The Alcohol Industry - Excise Technical Guidelines (current to 30 June 2006)

Chapter 8 - Liqueurs and Other Excisable Beverages

This document has been archived. It is current only to 30 June 2006.

Section 1 Introduction

1.1 Acronyms used in this chapter

ETI Excise tariff item

NEI Not elsewhere included

PSP Periodic settlement permission

RTD Ready-to-drink beverage.

1.2 Foreword

If you want to know more about Excise go to our website at www.ato.gov.au .

Section 2 Overview

2.1 Liqueurs

Liqueur is defined in the Schedule to the Excise Tariff Act as the product obtained by mixing or by distillation of spirit with or over, fruits, flowers, leaves or other vegetable substances or their juices either singly or in combination with extracts derived by distillation, infusion, percolation or maceration of such vegetable substances, and containing no less than 25 grams per litre of sugars and not less than 17% alcohol by volume.

In general terms liqueurs may be regarded as strongly spirituous and sweetened compounds, flavoured with aromatic herbs, essences, essential oils, vegetable and fruit extracts, and sometimes with added colouring.

2.2 Other excisable beverages

Other excisable beverage is defined in the Schedule to the Excise Tariff Act as any beverage containing more than 1.15% alcohol by volume but does not include (a) beer, (b) brandy, (c) fruit brandy, (d) whisky, (e) rum, (f) liqueurs or (g) wine as defined in Subdivision 31-A of the A New Tax System (Wine Equalisation Tax) Act 1999 . Two duty rates apply depending on strength. The Excise Tariff Item (ETI) 1D rate applies to other excisable beverages not exceeding 10% a/v while the ETI 2H rate (equivalent to the general spirits rate) applies to those over 10% a/v.

Ready-to-drink (RTD) beverages (pre-mixed alcoholic drinks) are classified as o ther excisable beverages and have become an integral part of the liquor market. RTDs are manufactured from either a distilled spirit or a fermented/brewed alcohol base.

Special consideration needs to be given to RTDs made from a grape wine base and whether such RTDs are subject to wine equalisation tax (WET) legislation or to Excise legislation (see also section 4(6) in this chapter). Appendix: 10.1 in chapter 10 of this manual provides that grape wine products that are subject to WET must contain at least 70% by volume of grape wine and have a minimum strength of 8% by volume of alcohol. As most RTDs do not meet these requirements, they are excisable products. If uncertain full details should be forwarded to the AIG for decision.

In February 2002 a change in Customs/Tax Office administrative arrangements resulted in the complete incorporation within the excise regime of imported spirit intended for use in the manufacture of RTDs. Item 10 of schedule 2 of the Excise Regulations prescribes the conditions for the use of imported spirit to be used in the manufacture of other excisable beverages, namely:

• the manufacturer of the resulting beverage must be the holder of
  • a licence under the Excise Act to manufacture the other excisable beverage, or
  • a spirit makers licence under the Distillation Act
• the resulting beverage must be an other excisable beverage.

RTDs already mixed prior to importation are dealt with under the Customs regime.

2.3 Measurement of alcoholic strength

Details of the equipment and methods approved for the measurements of alcoholic strength of liqueurs or other excisable beverages are included in Excise Act (Alcoholic strength of ready to drink beverages and liqueurs) Determination No. ED 2003/3 ¹ .

The processes are as follows:

• by the use of gas chromatography
• by the use of near infra red spectrometry, or
• by distillation followed by the gravimetric measurement of the distillate or by measurement in a density meter.

A licensee should measure the alcoholic strength of other excisable beverages and liqueurs after they have been manufactured to their final strengths. Measurement must be done only with approved calibrated equipment.

2.4 Volumes for duty purposes

Volumes for duty purposes of spirit and other excisable beverages are dealt with in chapter 3 section 3.3 of this manual (liqueurs are included in the definition of spirit in section 4 of the Excise Act).

Section 3 Legislation

Liqueurs and other excisable beverages are excisable goods. The manufacture of liqueurs and other excisable beverages is subject to the provisions of the Excise Act and the Excise Regulations. The applicable duties of excise are listed in the Schedule to the Excise Tariff Act.

Section 4 History

• Prior to 4 October 1948, provision existed under ETI 2 (I) and related by-laws, for the use of spirit in the manufacture of liqueurs outside Customs control.
• With the increase of liqueur production, certain undesirable features arose in connection with the production and marketing of liqueurs. Under the 1948 conditions then existing, Customs had no control over labelling and had no guarantee that manufacture was being carried out in accordance with approved formulae. As manufacture was carried out outside Customs supervision there was the danger that spirit entered under other concessional rates would be used for liqueur production.
• With a view mainly to protecting the revenue and ensuring that the quality of liqueurs produced in the Commonwealth was maintained at a reasonable standard, ETI.5 (Liqueurs) was introduced on 4 October 1948 and manufacturing became subject to the Excise Act and Regulations.
• On 23 May 1985, ETI.5 was abolished and liqueurs became classified under ETI 2Gl and 2G2 and spirituous beverages (such as vodka and ouzo) under ETI 2Hl and 2H2 to conform to a review of legislation conducted through the National Health and Medical Research Council.
• Effective from 3 February 1997, the requirement for and duty advantage of an approved formula was removed in respect of both liqueurs and spirituous beverages. ETI 2G1 and 2G2 became 2G, and 2H1 and 2H2 became 2H. The description attached to 2H was changed from spirituous beverages to beverages (other than beverages comprised solely of fortified wine) containing distilled alcohol, not elsewhere included. This result was mainly due to the AAT decision in Re: Carlton & United Breweries Ltd & Chief Executive Officer of Customs ² which defined spirituous as containing much [sic] spirit and as such alienated beverages with lower alcoholic strengths, such as 6% distilled alcoholic mixer drinks.
• Concurrent with the Tax Reform provisions effective from 1 July 2000 the Schedule to the Excise Tariff Act was restructured such that all alcoholic beverages, other than wine covered by the WET legislation ³ , became subject to excise. This resulted in the creation of a new ETI 1D which covered all alcoholic beverages not exceeding 10% strength by volume that were not already covered elsewhere, for example beer. There was also a change to the wording of ETI 2H to cover all excisable beverages, with a strength greater than 10% by volume not already covered.

Tariff History - Liqueurs
To 2/2/1997	2G1	Liqueurs as prescribed by by-law	approved formula distinguished between these
To 2/2/1997	2G2	Liqueurs, other
3/2/1997	2G	Liqueurs	approved formula No longer required
1/7/2000	2G	Liqueurs	Neither ETI nor description changed for Tax Reform
Tariff History - Other Excisable Beverages exceeding 10% alcohol by volume
To 2/2/1997	2H1	Spirituous beverages as prescribed by by-law	approved formula distinguished between these
To 2/2/1997	2H2	Spirituous beverages, other
3/2/1997	2H	Beverages (other than beverages comprised solely of fortified wine) containing distilled alcohol, n.e.i (not elsewhere included).	approved formula no longer required, and change of wording.
1/7/2000	2H	Other excisable beverages, exceeding 10%	Change of wording as a consequence of Tax Reform (compare with new ETI 1D covering the same when not exceeding 10%).
Tariff History - Other Excisable Beverages 10% a/v or less
1/7/2000	1D	Other excisable beverages not exceeding 10%	First appearance of this item. All alcoholic beverages, not subject to WET, are now excisable.

Section 5 Packaging

5.1 Packaged in bulk containers

Liqueurs or other excisable beverages must not be entered for home consumption packaged in a bulk container without the written approval of the Tax Office (subsection 58(4) of the Excise Act).

5.2 Packing and labelling

The packing and labelling of liqueurs or other excisable beverages is covered by regulation 234D of the Excise Regulations as follows:

where bottles or flasks are packed in cases:

• each case is to contain only the one type of liqueur or other excisable beverage
• the same number of bottles or flasks are to be packed in each case, and
• each case containing a particular type of bottle or flask is to contain the same number of that type of bottle or flask.

The liquid quantity of liqueur or other excisable beverage in a case or bottle is to be measured as directed by the Tax Office.

The manufacturer of liqueurs or other excisable beverages is required to label each bottle or flask of liqueurs or other excisable beverages with the following details:

• either the name of the manufacturer and the address of the factory at which the liqueur or other excisable beverage was made, or the excise number of both the factory and the State in which the liqueur or other excisable beverage was made, and
• the words 'made in Australia' or words approved by the Tax Office indicating that the liqueur or other excisable beverage was made in Australia, and
• the name, type or brand of liqueur or other excisable beverage
• the quantity of liqueur or other excisable beverage contained in the bottle or flask, and
• any additional markings approved by the Tax Office.

If the manufacturer packs bottles or flasks of liqueur or other excisable beverage in a case they are required to paint or brand the following particulars on the case:

• either the name of the manufacturer and the address of the factory at which the liqueur or other excisable beverage was made, or the excise number of both the factory and the State in which the liqueur or other excisable beverage was made, and
• the words 'made in Australia' or words approved by the Tax Office indicating that the liqueur or other excisable beverage was made in Australia.

All particulars required to be included on a label or to be painted or branded on a case, must be easily readable.

Section 6 Records

The Excise Act requires a licensee to account for all excisable goods in their possession, custody or control and to correctly pay any excise liability ⁴ . The maintenance of adequate records is an important step towards meeting these obligations. Section 50 of the Excise Act requires a licensed manufacturer to record and retain such information as the Tax Office directs, and to produce that information to the Tax Office when requested. Under these provisions, a manufacturer of liqueurs or other excisable beverages will be directed to record each stage of production from the receipt of raw materials through to the delivery of the finished product. They must maintain the following minimum records:

Spirit account:

• quantity in litres of spirit received
• date spirit received
• strength of spirit received
• type of spirit received
• quantity in litres of spirit transferred to the manufacturing account, and
• date of transfer of spirit to the manufacturing account.

Manufacturing account:

• batch number
• date
• quantity and strength of spirit transferred from the spirit account
• details of ingredients (as per approved formula). Details must be sufficient to identify the excise tariff classification of the product
• quantity in litres and strength of product manufactured
• quantity in litres transferred to the case account, and
• details of any losses/gains.

Case account:

• quantity in litres received from the manufacturing account
• quantity in litres bottled (number of cases, number and size of bottles per case)
• bottling run number and date
• details of any losses or gains
• details of delivery document (excise return, single movement permission, continuing movement permission or export declaration number), and
• date of delivery.

Section 7 Goods Returned to Under Bond Stock After Removal or Delivery for Home Consumption

Goods falling within the following categories may be returned to under bond stock:

• incorrect stock selections, and
• over delivery.

Returns are subject to the following conditions:

• they must be accompanied by the original documentation, and
• they must be returned within 48 hours of delivery, or such further time as the Tax Office may allow if satisfied that the goods have been returned without delay.

Breakages that occur after goods have left Tax Office control may not be returned to under bond stock.

Interpretative Decisions (ATO IDs) which provide examples of circumstances where goods may or may not be returned to under bond stock after removal or delivery may be found at www.ato.gov.au .

Section 8 Allowance for Waste

Regulation 234B of the Excise Regulations states:

The Collector may make such allowances for waste as the Collector considers reasonable in respect of:

• the storage of spirit intended for use in the manufacture of liqueurs or other excisable beverages; and
• losses arising out of the manufacture, storage or bottling of liqueurs or other excisable beverages.

All loss or wastage of alcohol must be fully recorded by the manufacturer.

1 A determination made under section 77FB of the Excise Act.

2 Re: Carlton & United Breweries Ltd & Chief Executive Officer of Customs (1996) 42 ALD 321; (1996) 23 AAR 220.

3 See subdivision 31-A of the A New Tax System (Wine Equalisation Tax) Act 1999 for the definition of wine.

4 Sections 50, 53 and 60 of the Excise Act.

ATO references:
NO NAT 14790-04.2006