Alcohol Stakeholder Group key messages 25 July 2023

Welcome and introductions

Tony Poulakis opened the meeting with an Acknowledgment of Country, welcomed members and called for conflicts of interest, noting that Alcohol Stakeholder Group (ASG) discussions were not of a confidential basis, with minutes of meetings published on the ATO website. No conflicts of interest were declared.

The ASG 2 November 2022 meeting key messages have been published on ato.gov.au

There is one action item from the November 2022 meeting which is finalised with advice provided out of session on 17 November 2022.

Reflections of 2022–23 and Compliance Focus Areas for 2023–24

Michael Hughes noted that the current Wine Equalisation Tax (WET) program risk is considered low, with the system generally operating as intended. The current WET tax gap is 3%, or $30 million, which suggested a high level of compliance. An updated WET tax gap will be published in the ATO Annual report due October 2023. During 2021–22, overall revenue collections were $1.1 billion, which was made up of $1.4 billion in collections and $379 million returned in rebates and refunds. The New Zealand rebate scheme paid approximately $13 million, which had been trending down over recent years. WET collections have been growing since 2019 however the client population has been stable over the past decade at 3,600 clients. While there has been significant churn in the industry, this included new producers taking over existing facilities.

Compliance focus areas for 2023-24 will reflect a similar approach to 2022–23. There have been instances of fraudulent behaviour by non-genuine clients on all labels of the BAS, including the WET labels, which was being addressed by the ATO in tightening up pre-issue checking to maintain system integrity. The New-to-WET program will continue. This targeted client program assists clients to confirm they should be registered for WET and that new clients are setting up appropriate systems and processes to meet their obligations. Further targeted compliance will relate to identifying trends that seem unusual as well as where credits or producer rebates exceeded the $350,000 threshold. Work will be undertaken to ensure that legislative changes made in 2018 are effective and being applied correctly and to check current structures/other changes occurring in the industry.

In relation to alcohol excise, the legitimate industry was working well. The alcohol excise tax gap is currently 9.2%, or $629 million, which is considered out of tolerance, however this was mostly attributed to a particular element of the industry not complying. This is being addressed as part of the illicit alcohol project.

The ATO continues to have a focus on education of clients with regularly updated web content and the New to Excise program to assist new entrants to the alcohol excise industry to understand their obligations. The Excise Client Manager (ECM) program continued to engage and assist large payers. The ATO used ‘nudge’ campaigns to follow up clients who have not lodged excise returns or paid excise duty on time. The ATO will be contacting clients exceeding the $350,000 Alcohol Manufacturers Remission scheme threshold to understand where errors were being made.

Where the reminders to lodge and pay are unsuccessful, consideration of a firmer administrative approach will be considered. Where lodgment and payment requirements are not met, this may result in removal of PSPs or certain conditions being attached.

Naomi Schell noted that the alcohol excise tax gap continues to be one of the largest tax gaps for the ATO in percentage terms. An updated tax gap will be published in October 2023. Large scale illicit alcohol activities continue to be responsible for over 90%, or $577 million, of the most recent tax gap published for the 2019–20 year.

Updates about the Illicit Alcohol project have been provided at previous ASG meetings. To date an ongoing intelligence component of the program has been undertaken and as part of the ongoing education and prevention component, a range of communications have been published (Taxpayer Alert, updated web content and an illicit alcohol flyer designed for retailers). With COVID-19 restrictions lifting, there has been a shift in compliance in late 2022 to field activities being undertaken forming part of the correction component. These are ongoing, with initial results expected in late 2023.

A retailer visit program has recently been undertaken by ATO officers to approximately 250 alcohol retailers around Australia. Retail outlets were selected based on both a random basis and because of intelligence holdings. The visits were designed to gather information to inform compliance activities and to educate retailers on key indicators of illicit alcohol activity and risks, including penalties, in dealing in illicit alcohol product. ATO officers spoke to store managers and participation in the visits was on a voluntary basis. Suspected illicit alcohol product had been identified in approximately half of the stores visited, which reflected accurate intelligence. Retailers were encouraged to discuss these issues with their suppliers. ASG member feedback on the initial program was acknowledged. Follow up visits will be undertaken to assess the effectiveness of those initial visits.

During 2023–24, the ATO will continue to focus on illicit alcohol compliance, strengthening activities working with Australian Border Force and other state and federal agencies.

E-commerce is another area that will be investigated in relation to online sales of alcohol to better understand and, if necessary, treat that risk. Over 2023–24, excise centre staff may consult with ASG members to gain a better understanding from industry on any insights in relation to online sales.

Contemporary excise experience (CEE) project

Nathan Lindemann advised members that over the weekend of 25–27 August, excise data will be moved from legacy systems into the same accounting system used by the ATO for other taxes. This will enable clients to lodge and amend excise returns and make excise claims online for the first time. The ATO will advise clients when they can commence accessing the new online system.

Current processes used in relation to licence authorisations and permissions will not be changing. System updates will have no effect on the way that taxpayers lodge customs remission claims.

Action item	25072023-4-1
Due date	August 2023
Responsibility	Rowena Troth, ASG secretariat
Action item details	A copy of the presentation used at the meeting to be distributed to ASG members.

 

Action item	25072023-4-2
Due date	September 2023
Responsibility	Rowena Troth, ASG secretariat
Action item details	A webinar is to be arranged for interested ASG members to go through various system changes occurring in relation to CEE updates.

Deregulation new measures

Liz Jaspers advised that there has been progress on the excise deregulation package with 2 measures legislated as part of the Treasury Laws Amendment (Refining and Improving our Tax System) Act 2023, which received Royal Assent on 28 June 2023 and took effect from 1 July 2023. This included a measure to align excise and customs reporting with other indirect taxes for businesses with an aggregated annual turnover under $50 million; and allowing small-scale repackaging of duty-paid beer into smaller containers.

The government announced in the 2023–24 Budget that there would be a delay in the start date for the remaining measures, which is now 1 July 2024. These measures related to licensing, a uniform business experience and other items relating to streamlining fuel excise arrangements.

Treasury continue to work with the Department of Home Affairs to progress the remainder of the package and will follow standard processes and consult with stakeholders and industry on draft legislation. The timing of consultation will be dependent on government decisions and legislative processes. The standard consultation period for draft legislation is usually 2 to 4 weeks and invitations for submissions will appear on both the Department of Treasury and Department of Home Affairs websites, providing key dates and deadlines.

Treasury noted lead time for industry is important to implement changes on a practical level, including any requirement for system changes.

Anthony Barnard provided further information about the 2 measures taking effect on 1 July 2023. The small-scale repackaging measure relates to the alcohol industry and removes the requirement for an excise manufacture licence when repackaging duty-paid beer in certain circumstances. He noted that this mainly relates to small brewers, bars, clubs, and pubs as retail sale is required immediately after repackaging. Amendments have been made to public advice and guidance and industry alcohol guidelines are being updated. This measure is similar in effect to the administrative concession the ATO provided to industry during COVID-19 to assist businesses. The ATO are keen for any industry feedback.

The other measure aligns excise and customs reporting with other indirect taxes for businesses; those with an aggregated annual turnover under $50 million. Where these entities previously lodged weekly or monthly, applications could be made to the ATO to report on a quarterly basis. Anthony noted that there are approximately 1,800 alcohol clients as well as a small number of fuel clients that are under the $50 million threshold. Applications to report on a quarterly basis will be risk-assessed by the ATO to ensure compliance obligations such as lodgments and payments are up to date.

Anthony noted that the ATO will continue to support Treasury on implementation of the remaining 3 measures, which may include consultation through the ASG.

Members noted significant investment by industry to date in consultation on deregulation and expressed a strong interest in being involved in future consultation. Members also strongly advocated for changes in relation to ad valorem, particularly in relation to cost to business. Industry noted the revised start date of 1 July 2024 provided a tight timeframe, particularly where material work in system changes may be required, however it was also noted the extent of changes required by industry would be determined by the draft legislation.

Members queried whether the aligning reporting measure would be extended to larger businesses. This had been considered by the Deregulation Taskforce, however the issue of aggregate deregulation benefit versus deferred revenue were a deciding factor in the final decision.

Joe Limongelli reiterated that applications for a change from monthly to quarterly reporting would take into consideration compliance with existing PSP obligations such as lodgment and payment and asked industry associations to remind their members to ensure their obligations were on track before applying.

Industry updates – Roundtable

Kylie Lethbridge, Independent Brewers’ Association (IBA), noted that increasing energy and other costs are impacting the industry and the IBA will be increasing advocacy efforts.

Rebecca Tolhurst, Vok Beverages Pty Ltd, acknowledged the work being done by the ATO on illicit alcohol to ensure a level playing field for industry. Rebecca also referred to the ECM program and advocated for a dedicated account manager to liaise with to discuss excise-related issues. Tony Poulakis indicated that aspects of the ECM program may be rolled out to the next tier of clients in the alcohol industry.

Paul McLeay, Australian Distillers’ Association, reiterated industry comments about pressures on businesses and commended the ATO for continuing a compliance focus on illicit alcohol.

Paul Onley, Metcash Trading Ltd, queried the usual legislative process. Liz Jaspers clarified that the usual process involved an Exposure Draft being issued, followed by introduction of a Bill. Paul also noted a preference to ‘turn off’ ad valorem rather than decoupling as that may lead to 2 parties in the chain paying some impost on the same supply.

Sonja Icanovski, Lion Ltd referred to the 2 to 4 week timeframe for Treasury consultation and noted that early engagement with industry would greatly assist, particularly in relation to potential changes / system changes which may be required.

George Nikolaou, Coles, noted that following the increase in alcohol sales during COVID-19 for some entities, the market had reduced or levelled out significantly for alcohol excise and WET products.

Stuart Wood, Pernod Ricard Winemakers, also noted the tough trading environment for industry, which would be impacted by the upcoming increase in indexation.

Warwick Billings, Cider Australia, reiterated the challenging environment for industry and advised that a 2 to 4 week consultation on proposed legislation would be difficult for those ASG members who are in industry associations, requiring them to consult with their members to provide a comprehensive response to Treasury.

Trevor Barr, Wilmar BioEthanol (Australia) Pty Ltd echoed earlier comments about the value of ECM support for clients, particularly in new staff education and providing support. Trevor referred to Concessional Spirit Class of persons determination which does not impost volume limits in the sale of potable alcohol. At times the volume of sales increased significantly and may be being diverted into illicit streams. This information has been shared with the ATO in an effort to stop any criminal behaviour.

Other business

ATO technical

Margaret Whelan advised members that the final Public Ruling on the meaning of 'Legally and Economically Independent' as it pertained to the Alcohol Manufacturers Remission scheme has been published earlier in the year. Margaret thanked members for their feedback on the earlier draft.

The ATO has previously circulated a discussion paper to ASG members on a proposed Practical Compliance Guideline relating to classification of certain products, in particular alcoholic seltzers. This was a reasonably complex issue that related to definitions under the beer and spirits excise tariffs, as well as WET. Following feedback, as well as advice from the Tax Counsel Network, consideration is being given for this to instead be issued as 2 Public Rulings, which will provide more certainty for industry and clients. One ruling would cover products that might meet the definition of beer and the other ruling would cover products that might be able to be classified as subject to WET. The ATO is also consulting with the Australian Border Force as there is equivalent legislation for imported goods. Drafts will be issued to industry for consultation.

Margaret encouraged ASG members to contact the Excise Centre’s Technical Advice team for technical advice in relation to alcohol excise and WET issues.

Rowena Troth advised ASG members that a draft Charter was being finalised for the ASG and will be distributed to members for consideration and endorsement out of session.

Meeting close

Tony Poulakis thanked members for their participation and ongoing engagement throughout the year.

Attendees

Attendees list

Organisation	Attendee
ATO	Tony Poulakis (Chair), Small Business, Excise Centre
ATO	Anthony Barnard, Small Business, Excise Centre
ATO	Bennett Sandhu, Small Business, Excise Centre
ATO	Brian Geovanovich, Small Business, Excise Centre
ATO	Caraline Hill, Small Business, Excise Centre
ATO	Claudia Bianco, ATO Corporate
ATO	Joe Limongelli, Small Business, Excise Centre
ATO	Lyn Nilsson, Small Business, Excise Centre
ATO	Margaret Whelan, Small Business, Excise Centre
ATO	Michael Hughes, Small Business, Excise Centre
ATO	Naomi Schell, Small Business, Excise Centre
ATO	Nathan Lindemann, Small Business, Excise Centre
ATO	Paul Macklin, Small Business, Excise Centre
ATO	Richard Grebneff, Small Business, Excise Centre
ATO	Rowena Troth (Secretariat), Small Business, Excise Centre
ATO	Sally Fonovic, Small Business, Excise Centre
ATO	Telly Nikolakopoulos, Small Business, Excise Centre
Accolade Wines	Annalisa LoBasso
Angove’s Proprietary Ltd	Victoria Angove
Asahi Group Holdings	Paul Jackson
Asahi Group Holdings	Yingchao Ma
Australian Border Force	Kimberlee Stamatis
Australian Border Force	Jo Schultz
Australian Distillers’ Association	Paul McLeay
Australian Distillers’ Association	Michael Sugg
Australian Grape and Wine Incorporated	Lee McLean
Brown-Forman Australia Pty Ltd	Jane Wu
Campari Australia Pty Ltd	Ruth Golden
Cider Australia	Jane Anderson
Cider Australia	Warwick Billings
Coca Cola Amatil	Karen McCoy
Coles Financial Services	Frank McNamara
Coles Financial Services	George Nikolaou
Coopers Brewery	Brad Grunert
Diageo Australia Ltd	Rebecca Carter
Diageo Australia Ltd	Tomomi Yamada
Endeavour Group Limited	Priyanka Nagpaul-West
Independent Brewers Association	Kylie Lethbridge
Lion	Sonja Icanovski
Mainfreight Warehousing	Andrew Robinson
Mainfreight Warehousing	Rowan Cooke
Metcash	Paul Onley
Pernod Ricard	Stuart Wood
Samuel Smith and Son	Bob Smart
Spirits and Cocktails Australia	Nicole Lestal
Taylor Ferguson Pty Ltd	Chris Parton
Treasury	Liz Jaspers
Treasury	Tracy Richards
Vok Beverages	Ashlee-Louise George
Vok Beverages	Rebecca Tolhurst
Wilmar BioEthanol	Kat Figiel
Wilmar BioEthanol	Trevor Barr
Wine Australia	Ned Hewitson

Apologies

Apologies list

Organisation	Member
Aldi Stores	Darren Thomas
Brewers’ Association of Australia	John Preston
Manildra Group	Debbie Forster
Spirits and Cocktails Australia	Greg Holland
Tarac Technologies	Robert Pelton
Taylor Ferguson Pty Ltd	Frank Ciampa
The Drinks Association	Georgia Lennon
Treasury Wine Estates	Catherine Dishon

Key messages from the Alcohol Stakeholder Group meeting held 25 July 2023.