Methodology for estimating PSO gap

Levy and benefit

The product stewardship for oil (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	2018–19	2019–20	2020–21	2021–22	2022–23	2023–24
1	Estimate the PSO levy gap ($thousand)	654	979	1,195	1,071	1,195	2,148
2.	Estimate the PSO benefit gap ($thousand)	-1	1	-2	-9	52	-13
3	Combine Steps 1 and 2 to estimate the program level gap ($thousand)	653	980	1,192	1,061	1,247	2,135
3.1	Theoretical transfers ($thousand)	124,574	126,918	148,371	132,359	138,034	187,103
3.2	PSO program gap ($)	653	980	1,192	1,061	1,247	2,135
3.3	PSO program gap (%)	0.5%	0.8%	0.8%	0.8%	0.9%	1.1%

Find out 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.

Figure 2a: Current and previous net tax gap estimates, 2015–16 to 2023–24

Table  3: Current and previous net PSO estimates, 2018–19 to 2023–24

Program year	2018–19	2019–20	2020–21	2021–22	2022–23	2023– 24
2025	0.5%	0.8%	0.8%	0.8%	0.9%	1.1%
2024	0.7%	0.8%	0.8%	0.8%	0.9%	n/a
2023	0.5%	0.6%	0.6%	0.6%	n/a	n/a
2022	-0.1%	0.0%	0.2%	n/a	n/a	n/a
2021	1.0%	0.6%	n/a	n/a	n/a	n/a