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Petroleum Stakeholder Group key messages 27 October 2020

Summary of key topics discussed at the Petroleum Stakeholder Group meeting 27 October 2020.

Last updated 29 November 2020

Welcome and introductions

Tony Poulakis welcomed members to the meeting.

No conflicts of interest were declared. Minutes of the meeting of 11 July 2019 had been finalised and published on the ATO website.

There were four outstanding action items.

11072019-2-3 – Completed – Excise Client Manager (ECM) confirmed on 19 December that the issue had been finalised.

11072019-3-1 – Completed – The ATO worked with Petroleum Stakeholder Group (PSG) clients to resolve issues in the lead up to the transition to myGovID and Relationship Access Manager (RAM), which occurred on 27 March 2020.

11072019-4-1 – In Progress – Australian Border Force (ABF) are working on a whole-of-government solution. PSG members will be consulted. Indicative timing was not possible at this time.

11072019-4-2 – In Progress – Treasury will liaise with Australian Institute of Petroleum (AIP) to discuss this issue further.

Reflections of 2019–20 and compliance focus areas for 2020–21

Michael Hughes provided an update about the ATO’s work on the biofuel industry, noting the assistance provided by the AIP to gain a better understanding of the industry and drivers for biofuels. These drivers included oil price (competition) and agricultural commodity prices. The ATO found that the trends in clearances of biofuels were not a concern however the ATO will continue to monitor this area of industry.

The fuel excise tax gap was recently published. Overall, the gap was relatively small which indicated that the fuel excise system was working well through significant controls and systems in place, the concentration of the market and the strong relationship management with major payers of excise. The ECM role had transitioned over the previous year due to staff movements and a restructure was now in place and allocations were being finalised.

The collaborative relationship with the AIP had greatly assisted the ATO since March 2020 with regular contact to share updates of the COVID-19 impact on industry. There had been some very particular issues around supply and demand, with real-time solutions required.

These included impacts on storage capacity, the treatment of off-spec fuel, major licensing changes to assist with restructures and some business pivoting to assist with production of ethanol for hand sanitiser.

From a debt and lodgment perspective, the fuel excise industry had performed well with very low levels of non or late lodgment and comparatively low levels of debt as a consequence. The ATO will continue to monitor as part of the ATO’s work to support clients.

Our level of confidence work (high level assurance) had been very active in late 2019 to gain an understanding of client systems and processes but had been on hold since February 2020. The ATO plans to restart that work in 2021. Members were reminded that the level of confidence work focussed on gaining an understanding of the processes and controls in place and an assessment of their ability to properly account for excise if applied correctly. Level of confidence work however did not normally involve the same level of testing of controls and transaction data as Justified Trust.

ECMs also provided some support to second tier or specialised industries such as oil recycling. As such, they had recently worked to assist clients entitled to claim the additional benefit from the recent product stewardship for oil (PSO) Category 1 increase.

For 2020–21, the ATO would continue to invest in the valuable ECM role and would be restarting level of confidence work as well as monitoring debt and lodgment activities. Level of confidence work would generally be carried out at the convenience of industry.

The ATO reiterated its appreciation of the assistance of the AIP and PSG members, particularly over the previous eight months in working through the impact of COVID-19.

Industry Updates - roundtable

Nathan Dickens provided an update of the impact of COVID-19 on the fuel industry. He noted that pre COVID-19, industry had been facing a soft and unsupported refining margin. The pandemic created an unprecedented set of circumstances for industry including operational challenges. At the lowest point there had been a 50% decrease in gasoline and 80–90% decline in jet fuel. Refinery production dropped to the lowest level ever as it slowed to match customer and major user levels.

Many short-term operational challenges were managed by industry over following weeks and the AIP noted key Government support including fuel quality waivers to assist with jet fuel inventory. Industry had adapted to operate in different ways across the entire supply chain including refining, shipping and storage operations. It was expected that some of these would continue during the recovery phase and beyond as flexibilities and different modes of operation were found to be more efficient. This would necessitate collaboration between agencies. Shipping had been found to be an effective means of storage and that would be important in the coming months where there may be rapid escalation in demand with significant supply needed at short notice.

Gasoline had recovered somewhat and was on average 10–15% down on pre COVID-19 levels; jet fuel was 50–60% down on normal volumes. The continued levels of diesel were positive, with agriculture and transport industries continuing at strong levels.

A big issue for industry had been very short term and medium-term financial impacts of COVID-19. Refiner margins remained very low and the forecast indicated this would remain the case into the future. Where there had been global confidence in the outlook for refineries, local refineries were now assessing ongoing viability and some form of structural adjustment was inevitable. The Government had committed to maintain sovereign onshore refining capability, primarily through the fuel security plan being developed. The AIP had been liaising with the Department of Industry, Science, Energy and Resources on the plan. Industry noted that resolving current issues around excise reform, bunker fuels and double duty taxation would assist in supporting the ongoing viability of refineries. The AIP noted that industry was under significant pressure with all members engaged in efficiency programs.

Helen Curran raised the issue of floating storage. Concessions had been made by Government as a COVID-19 assistance measure in relation to a number of specific situations, however industry was keen for this to be formalised and continue post COVID-19. This would provide excise payers with certainty going forward and would streamline processes as well as assisting with cash flow issues.

Action item

Action item

27102020-3-1

Due date

15 December 2020

Responsibility

Anthony Barnard

Description

Anthony Barnard to liaise with ABF with regard to a longer-term solution to floating storage issues

ATO updates

Know our client's framework

Michael Hughes advised members of work being carried out in the Excise Centre to improve the client and staff experience. Many fuel excise clients were large organisations with many other tax roles, including income tax and GST. The team were currently working on ways to more easily build and extract data about entities to obtain up-to-date data and to assist in monitoring and engaging with entities on a real-time basis. This would assist ATO staff in obtaining a holistic view of a client’s interactions with decisions about licensing and conditions, reflecting a whole of ATO risk management and tailored services approach. More tailored conditions for clients and better linking of treatments to provide better integrity in the system were the intended outcomes.

Justified Trust update

Andrew McIver advised members that Justified Trust activities would not be undertaken for the next year, with Excise Centre continuing with Level of Confidence work instead. The fuel excise tax gap had shown that the industry was largely compliant and did not warrant the more intensive substantive testing and audit teams carrying out Justified Trust work. The Level of Confidence work related more to the ATO gaining an understanding of the controls in place and whether there were any weaknesses. The ATO has compiled guides for income tax and GST about what to expect in Justified Trust. It was tentatively planned for a similar guide to be published for excise at the end of 2020–21.

Bunker fuels – clarification of web content

Anthony Barnard advised members that there would be a slight amendment to ATO web content to clarify fuel supplied to international ships being treated as duty free. The reference currently stated: 'Bunkers may be acquired free from excise duty and GST if it can be shown that they are acquired for the purpose of resuming an international voyage'. While this was not incorrect, further clarity would assist.

The reference would be amended to state 'For a ship that is resuming an international voyage, bunkers can only be acquired free from excise duty and GST once all domestic voyages are completed'. PSG members would be provided a link to the updated commentary once published.

Action item

Action item

27102020-4-1

Due date

1 December 2020

Responsibility

Anthony Barnard

Description

Anthony Barnard to provide ATO website link to updated guidance.

Contemporary Excise Experience (CEE)

Michael O’Rourke provided an update about two current ATO projects impacting PSG members.

The CEE referred to the new system flagged for development to replace the current Excise Collections System (ECS) and the Generic Payment System (GPS). These systems were considered costly, time consuming and outdated. Integration with other ATO systems also hindered staff and clients from having a holistic view, and current interactions were predominantly manual, which was not consistent with other ATO products. Funding was approved in the 2018 Budget to create a more tailored and validated system online including excise authorisations which would provide the client with more timely, consistent and relevant information to inform tax decisions. CEE work had commenced in May and would take approximately two years. System design was taking place with GPS (including build and testing of PSO and other indirect taxes) likely to be available in September 2021. ECS was expected by the end of 2022.

The Online Service for Business (OSB) was a whole of ATO project which would replace the Business Portal. Some clients had recently assisted in testing PSO claims. Private beta testing was taking place until the end of January 2021, with full deployment expected by July 2021. From March 2021, the OSB would be the ATO preferred mail channel for those currently using the Business Portal. The Business Portal was planned to be decommissioned in July–August 2021. Members noted the features of OSB including access to communication history with ATO, communication preferences, income tax history and copies of previous returns, in-channel payments, payment plans, device optimisation. On the new ATO OSB homepage, clients would be able to switch between ABNs with a single logon and advice on completion of audits would be communicated through OSB. While other taxes would be visible on OSB from March 2021, excise information would not appear until the CEE had been completed, including the conversion from legacy systems to OSB. PSO and grants were expected in September 2021 and ECS accounts at the end of 2022. Lodgment and returns would be available through the OSB platform.

The ATO would continue to advise clients of system changes as they occur and ECMs would contact clients to gauge interest in undertaking beta testing for OSB, expected in 2021. The ATO would ensure industry was informed and reasonably prepared for the changes, noting previous issues which arose around international tax teams employed by companies during the transition to myGovID.

ATO Focus Topic

Brett O’Neill outlined the legislation to amend the definition of oils in the Product Stewardship (for Oil) Program and corresponding changes to Item 15 of the Excise Tariff Act 1921 to restore the policy intent of the PSO scheme being self-funding.

Industry advised that while the PSO amendments were understandable, there had been confusion about the consequential amendments to the Excise Tariff Act. Industry would further consider practical examples of products and advise the ATO if there were issues relating to the consequential amendments.

Other Business

There was no other business.

Attendees

Attendees list

Organisation

Attendees

ATO

Tony Poulakis (Chair), Excise Centre, Private Wealth

ATO

Andrew McIver, Private Wealth

ATO

Anthony Barnard, Private Wealth

ATO

Anthony O'Connell, Private Wealth

ATO

Brett O'Neill, Tax Counsel Network

ATO

Michael Hughes, Private Wealth

ATO

Michael O'Rourke, Private Wealth

ATO

Michelle Nourse, Private Wealth

ATO

Rowena Troth (Secretariat), Excise Centre, Private Wealth

ATO

Stasi Polas, Private Wealth

ATO

Tony Martiniello, Private Wealth

Ampol Australia Petroleum Pty Ltd

Jenny Park

Ampol Australia Petroleum Pty Ltd

Lee Holland

Australian Border Force

Katie O'Brien

Australian Institute of Petroleum

Nathan Dickens

BP Australia Pty Ltd

Mark Gall

BP Australia Pty Ltd

Michael Mcauliffe

ExxonMobil

Grace Abinoja

ExxonMobil

Rod Geer

ExxonMobil

Stavroula Harlaftis

Viva Energy Australia

Helen Curran

Treasury

Andrew Boland

Treasury

Deepti Paton

Apologies

Apologies list

Organisation

Members

Ampol Australia Petroleum Pty Ltd

Megan Kirkby

BP Australia Pty Ltd

Louise Mcnamara

QC64227