ATO/General
Fuel Tax Credits – incidental travel on public roads
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Fuel tax credit over-claims? ATO flags monitoring marketing and use of GPS telematics technology products
As many TaxEd members are significant fuel tax credit claimants we take a look at a recent ATO announcement that flags it has some concerns regarding the use of GPS telematics technology products to determine fuel tax credit eligibility.
The ATO announcement is relatively straightforward but a firm reminder to fuel tax credit claimants and their professional service providers, “…if its sounds too good to be true, it probably is“.
On 17 September 2021, the Commissioner issued TA 2021/3 titled ‘Fuel tax credit overclaims arising from aggressive marketing and use of GPS telematics technology products’.
TA 2021/3 states that the ATO is currently reviewing arrangements where GPS, telematics or software providers, or tax professionals, market technology products (Products) which lead to incorrect apportionment of Fuel Tax Credits (FTCs), resulting in overclaims.
The ATO’s concerns
TA 2021/3 states that the ATO is aware that some marketers or tax professionals are approaching taxpayers and encouraging them to use their Product to claim additional FTCs. The ATO is concerned that the people marketing the Products are using aggressive and misleading marketing strategies fuelled by commission-based fee-arrangements. This may include assertions that:
- taxpayers will miss out on significant FTCs if they do not use the particular software they are marketing;
- taxpayers will receive large FTC refunds without scrutiny from the ATO;
- the ATO has endorsed a particular product.
The ATO has identified the following practices that may lead to incorrect apportionment of fuel and erroneous FTC claims. The ATO urges GPS, telematics or software providers or tax professionals to consider whether the Product they are promoting has any of these characteristics that may distort FTC claims.
| Concerns | Examples (not exhaustive) |
| Incorrect classification of roads or locations |
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| Inadequate sample sizes or applying Product results that are not representative of a client’s fleet |
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| Use of incorrect assumptions, inputs, algorithms, fuel consumption rates or results within the Product |
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| Failure to reconcile source documentation and business records with these new FTC claims |
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| Failure of the software or business processes to account for inherent limitations of data derived from the Product |
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| Incorrect use of ATO simplified methods (safe harbours) |
|
The ATO’s actions
The ATO suggests it is scrutinising FTC claims which have been prepared using a GPS or telematics technology product that exhibits the types of issues and practices contained in the above table that lead to overclaimed credits. Where necessary, the ATO indicates it will adjust FTC claims and may impose penalties and interest on the relevant taxpayer.
In addition, the ATO cautions:
- the promoter penalty rules in Div 290 of Sch 1 to the TAA may apply to marketers of relevant products; and
- registered tax agents may be referred to the Tax Practitioners Board to consider whether there has been a breach of the Tax Agents Services Act 2009.
Actions for marketers and tax professionals
The ATO advises tax professionals, providers or marketers of Products to ensure that the relevant Product generates correct results as represented and undertake any corrective actions if any practices identified in TA 2021/3 apply to the Product. It also recommends prudential steps be taken to ensure that the Product and its results lead to correct claims (for example, reconciliations and reasonableness checks), and evidence should be kept to support that claims are correct.
If tax professionals providers or marketers of Products recognise that their Product has features as outlined in TA 2021/3, the ATO advises they should:
- stop offering the Product immediately and limit advertising;
- correct functionalities and rectify issues that are misleading, incorrect or lead to erroneous results;
- advise clients that have used the Product of the issues;
- contact the ATO to correct FTC claims for clients who may have overclaimed using the product.
The ATO encourages marketers and tax professionals to seek guidance from the ATO on their Products by applying for a Product Ruling or Class Ruling to ensure that FTCs are being claimed appropriately.
Actions for taxpayers
The ATO encourages taxpayers to:
- undertake certain checks to ensure that they have claimed FTCs appropriately;
- make a voluntary disclosure to the ATO if they find any errors or if they have overclaimed FTCs to reduce penalties that may apply;
- report schemes and promoters of schemes that exhibit features as outlined in TA 2021/3;
- consider whether the telematics technology product they are using is covered by a Product Ruling or a Class Ruling. If it is not covered by a Ruling, taxpayers may request a Private Ruling to obtain certainty.
This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.