap ($'000)	1,385	1,101	849	1,000	1,210	1,110
2.	Estimate the PSO benefit gap ($'000)	121	224	223	226	264	264
3	Combine steps 1 and 2 to estimate the program level gap ($'000)	1,264	877	626	774	946	846
3.2	PSO program gap (%)	1.0%	0.7%	0.5%	0.6%	0.6%	0.6%

Find out more about our overall methodology, data sources and analysis used for creating our tax gap estimates.

Limitations

We calculate the PSO levy estimate with reference to the compliance levels indicated by the fuel excise gap analysis. We assume compliance levels are similar for PSO producers, given these segments share key producers.

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.

Last year we used data from the PSO Program Annual Report to inform the size of the benefit gap. This year we used ATO data. This has allowed us to attribute benefits in the tax year they relate to instead of the year they were paid. It more accurately reflects compliance with the program for the 2021–22 income year.

Table 4: Current and previous net PSO estimates, 2013–14 to 2021–22

Year	2013–14	2014–15	2015–16	2016–17	2017–18	2018–19	2019–20	2020–21	2021–22
2023	n/a	n/a	n/a	1.26	0.88	0.63	0.77	0.95	0.85
2022	n/a	n/a	0.39	0.39	0.12	-0.05	0.04	0.18	n/a
2021	n/a	1.5	1.3	1.1	1.3	1	0.6	n/a	n/a
2020	1.7	1.5	1.3	1.1	1.3	1	n/a	n/a	n/a