Alcohol Stakeholder Group key messages 30 July 2024

Group governance

Integrity declaration

Members were advised of the introduction of an integrity declaration for all consultation groups., A copy of the declaration will be provided to members by email and will need to be completed and returned prior to the first meeting in 2025.

Integrity declarations are required to be signed annually by primary members of the group, as well as by proxy members at meetings. They are not required to be completed by Commonwealth members, who are covered by other Australian Public Service guidelines.

Annual review

An annual review is currently being conducted as required for all consultation groups to ensure relevant representation of industry organisations and associations. Ongoing engagement is a factor in membership consideration.

Charter

The Alcohol Stakeholder Group (ASG) charter has been updated to include the integrity declaration, formatting updates and a draft was provided with the meeting papers.

2023–24 reflections and 2024–25 compliance focus areas

Wine equalisation tax

The wine equalisation tax (WET) system is operating largely as intended. Over $1 billion was collected in 2022–23 with approximately 3,600 clients and this number has been stable over time. The 2020–21 tax gap estimate was 2.8% or $31 million which is consistent with previous years and suggests a high level of compliance. The 2023–24 period is reasonably stable in terms of the WET system, however we are interested to hear feedback from industry. Compliance focus areas for 2024–25 will be like 2023–24 which included monitoring for potential business activity statement (BAS) fraud using WET labels, aiding 'New to WET' clients, targeted compliance work based on data-based insights and testing compliance with the 2018 legislative amendments.

Alcohol excise

The system is largely operating as intended, however illicit alcohol behaviour continues to pose a risk to revenue collection and community confidence in relation to health effects of drinking unsafe, illicit products. Alcohol excise collections for 2022–23 was approximately $7.5 billion, with around 3,500 alcohol excise clients. The 2021–22 Alcohol Net Tax Gap, comprising excise and customs duty, is approximately 9.1% and $745 million. Large value illicit alcohol activities in the shadow economy is the key contributor to the tax gap making up approximately 88%, or $660 million. The overall tax gap trend has been steady at around 9% for the last 5 years.

The ATO’s implementation of the Contemporary Excise Experience project was a significant change for alcohol excise clients, enabling online lodgments and visibility of accounts, as well as built-in checks for example, to cap claims for the Alcohol Manufacturers’ Remission (AMR). Automated lodgment reminders for monthly and quarterly lodgers commenced in March 2024. Two draft legislative determinations were recently published.

Compliance focus areas for 2024–25 will include continued web content updates and provision of education to 'New to Excise' clients. This program ensures that clients are aware of obligations in setting up their business, and a later contact in relation to the running of their business. The Excise Client Manager (ECM) program will be expanded, which provides assurance for our largest payers to provide one-on-one support and engagement. Excise Centre continues to monitor AMR claims to identify trends and patterns of non-compliance, particularly where there are shared premises with other licensed manufacturers. A firmer risk-based approach will continue in relation to assessment of authorisations, including periodic settlement permissions and greater use of financial securities. Where more complex matters are involved, there will be targeted review and audit activities. Insolvencies are occurring in the alcohol excise industry, as with other industries, and the Excise Centre is proactively contacting administrators to ensure that excise obligations are considered. Issues for administrators include how they deal with stock on hand and equipment. Excise Centre works with other areas of the ATO to manage debts and insolvencies. The ATO will continue to provide updates to the ASG and direct email contact to assist clients to meet their obligations.

Illicit alcohol

Illicit alcohol remains a priority risk. We have continued the 'retailer visits' program, which was expanded to include clubs, nightclubs and hospitality venues. These visits provided an opportunity to educate retailers about illicit alcohol risks and to collect intelligence about potentially illicit alcohol products being supplied to retailers and venues. In addition to under-reporting of excise duty, we have seen instances of improper manufacturing processes, as well as issues around the use of concessional or denatured spirit being diluted or flavours added. To treat the illicit alcohol risk, we have worked with other government agencies, including state and territory law enforcement. For example, members were reminded of the recent media commentary on an enforcement activity on a distiller conducted by Victoria Police, where Excise Centre staff attended as subject matter experts.

An issue in lodgment of returns was noted, where a second return was incorrectly lodged for the same week, with the second return defaulting to the next period. Excise Centre staff will investigate this.

Deregulation new measures

Royal Assent for the Excise and Customs Legislation Amendment (Streamlining Administration) Act 2024 was received on 28 June 2024, with amendments to respective regulations registered on 20 June 2024.

Members were advised by email on 4 July of updated ato.gov.au content. The Excise guidelines for the alcohol industry will be updated soon and members will be advised of their completion.

Changes to legislation because of the new measures from 1 July 2024 included:

• Excise and Customs licence holders will no longer need to renew licences or pay a licence fee. Due to the late passage of the law, some excise equivalent goods warehouse (EEG) licence fees were paid for the 2024–25 financial year however, these have since been refunded.
• From 1 July, clients can apply for entity-level licences. Previously, multiple licences were required where an entity had multiple premises. Changes now mean that these can be consolidated into one licence with an attached schedule providing details of the various premises. Clients will be required to apply as these will not be automatically issued.
• General Movement Permission (GMP) is available to allow clients to move goods from any of your licensed premises to any other premises that are licensed to receive goods of that kind. These are optional and can be in addition to other permissions. Previously the law focussed on movement permissions specifying details of both premises. A consideration of granting a GMP will be that there are adequate controls in place to account for goods being moved.
• We will be publishing a public register of licence holders providing the name and Australian business number (ABN) of all clients holding an excise or EEG licence. The register will be updated monthly to provide clients with a reference point for potential engagement for movement and storage of goods. A link to the register will be provided to members.
• The entitlement to claim excise refunds for excise duty paid on or after 1 July 2024 has been extended from 12 months to 4 years to align with customs duty and other indirect taxes.

Implementation of the measures will continue over the coming months. The package is the result of many years of advocacy from the ATO and industry and members were thanked for their support and engagement through the process.

Further details of the entity level licensing and GMPs was provided. As the legislation has only recently been passed, members noted that they would now consider optional licensing changes.

Members raised several queries and the following were confirmed:

• Controls currently required for licences would still be required for each entity under entity level licensing, for example, in relation to key personnel or site changes.
• The public register would provide enough information for clients to make initial contact with other licence holders.
• Entity level licences relate to entities under one ABN.
• To be considered for a GMP, the client is required to hold a licence. Further, if granted a GMP only allows the client to move goods from premises covered by their licence to any other premises that are licensed to receive goods of that kind.

Members were generally supportive of the introduction of new measures. Any member queries relating to the implementation of the new measures should be directed by email excise.experience@ato.gov.au

ATO technical advice

Members were notified of changes in the Alcohol Excise Technical team.

A paper from the 2022 ASG meeting gave a view on the addition of water to beer, cider or perry. This has been redrafted as, Draft Excise Determination ED 2024/D1W Alcohol excise: the addition of water to beer and Draft Wine Equalisation Tax Determination WETD 2024/D1 Wine equalisation tax: the addition of water to cider or perry.

The drafts were issued to members for consultation on 12 June 2024, with a due date for submissions of 12 July 2024. Several submissions were received and the ATO is working through the feedback. A concern was raised relating to the proposed date of effect and members were advised that the ATO will be taking a prospective compliance approach, with compliance resources not allocated until after December 2024.

At this stage, there is no set date of effect, but members will be informed about potential timeframes. Members expressed disappointment at the short timeframe between consultation dates and the proposed date of effect and the potential unintended consequences of the drafts on alcohol treatment. Members were encouraged to provide feedback to the ATO to ensure that all aspects associated with the ATO view were considered and investigated.

Members were advised that the Class of Persons Legislative Instrument was due to sunset in April 2025. This related to section 77FE of the Excise Act 1901 regarding entities entitled to obtain spirits at a free rate of duty for specific purposes. The draft instrument is expected to issue for public consultation in mid to late August 2024. Potential changes may include the introduction of limits on the amount that is able to be obtained by each Class of Person, which is currently unlimited.

Industry updates – roundtable

The Independent Brewers Association (IBA) advocated for industry relief from biannual indexation rate increases. The IBA appreciated the introduction of deregulation new measures but noted that there continues to be a growing number of insolvencies and liquidations in the craft brewing industry.

Vok Beverages expressed interest in more regular updates, particularly in relation to illicit alcohol.

The Australian Distillers’ Association (ADA) thanked the Excise Centre staff who attended the annual ADA conference and acknowledged the assistance provided to members over many years by Margaret Whelan. They also expressed disappointment in the upcoming excise rate indexation, with Australia now the third highest taxing country of alcohol products. Members were advised that the ATO is happy to present on excise matters at conferences or national conventions, where staff are available.

A member queried the ATO’s resourcing in illicit alcohol activities and was advised that the Excise Centre currently has approximately 6 staff solely working on illicit alcohol risk mitigation, with support from other areas in the ATO, as well as leveraging off work with other areas of the government and state and territory organisations. Mitigating the illicit alcohol risk is a priority for the ATO and other government agencies. Interest in other measures raised during earlier deregulation consideration was expressed and whether they would be introduced was queried. Members were advised that a large package of measures was introduced, and Treasury continues to review all taxation settings for consideration however, any policy changes are a matter for government and subject to prioritisation.

A member expressed interest in bi-annual meetings. Also noted was a reduction in alcohol sales with one product down by 35% and a move to cask sales and cheaper alcohol as well as an increase in ready to drink products was mentioned. Another member noted the reduction in alcohol sales as well and expressed disappointment with the issue and date of proposed effect of the draft determinations.

Support was expressed for deregulation measures and the potential introduction of limits relating to Class of Persons, an issue that Wilmar has advocated for.

The work over the last year on deregulation new measures was noted by Treasury and they expressed interest in ongoing feedback from the alcohol industry. Members showed appreciation for this significant work carried out by Treasury, ATO and Australian Border Force colleagues in relation to the introduction of deregulation new measures.

Other business

Excise Client Management – Tier 2

Members were reminded of discussions at the 2023 ASG meeting regarding the expansion of the current ECM program to a wider group of clients. The next tier of client management would not be on a one-to-one basis as with Tier 1 but would instead provide for a small team of Adelaide-based staff to be a single point of contact for selected clients. Excise Centre will be contacting those clients for further discussion about the proposed detail of that expansion which would provide a level of service but more importantly, improved confidence and assurance in relation to revenue protection.

Attendees

Apologies