Fuel tax credits gap 2018-19
This information is for historical purposes only. If you require previously published content for past estimates, please email taxgap@ato.gov.au.
This estimate for the fuel tax credits gap relates to the 2018-19 financial year.
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This gap forms a part of our overall tax performance program.
Fuel tax credits provide businesses with a credit for the excise or customs duty included in the price of fuel they use in the ordinary course of operating their business.
The fuel tax credit gap arises from taxpayers not claiming their correct credits. As the fuel tax credits system is voluntary, there is potential for taxpayers being overly conservative in claiming. That is, eligible taxpayers might underclaim or not make a claim, which results in a negative gap.
For 2018–19, we estimate a net gap of −0.1% or −$7.4 million. This means that over 99% of fuel tax credits were correctly claimed.
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Trends and latest findings
The fuel tax credits net gap estimate for 2018–19 is a small, negative gap of −$7.4 million (−0.1%). This negative gap is a result of fuel tax credits underclaims slightly exceeding overclaims. This means that some taxpayers who are entitled to receive fuel tax credits have not claimed their full entitlement. Over time, this gap shows very little variation and the trend is steady.
The underclaiming element is likely due to:
- conservative estimates
- perceived complexity
- being unaware of rate increases.
The overclaiming element is largely due to:
- an increase in use of data from global positioning system (GPS) or telematics technologies to make claims, where
- data assumptions and methodologies in these systems may not be accurate.
Table 1 shows the fuel tax credits claims, compliance, and gross and net fuel tax credits gap estimates for the period 2014–15 to 2018–19.
Table 1: Fuel tax credits gap, 2014–15 to 2018–19
Element
|
2014–15
|
2015–16
|
2016–17
|
2017–18
|
2018–19
|
Credit payments ($m)
|
6,083
|
6,143
|
6,281
|
6,858
|
7,190
|
Gross gap ($m)
|
−51.3
|
−58.1
|
−36.8
|
−8.7
|
-48.2
|
Amendments ($m)
|
−43
|
−48.1
|
−32.4
|
−11.8
|
-40.8
|
Net gap ($m)
|
−8.2
|
−10.1
|
−4.4
|
3.1
|
-7.4
|
Gross gap (%)
|
−0.8%
|
−0.9%
|
−0.6%
|
−0.1%
|
-0.7%
|
Net gap (%)
|
-0.1%
|
−0.2%
|
−0.1%
|
0.0%
|
-0.1%
|
Figure 1 shows the trend as a percentage.
Figure 1: Fuel tax credits gross and net gap percentages, 2014–15 to 2018–19
ATO action to reduce the gap
The intention of fuel tax credits is to remove or reduce the cost of fuel tax on taxable fuels used in business operations.
Differing rates of credits apply depending on the type and use of the fuel. Challenges for claimants exist due to complexities resulting from:
- the frequency of rate changes
- needing to apportion fuel use for different business activities and types of vehicles
- apportionment issues over whether fuel is used on or off public roads – this affects the rate at which claims can be made
- an increase in the use and marketing of imperfect GPS or telematics technology to support claims
- failure to undertake appropriate testing of assumptions that underpin GPS or telematics technology based claims, or comparison against contemporaneous records to support claims.
We seek to sustainably manage the fuel tax credits gap by:
- actively managing the key compliance risks
- developing clear guidance and promoting the use of simplified methods
- making it hard to not comply and setting firm expectations to help claimants and advisers.
Our strategies are underpinned with the knowledge that supporting high levels of voluntary compliance is the best way to maintain a very small gap.
To help small businesses including taxpayers who are underclaiming, we have produced guides, 'Tips to avoid common errors' tools and safe harbours that make it easy to claim the right amounts.
To help taxpayers who are overclaiming because of imperfect GPS or telematics technology, we will continue to identify and publish safe harbours to simplify claiming and reduce compliance costs. We will also promote and encourage early engagement by advisors and software providers with us to improve the accuracy and reliability of fuel tax credit claims via our Product Rulings regime.
We also undertake targeted compliance activity to address aggressive claiming or deliberate non-compliance. We monitor outlays and compare this against other data.
These strategies are highly effective in limiting inappropriate or excessive claiming.
Online services and information
We continue to support taxpayers to get it right the first time. Our free tools and information includes:
Methodology
The fuel tax credits gap is derived through applying a bottom-up model-based method. We use five steps in applying this method to estimate the gap. These steps are expanded on below followed by a summary of the overall estimate:
Step 1: Calculate ratio of extrapolation to total amendments
Calculate the mean amendment and incidence rates for underclaims and overclaims found in the random enquiry program (REP) and extrapolate to the 2014–15 population. Take the extrapolated amount and divide by the total amendment value to obtain a ratio. The ratio used is the same as for the 2019 release.
Step 2: Apply the ratio to each year
Take the ratio from Step 1 and multiply by the total amendment value for the respective year.
Step 3: Estimate for non-detection
Multiply the amount from Step 2 by the uplift factor to account for non-detection.
Step 4: Estimate for non-pursuable debt
Add non-pursuable debt to account for over claims not repaid.
Step 5: Estimate the gross gap, net gap and theoretical credit
Add Step 2, Step 3 and Step 4 to estimate the gross gap. Then subtract the amendments from it to estimate the net gap. The theoretical credit is then estimated by subtracting the gross gap from the voluntary credits. The gap percentages are derived by dividing the gap amounts by the theoretical credit.
Summary of the estimation process
Table 2 displays the dollar values at each step rounded to the nearest million.
Table 2: Summary of estimation process for steps of the fuel tax credits gap
Step
|
Description
|
2014–15
|
2015–16
|
2016–17
|
2017–18
|
2018–19
|
1
|
Calculate ratio of extrapolation to total amendments ($m)
|
1.09
|
1.09
|
1.09
|
1.09
|
1.09
|
2
|
For each year multiply total value of amendments by the same ratio ($m)
|
−47
|
−52
|
−35
|
−13
|
−44
|
3
|
Add estimate for non-detection ($m)
|
−12
|
−13
|
−9
|
−3
|
−11
|
4
|
Add claims made incorrectly and not paid back ($m)
|
7
|
7
|
7
|
7
|
7
|
5.1
|
Combine previous steps results to give gross gap ($m)
|
−51
|
−58
|
−37
|
−9
|
−48
|
5.2
|
Subtract Amendments to obtain net gap ($m)
|
−8
|
−10
|
−4
|
3
|
−7
|
5.3
|
Estimate theoretical credit by subtracting the gross gap from total FTC claims ($m)
|
6,099
|
6,161
|
6,293
|
6,862
|
7,205
|
5.4
|
Gross gap (%)
|
−0.8%
|
−0.9%
|
−0.6%
|
−0.1%
|
−0.7%
|
5.5
|
Net gap (%)
|
−0.1%
|
−0.2%
|
−0.1%
|
0.0%
|
−0.1%
|
Limitations
The fuel tax credits gap estimates are derived from the randomly selected sample. They are subject to the following limitations:
- Although it is assumed that the sample is representative of the population, there may be isolated instances of non-compliance around fuel tax credits outside the sample, which have not been captured in this analysis. It is also assumed that the ratio of the extrapolation to amendments is relatively constant over time.
- The sample size for this random enquiry program (REP) is small. In general terms, the larger the sample the more reliable the results.
- The extent of non-detection is unknown and is extremely challenging to measure. The REP is subject to uncertainty around the impact of the non-detection error.
- This estimate does not include the population that may be entitled to fuel tax credits, but have not registered and lodged a claim to receive fuel tax credits.
- This population does not include a small number of taxpayers who claimed for fuel tax credits for domestic electricity generation.
Updates and revisions to previous estimates
Each year we refresh our estimates in line with our annual report. Changes from previously published estimates occur for a variety of reasons, including:
- improvements in methodology
- revisions to data
- additional information becoming available.
For the 2021 Annual Report, with the most current data available we have been able to refresh our gap estimate for 2018–19.
Figure 2 displays the net gap from our current estimate, which uses the modified approach, compared to our previously published estimates.
Figure 2: Current and previous net fuel tax gap estimates, 2011–12 to 2018–19
For the estimate released in 2018, the change in 2014–15 from using the benchmark to the REP results led to the gap moving from positive to negative in that year. The current estimate, using the modified approach for each year from 2014–15 to 2018–19, produces a more stable series.
The data used in Figure 2 is presented in Table 3 below.
Table 3: Current and previous net fuel tax gap estimates, 2011–12 to 2018–19
Year published
|
2011–12
|
2012–13
|
2013–14
|
2014–15
|
2015–16
|
2016–17
|
2017–18
|
2018–19
|
2015
|
1.5%
|
1.5%
|
1.5%
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
2016
|
0. 8%
|
0.6%
|
0. 6%
|
-0.4%
|
n/a
|
n/a
|
n/a
|
n/a
|
2017
|
0.7%
|
0.7%
|
0.7%
|
−0.5%
|
-0.3%
|
n/a
|
n/a
|
n/a
|
2018
|
0.7%
|
0.7%
|
0.8%
|
−0.4%
|
−0.2%
|
−0.3%
|
n/a
|
n/a
|
2019
|
n/a
|
-0.2%
|
-0.1
|
0.0%
|
−0.1%
|
−0.1%
|
−0.1%
|
n/a
|
2020
|
n/a
|
n/a
|
n/a
|
−0.1%
|
−0.2%
|
−0.1%
|
−0.1%
|
−0.1%
|
2021
|
n/a
|
n/a
|
n/a
|
-0.1%
|
−0.2%
|
−0.1%
|
0.0%
|
-0.1%
|
Reliability
We seek feedback and advice about the methods we use to estimate the gap from our external and internal subject matter experts. Based on the advice and assessment, the reliability for this estimate is medium (with a score of 16).
In future analysis, we will seek to explore alternative methodologies to improve the reliability rating.
Figure 3: Reliability rating scale from very low to very high – fuel tax credits gap
This estimate for the fuel tax credits gap relates to the 2018-19 financial year.