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  • Petroleum Stakeholder Group record of meeting, 7 June 2018

    Discussion summary

    Disclaimer

    The Petroleum Stakeholder Group agendas, minutes and related papers are not binding on the ATO, Treasury, Department of Home Affairs or the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

    Agenda Item 1 – Welcome

    Introductions, review of action items and previous minutes - Raj Srikhanta

    Outcome: It was noted that the minutes of the meeting of 6 July 2017 had been circulated and were finalised. All action items have been finalised. No conflicts of interest were declared by members.

    Agenda Item 2 – Reflections of 2017/18 and Compliance Focus Areas for 2018/19

    Reflections of 2017/18 and Compliance Focus Areas for 2018/19 - Wendee Mundy

    Outcome: Members noted the report by Wendee Mundy.

    Wendee Mundy advised that there were no significant areas of risk in fuel and energy that require particular attention or treatment.

    2017/18 focused on obligations assuring appropriate permissions and licences were in place; and ensuring that payment and lodgement of returns were in place. Clients were identified in 2017/18 receiving goods to unlicensed sites and without appropriate movement permissions. New sites had been established which did not have the appropriate licence. Another instance was where a client reported a blend which resulted in underpayment of duty. Management of the risk for fuel and energy is supported by Relationship Managers, which provide a high level of confidence.

    For 2018/19, the focus will be on Justified Trust and Key Taxpayer Engagement / level of confidence work. Clearances across the product will be monitored. Where there is a significant increase or decrease, RMs will contact the client to ascertain reasoning for the change.

    The number of taxpayers in the fuel and energy was discussed with four entities paying approximately 90% of fuel excise and the top 10 paying 98.5%.

    Wendee advised that work will also take place on the second and third tier companies. The emphasis would be on client education.

    Agenda Item 3 – ATO updates

    • Justified Trust / Level of Confidence - Andrew McIver

    Outcome: Andrew McIver provided an explanation of Level of Confidence work as compared to Justified Trust. Justified Trust work will also look at a client’s systems control, corporate governance, tax management and will then seek evidence to ascertain whether trust in the organisations systems is justified.

    Level of Confidence work will be similar but will not be a formal review and data will not be extracted. Relationship managers will carry out the Level of Confidence work over a period of time to gain an understanding of how a client’s systems operate. As there is no substantive testing, this work does not provide assurance, however it is one tangible way in which the ATO will gain a level of confidence in the Excise Product.

    The excise team will not be undertaking case work; information will be gained by auditors. In cases where auditors are undertaking an audit and that client has an excise role, the excise team will join that audit. Working across the ATO, if the ATO’s Income Tax or other areas of Indirect Taxes (including excise) collect information on an excise client, that information will be shared with EPL so that clients are not asked more than once. Andrew explained the process of conducting internal panel discussions across the various work areas to share information.

    In relation to Justified Trust, a self-assessment process can be found on the ATO website which becomes part of the evidence which auditors will use provided the scope of the information fits with the audit and there is evidence underpinning the information.

    Relationship managers will be discussing level of confidence work with clients. Justified Trust is a more formal process requiring a substantive test of data.

    Level of confidence work may utilise macro data such as ABS information, monthly oil summaries to cross check at an industry level. Should an area of concern be identified, the ATO would discuss with clients to correct the issue. Any significant issues would be fed into the ATO’s risk management work. The ATO is focused on help / education and correction processes. Raj Srikhanta asked members to provide feedback of the Level of Confidence work – if it is proving onerous, the ATO would like to know.

    Andrew advised that the ATO has not received mandatory reporting trends information. Information received from the Department of the Environment and Energy is by exception and provides a view of the industry and what may have caused a variation. The ATO are monitoring excise duty at a macro level as well as through clearance information.

    Action Item 07062018-3-1 - ATO to provide a link to the ATO's Tax Risk Management and Governance Review Guide to PSG members.

    Action Item 07062018-3-2 - ATO to provide a copy of the Excise checklist being used for Level of Confidence work to PSG members.

    • ATO / Home Affairs jurisdictional roles relating to fuel stored in dual excise / customs licensed warehouses - Stasi Polas

    Outcome: Members noted the information provided by Stasi Polas. Under the Customs Act, product incurs a liability when it comes in the border. A document was provided containing examples including circumstances where duty of excise-equivalent goods (EEGs) was extinguished; when goods are entered for warehousing (under N20); where excisable goods are manufactured and the EEGs are used in that manufacture; where EEGs are subject to customs control at the time they are used in that manufacture; and the need for that manufacture to occur at a dual licensed warehouse as authorised in the Customs Act 1901 and a premises specified in a manufacturer licence granted under the Excise Act 1901 to transfer EEG’s from customs control to excise control.

    Once importation occurs, bulk fuel deliveries into fuel storage tanks are dealt with in accordance with Part VIIB of the Excise Act. Section 77G deals with deeming provisions which deems the blending of fuel to be excise manufacture. This was contrasted with Excise Ruling 2012/1 which provides the ATO view regarding the meaning of “manufactured or produced” for the purposes of the excise regime.

    The meeting discussed examples of blending, particularly in relation to different compartments when discharged into tanks. Where product enters the system in drums, it will not come to the excise system – any diversion prior to extinguishment is the responsibility of the Australian Border Force (ABF); any diversion after is the ATO’s responsibility. The ABF are not authorised to operate in relation to excise goods.

    Members were advised that there are particular information-sharing requirements about what can be shared between Home Affairs and the ATO.

    Action Item 07062018-3-3 - A copy of the slides titled "EEG Transfer from Customs to Excise Control" to be provided to PSG members.

    Agenda Item 4 - Home Affairs updates

    • Australian Trusted Trader Program - Kim Simmat

    Outcome: Kim Simmat provided a summary of the Australian Trusted Trader Program being conducted by the Department of Home Affairs. Australia is the 74th country to implement this type of program. Members were advised of the criteria required to be met and benefits associated with trusted trader accreditation.

    The online application form had recently been reduced from an original 66 pages to 6 pages. Officers from Home Affairs conduct a visit and that is part of the validation of the application. The validation covers: operating systems, IT security, personal security, physical security, risk assessments and compliance with Customs law and third parties. Where a company has several sites, a selection is chosen to visit. The Account Manager will also seek information from other areas of the Department, such as: Depot and Warehouse Licensing. The ATO and Home Affairs are looking in to what information can be shared across agencies but within legislative requirements. Kim will discuss this further with the Home Affairs Policy team.

    Action Item 07062018-4-1 - Information for the Australian Trusted Trader Program, including a link to the website, to be provided to PSG members.

    Agenda Item 5 - Industry / Member Updates

    Outcome: Nathan Dickens raised the recent biosecurity level announcement in the Budget. AIP are working to ascertain the extent of impact on petroleum clients. The Department of Agriculture and Water Resources are responsible for implementation. Members discussed growth in the fuel environment, particular in aviation and diesel. Significant infrastructure is being undertaken which also signals industry confidence in growth.

    The industry is very interested in the work of the Ministerial Forum on Emissions and Fuel Quality StandardsExternal Link as well as any outcomes as part of the mandate for Queensland and NSW Governments relating to biofuels.

    Agenda Item 6 - Other Business

    Outcome: Members noted the update from Raj Srikhanta about the recent Budget announcement moving the taxing point of tobacco to the border. Previous discussions around excise modernisation and reducing red tape are not linked to this initiative. The announcement resulted from recommendations from the Black Economy Task Force to specifically address illicit tobacco. As part of the new measures, funding had been allocated to upgrade all excise systems (FY 2020/21). It is expected that lodgements will become paperless.

    There was no other business.

    The meeting concluded at 11.00am.

    Meeting details

    Venue: ATO Office, 747 Collins Street, Docklands

    Date: 7 June 2018

    Start: 10.10am Finish: 12.00pm

    Chair: Rajitha Srikhanta

    Secretariat: Rowena Troth

    Attendees:

    Rajitha Srikhanta

    ATO - Chair

    Andrew McIver

    ATO

    Stasi Polas

    ATO

    Chris Brennan

    ATO

    Ian Taylor

    ATO

    Tony Martiniello

    ATO

    Wendee Mundy

    ATO

    Juanita Laird

    ATO

    Rowena Troth

    ATO - Secretariat

    Susan Turville

    Department of Home Affairs

    Sarah Marslen

    Department of Home Affairs

    Kim Simmat

    Department of Home Affairs

    Nathan Dickens

    Australian Institute of Petroleum

    Stuart Smith

    BP Australia Pty Ltd

    Grace Leung

    Caltex Australia Petroleum Pty Ltd

    Helen Curran

    Viva Energy

    Rod Geer

    Exxon Mobil

    Grace Abinoja

    Exxon Mobil

      Last modified: 26 Nov 2018QC 57481