Welcome and introductions
Tony Poulakis welcomed members to the annual meeting of the Fuel Schemes Stakeholder Group (FSSG).
No conflicts of interest raised by any members.
Minutes of the previous meeting of 4 November 2020 had been published on ato.gov.au and action items had been finalised.
Compliance focus areas
Michael Hughes advised that the current tax gap was measured as a minor negative gap (-0.1% or $7 million) which indicated that fuel tax credit payments were mainly on track, although he noted that this reflected an element of some clients underclaiming whilst others were overclaiming. An updated tax gap for 2019–20 would be published in October 2021.The Excise Centre was working with the Tax Gap Panel to ensure the methodology used to calculate the tax gap remained fit for purpose and reflected contemporary risks. The Excise Centre continued to improve advice to clients to ensure claims were correct and noted appreciation of the assistance provided by members in development of public advice, particularly the GPS provider checklist.
The ATO would continue to carry out audits and review claims to ensure overclaims were addressed. The backlog of audits and objections had substantially reduced, through working with advisors and providers to clarify technical decisions and agreement on acceptable parameters.
There had been strong performance in fuel tax credit claims despite impacts of the COVID-19 pandemic, with major business areas remaining largely unaffected in mining, agriculture, road transport and construction.
Work with smaller clients focused on use of the fuel tax credits (FTC) calculator, with the opportunity for more accurate claims and low risk using the Basic Method for Heavy Vehicles Apportionment Method (BHAM) safe harbour. In addition, more certainty was being provided for larger claimants with the publishing of Product Rulings and Class Rulings. The ATO continued exploring the value of additional safe harbours, as well as the development of pre-lodgment online business activity statements (BAS) checks to flag potential errors to clients at lodgment. The BAS checks were currently being used for GST claims, but this was also being considered for fuel tax credits to flag where claims were not consistent with previous claims, or not consistent with similarly sized claims for that particular industry. This would enable clients and advisors to identify potential errors prior to lodgment of an activity statement.
Darryl Daisley queried the increased scrutiny around GPS-based claims and noted that it was involving clients operating road transport or mixed fleet operations primarily. Michael Hughes agreed and explained that it related to attempts to calculate off-road use. The ATO remained supportive of the use of technology to assist claims, however wanted claimants to be aware of some shortcomings where data was used for fuel tax credit claims.
Members discussed the issue of Class Rulings which provide limited protection for clients as the Class Rulings only cover whether some reports are 'tax records'. Far greater assurance and certainty for clients would be provided by products that had been issued with a Product Ruling, which would generally include the services of a tax advisor. The ATO will be reviewing and monitoring the various GPS-based products in the market.
Michael noted assistance provided by industry associations, in particular NatRoad and Australian Trucking Association (ATA) as well as discussions with advisors, towards improvements in advice to claimants.
Focus areas for 2021–22
There would be increased scrutiny on technology data-based claims that were not based on a Product or Class Ruling. Approximately 250 claims that may have been based on back claims would be analysed, with the ATO to contact clients to ascertain whether GPS-based products or other methodologies were used. The letters would flag ATO concerns with GPS-based systems and invite further discussion if necessary.
The ATO continued to work with other government agencies to develop tests which may be used to provide accreditation of GPS devices to support FTC claims, however this work was still in its early stages of development.
High risk claims would continue to be targeted, including fraud, and treated with a firm approach. Michael referred to a recent prosecution outcome and noted that the ATO continues to use pre-issue tests to target and address non-compliant behaviour.
FTC taxpayer alert and supporting web content
Tony Poulakis advised that a taxpayer alert concerning fuel tax credits and the use of telematics/GPS data to calculate claims was due to issue on 17 September 2021.
Arisva Tawadros advised members of the taxpayer alert, which addressed issues discussed at the 2020 meeting of the FSSG. The growing use of telematics technology for fuel tax credit calculations had increased significantly and assisted claimants with their claims. The ATO supports the use of technology where it leads to accurate results and is supported by robust checks and documentary evidence.
The taxpayer alert highlights ATO concerns where GPS, telematics or software providers or tax professionals were aggressively marketing telematics technology products for fuel tax credit purposes where the analysis of the GPS data, and methods used in that product, lead to an incorrect apportionment of fuel tax credits. Where this was identified, it may lead to substantial audit adjustments that may attract penalties and interest.
The ATO had identified practices that could lead to incorrect apportionment and GPS, telematics or software providers or tax professionals need to consider whether the product they were promoting had any of these characteristics:
- Incorrect classification of roads or locations – the ATO was currently updating web content with examples for reference in ‘what is a public road’ to provide more clarity.
- Inadequate sample sizes or apply product results that were not representative of a client’s fleet.
- Use of incorrect assumptions, inputs, algorithms, fuel consumption rates or results within the product.
- Failure to reconcile source documentation and business records with the new fuel tax credit claims.
- Failure of the software or business processes to account for inherent limitations of data derived from the product.
- Incorrect use of ATO simplified methods, or safe harbours.
Arisva noted that some products had sought to combine ATO simplified methods and other apportionment methods, however she advised that ATO simplified methods should not be used in conjunction with other methods.
Work had been carried out to update information on ato.gov.au to complement messaging in the taxpayer alert. Tips on ato.gov.au were updated to include a recommendation for claimants to use either simplified methods such as the BHAM safe harbour which provided certainty for claims less than $10,000, or a GPS or telematics technology product that had a current product ruling, which provides certainty regardless of the size of the claim.
A webinar has also been produced on the BHAM safe harbour and other communications would also issue to the FSSG, tax advisors and industry associations when the alert was published.
The alert encourages marketers/developers to get a Product or Class Ruling for their product but also to ensure that:
- sufficient internal controls and governance were in place
- supporting evidence to justify classification of roads, sample sizes, fuel measurements or estimates, algorithms used and any other variable or input used was retained
- the reasonableness of results with the actual use of fuel was tested
- the product results were reconciled with original and other supporting documentation.
Where providers found that their product was not fit for purpose to provide claimants with a level of confidence, the ATO recommends that they advise their clients of the issues and take steps to resolve issues, as well as working with the ATO to correct claims for their clients.
The ATO strongly encourages marketers or tax professionals to engage early to seek either a Product or Class Ruling to provide greater certainty about how the product applies to clients. In recent months the ATO has issued both Product and Class rulings and these were available on ato.gov.au/Law. Several other rulings were in progress.
Class Rulings being issued relate to reliability of the data and reports from the various telematics systems to be used as tax records and Product Rulings provide a greater level of assurance around the full service offering, including the tax services of a registered agent.
Product and Class Rulings would be prospective only and would not apply to back claims. At the time of the meeting, ATO staff were working with approximately four providers to ascertain which type of ruling was best for their product.
Tony Poulakis confirmed that the ATO would continue to consider updated information to provide greater confidence in parameters and data. This would include learnings from GPS data where it may provide more reliable indicative figures associated with various industry sectors.
Michael Hughes informed members of work being undertaken with Transport Certification Australia (TCA), an independent not-for-profit entity with government oversight which provides assurance services related to transport technologies and data. TCA have responsibility to certify GPS-based systems in Australia and carry out testing of the performance of GPS systems against TCA data. The ATO and TCA are working to build a particular test suited to ATO requirements which would provide greater assurance when applying for a ruling.
Tony Poulakis reiterated the ATO’s intent of working with providers to ensure that products used for fuel tax credit claims provided greater certainty for claimants.
ATO focus topic - Basic heavy vehicle apportionment method
Prior to the FSSG meeting, several questions had been issued to members for their consideration in providing feedback on the BHAM safe harbour which was published in February 2021.
Michael Hughes advised members that the BHAM safe harbour was introduced to assist smaller claimants as well as to test the concept of a safe harbour that might later be applied to larger claimants. The draft method had been shared with the FSSG as it developed, and Michael noted the assistance from the ATA and NatRoad in particular. The ATO would use the feedback of this group in consideration of further safe harbours.
Richard Calver queried whether fuel tax credit claims could be aggregated by sector and referred to a recent article in the Journal of Taxation as a reference.
Action item |
15092021-4-1 |
Due date |
15 October 2021 |
Responsibility |
Michael Hughes |
Action item details |
Michael Hughes to follow up with Richard Calver to obtain a copy of the recent article in the Journal of Taxation setting out a breakdown of industry groupings and amount of credits claimed across ANZSIC categories. |
Richard Calver advised that the current threshold of claims less than $10,000 was too low a threshold for NatRoad members. Tony Poulakis advised that initial estimates of those using the safe harbour would be close to 80% of the trucking industry based on previous claims and the ATO was keen to explore thresholds which would benefit more claimants.
Other feedback from members indicated a preference to either remove the threshold or increase it to expand the number of clients who might be able to access the safe harbour. Tony Poulakis noted that the BHAM safe harbour had been introduced to gauge interest in the use of safe harbours and more confidence would be gained for appropriate parameters from data as it was provided. This may result in further safe harbours for higher thresholds or relating to specific industries.
Further feedback on the BHAM was provided as part of the below industry updates.
Industry updates - roundtable
Paul Cornick of PwC noted that there were a small number of Class Rulings relating to GPS data. Paul also queried whether the ATO would be undertaking broader consideration around use of auxiliary use in other vehicles as contained in PCG 2016/11 Fuel tax credits - apportioning taxable fuel used in a heavy vehicle with auxiliary equipment. Michael Hughes indicated that the ATO would continue to monitor data collected from audits, reviews, and feedback about the existing percentages, however that was not a particular body of work at the current time. Paul also queried whether there was an update on the time limits and ability to amend fuel tax credit claims, Draft Miscellaneous Taxation Ruling TD 2018/D1 Time limits for claiming an input tax or fuel tax credit. Michael Hughes advised he would follow this up and provide the members with an update.
Action item |
15092021-5-1 |
Due date |
15 October 2021 |
Responsibility |
Michael Hughes |
Action item details |
Michael Hughes to provide advice to members about potential guidance in making a claim or amending claims beyond four years. |
Laura O’Brien of Deloitte queried whether the potential public ruling on public roads that was discussed at the 2020 FSSG meeting had been published. Arisva Tawadros advised that the ATO were considering whether a Public Ruling was the appropriate product. There was existing guidance which sought to address some of the practical examples, and the ATO would be open to feedback from FSSG members. Laura also raised the traffic light system for compliance that had been raised at the 2020 FSSG meeting. Tony Poulakis advised that the traffic light system had been user tested and feedback found that this was not beneficial as users preferred simpler messaging about the greater certainty provided by use of a simplified method or Product or Class Ruling.
Andy Larmour of KPMG supported the use of Product Rulings, however he queried how these might interact with the introduction of future safe harbours relating to the percentage of off-road use. He noted that organisations would benefit more from a product ruling that was sought after a safe harbour was introduced for off-road use rather than investing in a product now. While KPMG supported the BHAM safe harbour, Andy noted that a safe harbour that could be used by organisations for all sizes of claims would be more beneficial. KPMG would be keen to work with the ATO and industry to develop this further.
Kylie Norman of EY noted that they were not seeing a lot of clients using the BHAM safe harbour.
Peter Quattrochi of Pitcher Partners reiterated comments made by others and supported an increase in the BHAM safe harbour threshold.
Richard Calver of NatRoad noted the prompt assistance from the ATO recently relating to a query from members about past fuel tax credit rates. Richard agreed that the common issue for his members relates to correcting fuel tax credit errors.
Cate Kemp, representing BAS agents, advised that her work was mainly with micro-claimers of fuel tax credits and agreed with others that the current threshold of the BHAM safe harbour was too low for take-up. She advised that her clients were in the $5–10 million group with small farming or small equipment use.
Roz Chivers of the Bus Industry Confederation had sought feedback from her members on the BHAM safe harbour and found that awareness was very low. Roz noted that the threshold was extremely low and when members had checked the website, they had found that the commentary was very focused on the trucking industry. Consultation with the bus industry and an awareness campaign would be greatly appreciated.
Simon Staples of Australian Petroleum Production and Exploration Association noted that BHAM did not apply in the fuel and gas industry. Simon noted the work being carried out by the Deregulation Taskforce, including surveys by industry and recommended members be involved in that process.
Darryl Daisley of Association of Mining and Exploration Companies provided an update about the mining industry. He noted the industry was very healthy, with many new mines and a significant increase in drilling. That would likely lead to an increased consumption of diesel, but offsetting that was an increase in companies looking to greater use of renewable energies. Where there had been a previous shift from diesel to gas some 10–15 years ago, this was now shifting from gas to solar and hydrogen power, with many companies undertaking electrification trials around fixed assets of mobile mining equipment. This would likely impact excise payments as well as fuel tax credit claims.
Darryl noted that the current BHAM safe harbour was not relevant for his industry due to the low threshold. Darryl also queried whether a 'tips, tricks and common errors' communication that was used by the ATO previously may be revisited. Claudia Bianco advised that updated ato.gov.au content which included tips on how to get fuel tax credit claims right was about to be published. The ATO was keen for members to distribute that messaging in messaging, social media channels, or newsletters.
Other business
Members discussed work being carried out by the Department of Infrastructure, Transport, Regional Development and Communications on a pilot program for mass distance charging and testing the concept of Road User Charge that would be imposed. This was currently a pilot process that was expected to move to a larger scale pilot in future.
Action item |
15092021-6-1 |
Due date |
30 October 2021 |
Responsibility |
FSSG members |
Action item details |
FSSG members to provide feedback about the current BHAM safe harbour including whether the safe harbour should be based on a dollar figure or a volume figure. |
Claudia Bianco thanked members for sharing ATO messaging and advised members that the ATO could provide assistance with any future specific messaging about fuel tax credit claims.
Meeting close
Tony Poulakis thanked members for their assistance and contributions throughout the year and their participation at the meeting.
The next meeting of the FSSG is scheduled to take place in June or July 2022.
Attendees
Organisation |
Atendees |
|---|---|
ATO |
Tony Poulakis (Chair), Excise Centre, Private Wealth |
ATO |
Arisva Tawadros, Excise Centre, Private Wealth |
ATO |
Claudia Bianco, ATO Corporate |
ATO |
John Kirkpatrick, 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 |
Australian Petroleum Production and Exploration Association |
Simon Staples |
Australian Trucking Association |
Samuel Marks |
BAS Agent |
Cate Kemp |
Bioenergy Australia |
Shahana McKenzie |
Bus Industry Confederation |
Roz Chivers |
Civil Contractors Federation |
Duncan Sheppard |
Deloitte |
Laura O'Brien |
Deloitte |
Nick Boland |
EY |
Kylie Norman |
EY |
Simon Whyte |
KPMG |
Andy Larmour |
Minerals Council of Australia |
Ross Lyon |
National Farmers' Federation |
Alexander Desses |
NatRoad Limited |
Richard Calver |
Pitcher Partners Advisory Pty Ltd |
Peter Quattrocchi |
PwC |
Paul Cornick |
Ryan Financial Services |
Chris Sant |
Treasury |
Timothy Woltmann |
Apologies
Organisation |
Members |
|---|---|
Ampol Australia Petroleum Pty Ltd |
Megan Kirkby |
Australian Institute of Petroleum |
Nathan Dickens |
Australian Trucking Association |
Bill McKinley |
Commonwealth Fisheries Association |
Andrew Sullivan |
KPMG |
Leonie Fetterer |
Maritime Industry Australia Ltd |
Teresa Lloyd |
PwC |
Gary Dutton |
Shipping Australian Ltd |
Bryan Sharkey |
Treasury |
Joshua Toohey |