The ATO is reviewing arrangements where Global Positioning System (GPS), telematics or software providers or tax professionals are marketing telematics technology products for fuel tax credit purposes where the analysis of GPS data, and the methods used within the product, lead to an incorrect apportionment of fuel tax credits. This results in client overclaims which lead to substantial audit adjustments that may attract penalties and interest.
In particular, Taxpayer Alert TA 2021/3 identifies the following practices that can lead to incorrect apportionment of fuel and erroneous fuel tax credits claims. GPS, telematics or software providers or tax professionals need to consider whether the product they are promoting has any of these characteristics that may distort fuel tax credit claims:
• incorrect classification of roads or locations
• inadequate sample sizes or applying product results that are 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 these 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 (safe harbours).
The ATO is scrutinising fuel tax credit claims which have been prepared using a GPS or telematics technology product that exhibits the types of issues and practices described that lead to overclaimed credits. Where necessary, the ATO will adjust fuel tax credit claims and may impose penalties and interest for the fuel tax credit clients.
The ATO advises that the following prudential steps should be taken to ensure that the product used and its results lead to correct FTC claims by:
• having sufficient internal controls and governance in place
• keeping supporting evidence to justify classification of roads, sample sizes, fuel measurement or estimates, algorithms used and any other variable or input
• testing the reasonableness of results with the actual use of fuel (for example, the data is checked against contemporaneous business records, comparing the distance computed by the product to similar paths or distances with odometer readings and/or reputable mapping data sources, etcetera), and
• reconciling product results with original and other supporting documentation.
If a product is not suitable or it requires time to update so that fuel tax credit clients can easily rely on the product with confidence, marketers should:
• stop offering the product immediately and limit your advertising
• correct functionalities and rectify issues that are misleading, incorrect or lead to erroneous results
• advise clients that have used their product of the issues, and
• contact the ATO to work with them on correcting fuel tax credit claims for clients, for example, by voluntary disclosure.
Penalties may apply to participants in, and promoters of, the types of arrangements described in this Alert. This includes serious penalties under Div 290 of sch 1 to the Taxation Administration Act 1953 for promoters. Registered tax agents involved in the promotion of this type of arrangement may be referred to the Tax Practitioners Board to consider whether there has been a breach of the Tax Agent Services Act 2009.
Source: Taxpayer Alert TA 2021/3, ATO website, 17 September 2021, accessed 17 September 2021.