House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Wayne Swan MP and the Minister for Home Affairs, the Hon Bob Debus MP)

Chapter 1 - Increased tax on certain alcoholic beverages

Outline of chapter

1.1 This chapter explains amendments to the respective Schedules to the Excise Tariff Act 1921 and the Customs Tariff Act 1995 to alter the excise and excise-equivalent customs duties applying to certain alcoholic beverages not exceeding 10 per cent by volume of alcohol.

Context of amendments

1.2 Excise is a tax on certain goods produced in Australia including alcoholic beverages (other than wine). Imported goods comparable to those subject to excise, known as 'excise-equivalent goods', attract customs duty that includes a component at the same rate as the excise rate so that imports and locally-produced goods are taxed in an equivalent fashion. This component is commonly referred to as 'excise-equivalent customs duty'.

1.3 The Government tabled Excise Tariff Proposal (No. 1) 2008 and Customs Tariff Proposal (No. 1) 2008 in the House of Representatives on 13 May 2008. These tariff proposals increased the excise rate applying to 'other excisable beverages not exceeding 10 per cent by volume of alcohol' (commonly referred to as 'ready-to-drink beverages' or 'RTDs' or 'alcopops'), and the relevant excise-equivalent customs duty rates applying to the equivalent imported products, from $39.36 per litre of alcohol content to $66.67 per litre of alcohol content on and from 27 April 2008. The rate change equates to the applicable rate of other excisable beverages exceeding 10 per cent.

1.4 The rates for 'other excisable beverages not exceeding 10 per cent by volume of alcohol' are subject to indexation on a half-yearly basis and are increased in February and August each year.

1.5 The intention to alter the Excise Tariff had been previously announced in the Commonwealth Government Special Notices Gazette No. S87 of 26 April 2008 under section 160B of the Excise Act 1901. The intention to alter the Customs Tariff was announced in the Commonwealth Special Notices Gazette No. S88 of 26 April 2008 under section 273EA of the Customs Act 1901.

1.6 The Excise Tariff Validation Bill 2009 and Customs Tariff Validation Bill 2009 validated the revenue collected under Excise Tariff Proposal (No. 1) 2008 and Customs Tariff Proposal (No. 1) 2008 from 27 April 2008 until 13 May 2009 and received Royal Assent on 13 May 2009.

1.7 Excise Tariff Proposal (No. 1) 2009 and Customs Tariff Proposal (No. 3) 2009 were tabled in the House of Representatives on 12 May 2009. These tariff proposals increased the excise rate applying to 'other excisable beverages not exceeding 10 per cent by volume of alcohol' and the excise-equivalent rates of customs duty applying to their imported equivalents, to $69.16 per litre of alcohol content on and from 14 May 2009. The rate change equates to the applicable rate of other excisable beverages exceeding 10 per cent.

1.8 The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 form one part of the Government's ongoing strategy to discourage binge-drinking, particularly among young people. The measure has resulted from Government concerns at the growth in consumption of alcoholic beverages often known as 'alcopops', or 'ready-to-drink beverages'.

1.9 Such pre-mixed beverages are broadly described as mixtures of alcohol (in particular distilled spirits) with fruit juices or other flavourings.

1.10 The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 will raise $1.2 billion over the forward estimates.

Summary of new law

1.11 The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 amend the Schedule to the Excise Tariff Act 1921 to increase the rate under item 2 from $39.36 to $66.67 from 27 April 2008 and amends Schedules 3, 5 and 6 to the Customs Tariff Act 1995 so that the rates in those Schedules accord with changes to the Schedule to the Excise Tariff Act 1921. It is noted that the rates for item 2 of the Schedule to the Excise Tariff Act 1921 and Schedules 3, 5 and 6 to the Customs Tariff Act 1995 are subject to indexation on a half-yearly basis.

1.12 The ad valorem component of the customs duty on these beverages, where applicable, has not been changed by this measure.

Comparison of key features of new law and current law

Detailed explanation of new law

1.13 Other excisable beverages not exceeding 10 per cent by volume of alcohol are classified to item 2 of the Schedule to the Excise Tariff Act 1921. Goods classified to item 2 are defined as any beverage containing more than 1.15 per cent alcohol by volume but not exceeding 10 per cent alcohol by volume, but not including beer or wine.

1.14 'Beer' is defined in the Excise Tariff Act 1921 and 'wine' is defined in the A New Tax System (Wine Equalisation Tax) Act 1999. An excisable product not meeting these definitions and with an alcohol content not exceeding 10 per cent by volume falls into the category of other excisable beverages.

1.15 Imported alcoholic beverages not exceeding 10 per cent by volume of alcohol are classified under several subheadings in Schedule 3 to the Customs Tariff Act 1995, as well as items in Schedules 5 and 6. The subheadings that receive equivalent tax treatment to item 2 of the Schedule to the Excise Tariff Act 1921 include: 2203.00.31; 2204.10.23; 2204.10.83; 2204.21.30; 2204.29.30; 2205.10.30; 2205.90.30; 2206.00.52; 2206.00.62; 2206.00.92; and 2208.90.20.

1.16 The amendment set out in the Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 alters the Schedule to the Excise Tariff Act 1921 to increase the rate applicable under item 2, from $39.36 to $66.67 . [Schedule 1, item 1 of the Excise Tariff Amendment (2009 Measures No. 1) Bill 2009]

1.17 Additionally, Schedules 3, 5 and 6 to the Customs Tariff Act 1995 are altered by the Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 so that the relevant rates of excise-equivalent customs duty accord with changes to the Schedule to the Excise Tariff Act 1921. [Schedule 1, items 1 to 33 of the Customs Tariff Amendment (2009 Measures No. 1) Bill 2009]

Application and transitional provisions

1.18 In accordance with subsection 5(2) of the Excise Tariff Act 1921, these excise tariff amendments are taken to have effect on 27 April 2008 . [Section 2 of the Excise Tariff Amendment (2009 Measures No. 1) Bill 2009]

1.19 The amendments to the Customs Tariff Act 1995 are taken to have commenced on 27 April 2008. In addition, the amendments apply to goods imported into Australia on or after 27 April 2008 and to goods imported before 27 April 2008 that, in effect, have not been entered or delivered into home consumption before that date . [Schedule 1, item 34 of the Customs Tariff Amendment (2009 Measures No. 1) Bill 2009]