Excise guidelines for duty free shops

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About this guide

This guide is intended to be a reference tool for duty free shops to assist operators to meet their Excise obligations. It contains information about the excise system and how it applies to duty free shops.

The guide will provide you with a broad outline of excise law and your compliance obligations - it does not cover every aspect of how excise law applies to every situation.

Throughout this guide you will find important notes (look for the

 symbol) that will help you with key information you should note.

You will also find 'more information' boxes (look for the

 symbol) that will show any further steps you may need to take or supplementary information you may need to refer to.

The 'danger' notes (look for the

 symbol) give prominence to information that is critical to compliance. They suggest the highest level of urgency or facts you must comply with.

 If this guide does not fully cover your circumstances, please seek help from us or a professional adviser.

You can contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

TERMS WE USE

When we say you, we mean you as a duty free shop operator who is either registered or wishes to register for excise.

Some technical terms used in this guide may be new to you - some are defined in the legislation, others are not. They are shown in bold when first used and are explained at the end of that chapter.

The terms CEO, Collector, and Commissioner are all used in the legislation in reference to various officers. In most instances in this guide we have not used these specific terms and simply refer to 'us' or 'we'.

OUR COMMITMENT

The information in this publication is current at August 2008.

This publication is an expression of the Commissioner's opinion on the operation of the Excise Act 1901 and Excise Tariff Act 1921 as they relate to duty free shops (excise legislation). This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on excise legislation.

Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

01 INTRODUCTION

1.1 PURPOSE

1.2 WHAT IS EXCISE?

1.3 OVERVIEW OF EXCISE LEGISLATION

1.3.1 EXCISE TARIFF ACT

1.3.2 EXCISE ACT

1.3.3 EXCISE REGULATIONS

1.4 WHO ADMINISTERS EXCISE?

1.5 WHEN AM I INVOLVED IN THE EXCISE SYSTEM?

1.6 WHAT DO I NEED TO KNOW BEFORE I SET UP A DUTY FREE SHOP?

1.6.1 WHAT IS A DUTY FREE SHOP?

1.6.2 WHAT DO YOU NEED BEFORE YOU SET UP A DUTY FREE SHOP?

1.7 WHAT DO I NEED TO KNOW BEFORE I SET UP A DUTY FREE SHOP?

1.8 TERMS USED

1.9 LEGISLATION (QUICK REFERENCE GUIDE)

1.9.1 Excise Act 1901

1.9.2 Excise Regulations 1925

1.9.3 Excise Tariff Act 1921

1.9.4 Customs Regulations 1926

1.9.5 Commonwealth of Australia Constitution

1.1 PURPOSE

This chapter deals with:

• what excise is
• an overview of excise legislation relevant to duty free shops
• who administers Excise, and
• when you are involved in the excise system.

It provides a general introduction to excise as it relates to duty free shops. Further detail on the matters discussed is contained in later chapters.

1.2 WHAT IS EXCISE?

The Commonwealth of Australia Constitution Act (the Constitution) provides that only the Commonwealth can impose duties of excise.[1]

The Constitution also provides that laws imposing taxation (and excise is a tax) shall only deal with the imposition of tax. The Excise Tariff Act 1921 imposes excise on relevant goods manufactured or produced in Australia and the Excise Act 1901 deals with administrative arrangements applying to the excise system.

In Ha & Anor v. State Of New South Wales & Ors; Walter Hammond & Associates Pty Limited v. State Of New South Wales & Ors[2] (Ha), the High Court explained a duty of excise as follows:

 "... duties of excise are taxes on the production, manufacture, sale or distribution of goods, whether of foreign or domestic origin. Duties of excise are inland taxes in contradistinction from duties of customs which are taxes on the importation of goods."[3] 

Excise imposed by the Excise Tariff Act is imposed on goods dutiable under the Schedule to that Act and manufactured or produced in Australia of specified goods. It can be seen that this clearly fits the definition of duty of excise as described by the High Court in the Ha case.

1.3 OVERVIEW OF EXCISE LEGISLATION

The principal legislative framework for the excise system is contained in the:

• Excise Tariff Act 1921 (Excise Tariff Act)
• Excise Act 1901 (Excise Act), and
• Excise Regulations 1925 (Excise Regulations).

To change the Excise Tariff Act requires an amending act to be passed through Parliament. There are parliamentary procedures which allow for the modification of the Excise Tariff so that the changes can be implemented immediately. These procedures are known as Tariff Proposals.

For more information on Tariff Proposals see Section 1.3.1 - Excise Tariff Act.

1.3.1 Excise Tariff Act

There are three key provisions in the Excise Tariff Act that operate to:

• impose excise duty
• identify excisable goods and the applicable duty rates (the Schedule), and
• index the duty rate.

Imposition of Excise Duty

Section 5 of the Excise Tariff Act imposes excise duty on goods that are listed in the Schedule to the Act and manufactured or produced in Australia.  Excise duty is imposed at the time of manufacture or production of the relevant goods. The Schedule lists the various goods that are subject to excise and the rate of duty applicable. It is sometimes referred to as the Excise Tariff.

The schedule of excisable goods and the duty rates

The Schedule to the Excise Tariff Act is a table that lists the goods that are subject to excise duty (if those goods are manufactured or produced in Australia). The goods that are currently subject to excise fall within three broad groups:

• alcoholic beverages (other than wine) and spirits
• cigarettes and other tobacco products, and
• fuel and oils.

Within those three broad groups the schedule provides eight different items and those items are (in most cases) further broken down into subitems. The table contains a description of the items and subitems and provides the rate of duty applicable to them.

The following is an extract from the alcohol products section of the table:

Tariff Item	Subitem	Description of Goods	Rate
2		Other excisable beverages not exceeding 10% by volume of alcohol	$68.54* per litre of alcohol
3		Spirits; Other excisable beverages exceeding 10% by volume of alcohol
	3.1	Brandy	$63.99* per litre of alcohol
	3.2	Other excisable beverages exceeding 10% by volume of alcohol	$68.54* per litre of alcohol
	3.10	Spirits not elsewhere included	$68.54* per litre

*Rate of duty as at 1 August 2008. For the current rates of duty, refer to the Schedule under Excise Tariff Working Pages on our website atwww.ato.gov.au

Indexation of the duty rate

The rates of excise are set in the Schedule to the Excise Tariff Act. However, section 6A provides that the rates of duty may increase every six months (generally 1 February and 1 August). The amount of any increase is calculated by reference to the All Groups Consumer Price Index published quarterly by the Australian Bureau of Statistics.

These increases are commonly referred to as indexation. We publish these in the Commonwealth Gazette and, for ease of reference, we provide a 'working tariff' which shows an up to date rate taking account of the indexation increases.

Indexation increases also apply to rates set under a tariff proposal.

Tariff proposalsTariff proposals are a means of changing the Excise Tariff (rates can be adjusted up or down; products can be added or removed) so that it is effective from the time it is proposed rather than after the enactment of an Excise Tariff Amendment Act. Most of the processes relate to Parliamentary procedures, however, there are specific provisions in the Excise Act that provide for the making of tariff proposals when Parliament is not sitting.Effectively changes to the Excise Tariff can be notified in the Parliament or, if the Parliament is not sitting, by notice in the Gazette. We then apply the proposal as if it is law. The tariff proposal is required to be validated by an Act within12 months giving retrospective effect to the date of the proposal.You cannot commence proceedings against us for any action taken to collect the amount set by the tariff proposal during the periods specified in section 114 of the Excise Act.[4]Effectively this means you need to pay in line with a tariff proposal. Any increases in rates or introduction of new products through a tariff proposal technically does not impose excise but we will protect the revenue by collecting amounts in line with the proposal.If an amending Act validating the changes outlined within the tariff proposal is not passed within the prescribed periods, then any additional amounts will be refunded to you.

1.3.2 Excise Act

The Excise Act imposes controls in two main areas:

• manufacture, storage and movement of excisable goods, and
• payment of duty for excisable goods.

The Excise Act requires that excisable goods not be stored outside our control. This is to ensure that the correct amount of duty is ultimately paid or the excisable goods are otherwise satisfactorily dealt with. This is achieved by making various activities unlawful and allowing us to grant licences and permission to people to carry on those otherwise unlawful activities.

Manufacture, storage and movement of excisable goods

Before you can manufacture excisable goods, you need a manufacturer licence granted under the Excise Act.[5]

Before you can store excisable goods that you did not manufacture, you need a storage licence granted under the Excise Act.[6]

Before you can remove excisable goods on which duty has not been paid, you need permission granted under the Excise Act.[7]

Before you can sell excisable goods to relevant travellers, you need a permission granted under the Excise Act.[8]

For more information about the excise licensing regime refer to Chapter 2 - Licensing: Applications.

For more information about movement permissions refer to Chapter 5 - Movement permissions.

For more information about selling excisable goods to relevant travellers refer to Chapter 6 - Making duty free sales: Outwards and Chapter 7 - Making duty free sales: Inwards.

Payment of duty for excisable goods

In general terms duty free shops will not pay duty. However, payment of duty will be required when excisable goods are not taken overseas or are unable to be accounted for e.g. stock shortages.

The Excise Act specifies when the duty must be paid, how and what you must report to us, the relevant time to determine the rate of duty in force, and provides a mechanism to require payment where duty has not been correctly accounted for on excisable goods. 

For more information about payment of duty refer to Chapter 8 - Accounting for excisable goods.

1.3.3 Excise Regulations

The Excise Regulations set out provisions in relation to excisable goods such as:

• rules for duty free shops, and
• remissions.

For more information about rules for duty free shops refer to Chapter 6 - Making duty free sales: Outwards and Chapter 7 - Making duty free sales: Inwards.

For more information about remissions refer to Chapter 9 - Remissions and exemptions.

1.4 WHO ADMINISTERS EXCISE?

The Commissioner of Taxation has the general administration of the Excise Act and the Excise Tariff Act.[9] This means you have to deal with the Tax Office for Australian manufactured alcohol and tobacco products.

As excise is only levied on products manufactured in Australia imported alcohol and tobacco products are not subject to control by us. Customs duty, under the Customs Act 1901 (Customs Act) and Customs Tariff Act 1995 (Customs Tariff Act), is applied to imported alcohol and tobacco products. The Australian Customs Service (Customs) is responsible for administration of the Customs Act and Customs Tariff Act.

You must have a licence, under the Customs Act, before you will be granted a storage licence, with permission to sell duty free, under the Excise Act.

Who you need to deal with is summarised in the following table:

	Customs	Tax Office
Australian manufactured alcohol and tobacco products	No	Yes
Imported alcohol and tobacco products	Yes	No

 

 

 

 

 

 

 

1.5 WHEN AM I INVOLVED IN THE EXCISE SYSTEM?

You are involved in the excise system if you:

• operate a duty free shop
• manufacture excisable goods, or
• store or own excisable goods on which duty has not been paid.

1.6 WHAT DO I NEED TO KNOW BEFORE I SET UP A DUTY FREE SHOP?

1.6.1 WHAT IS A DUTY FREE SHOP?

A duty free shop is licensed to store excisable goods and has a permission to sell those goods to relevant travellers.

Understanding who is a relevant traveller is fundamental to the operation of a duty free shop.

A relevant traveller is:

• a person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew of (or the pilot or master of respectively) an aircraft or ship,[10] or
• a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew of (or the pilot), an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight.[11]

There are two types of duty free shops:

• outwards (off-airport and on-airport), and
• inwards (on-airport).

About Outwards off-airport duty free shops

Outwards off-airport duty free shops sell to relevant travellers who are departing from Australia. They can be located away from the airport or at the airport, but before the Customs processing point.

Duty free goods can only be sold to relevant travellers. Goods will be placed in a sealed bag[12] and a copy of the sales invoice is placed on the outside of the bag.[13] Relevant travellers must present any sealed bags for inspection, and removal of the invoice, by the proprietor of the duty free shop, or a servant or agent of the proprietor, either:

• when surrendering them, to airline or shipping staff, for carriage other than in the cabin of an aircraft or ship, or
• in the departure area.[14]

Duty free operators must ensure that invoices are retrieved from the outside of the sealed bags.[15] This is done by Duty Free Security, who are collection agents (docket pluckers) authorised by the duty free shop.

For more information about the requirements for outward duty free sales see Chapter 6 - Making duty free sales: Outwards.

Changes to airport security arrangements on 31 March 2007 prevent passengers from carrying any liquid, aerosol or gels goods on board aircraft as hand luggage.

For information about how we currently administer the export of liquid, aerosol and gels duty free goods, as a result of these security changes, please refer to 'Exporting liquid, aerosol and gels duty free goods' in Chapter 6 - Making duty free sales: Outwards.

When an invoice is not retrieved, there is no proof that the goods have left Australia and the duty free shop is liable to pay us an amount equal to the rate of excise duty that was payable on the goods when they were delivered to the relevant traveller.[16]

For more information about when and how to pay excise duty see Chapter 8 - Accounting for excisable goods.

About Outwards on-airport duty free shops

Outwards on-airport duty free shops are located after the customs barrier in the departure lounges at international airports. Goods sold in these shops are not required to be placed in sealed bags.

About Inwards duty free shops

Inwards duty free shops are located at international airports between the disembarkation point and Customs and Immigration processing.

After the goods are sold to arriving passengers, they are presented at the inwards Customs processing point.

There are limits on the quantities of excisable goods that can be sold. These are linked to Customs Act limits for arriving passengers.

For more information about these limits contact Customs or visit the Customs website atwww.customs.gov.au

1.6.2 WHAT DO YOU NEED BEFORE YOU SET UP A DUTY FREE SHOP?

You need:

• a customs warehouse licence[17]
• an excise storage licence,[18] and
• a permission to sell duty free.[19]

You may also need permission to move goods underbond if your suppliers don't have one.

Customs warehouse licence

You need to be licensed as a warehouse by Customs, before you can be granted a permission to sell excisable goods to relevant travellers.[20]

A proprietor of a duty free shop is the holder of a Customs warehouse licence.[21] Proprietor has the same meaning in the Excise Act as it has in the Customs Act 1901.[22]

For more information about customs warehouse licences, contact Customs or visit the Customs website at www.customs.gov.au

Excise storage licence

You also require a licence to store excisable goods. This licence is issued by us.

For information about how to obtain an excise storage licence see Chapter 2 - Licensing: Applications.

Licence conditions

Excise storage licences for duty free shops include conditions[23] that limit the amount of excisable cigarettes and excisable tobacco each shop can receive over a calendar year. The quantity you can receive will be determined according to the bona fide business requirements of your duty free shop.

As part of the application process, we may ask you to nominate and justify, via a business plan, the quantity of excisable tobacco products (on which duty has not been paid) you require over the annual period.

Permission to sell duty free

Before you can sell excisable goods on which duty has not been paid, you need a permission to sell duty free. We will also issue you with this permission.[24]

Underbond movement permission

Excisable goods, on which duty has not been paid, cannot be moved unless there is a movement permission. This permission can be held by you or your supplier.

For information on movement permissions see Chapter 5: Movement permissions.

1.7 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on excise, as it relates to duty free shops, contact us:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

1.8 TERMS USED

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are listed in the Schedule to the Excise Tariff Act and manufactured or produced in Australia.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Section 7 of the Excise Act 1901 refers to the CEO as having general administration of this Act. In this manual we will also refer to this general administration as Excise Control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Excise return

An excise return[25] is the document that you use to advise us the volume of excisable goods that have been delivered into the Australian domestic market.

Proprietor

In relation to duty free shops, is the holder of the warehouse licence that relates to the outwards duty free shop[26] or inwards duty free shop.[27]

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

1.9 LEGISLATION (quick reference guide)

In this chapter, we have referred to the following legislation:

1.9.1 Excise Act 1901

Section 4 - Definitions

Section 7 - General administration of Act

Section 25 - Only licensed manufacturers to manufacture excisable goods

Part IV - Manufacture, storage, producer and dealer licences

Section 61A - Permission to remove goods that are subject to CEO's control

Section 61D - Outwards duty free shops

Section 61E - Inwards duty free shops

Section 114 - Time for commencing action

1.9.2 Excise Regulations 1925

Regulation 79 - Outwards duty free shops

1.9.3 Excise Tariff Act 1921

Section 1A - General administration of Act

Section 5 - Duties of excise

Section 6A - Indexation of rates of duty

The Schedule

1.9.4 Customs Regulations 1926

Regulation 94 - Declaration in respect of airport shop goods

1.9.5 Commonwealth of Australia Constitution

Section 90 - Exclusive power over customs, excise, and bounties

02 LICENSING: Applications

2.1 PURPOSE

2.2 INTRODUCTION

2.2.1 WHY IS THERE A LICENSING REGIME?

2.2.2 WHAT IS A LICENCE?

2.3 POLICY AND PRACTICE

2.3.1 WHAT TYPE OF LICENCE DO I NEED?

2.3.2 WHAT ARE MY RESPONSIBILITIES AS A LICENCE HOLDER?

2.3.3 WHAT ELSE CAN WE DO?

2.3.4 WHAT RECORDS DO I NEED TO KEEP?

2.3.5 HOW LONG IS MY LICENCE VALID FOR?

2.3.6 IS MY LICENCE TRANSFERABLE?

2.3.7 CAN MY LICENSING INFORMATION BE DISCLOSED?

2.4 PROCEDURES

2.4.1 HOW DO I REGISTER FOR EXCISE?

2.4.2 HOW DO I APPLY FOR A LICENCE?

2.4.3 HOW DO I CHANGE MY LICENCE DETAILS?

2.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

2.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO LICENCES?

2.6 TERMS USED

2.7 LEGISLATION (quick reference guide)

2.7.1 Excise Act 1901

2.7.2 Excise Tariff Act 1921

2.7.3 Crimes Act 1914

2.7.4 Criminal Code Act 1995

2.1 PURPOSE

This chapter deals with:

• why there is a licensing regime
• what a licence is
• different licence types
• how long a licence is valid for
• whether licences are transferable
• disclosure of your licensing information
• how to register for excise
• how to apply for a licence
• how to change your licence details, and
• penalties that can apply to offences in relation to licences.

2.2 INTRODUCTION

2.2.1 WHY IS THERE A LICENSING REGIME?

The excise duty attached to excisable goods forms a significant component of the overall value of the goods. A licensing regime reduces the risk that the correct amount of duty will not be paid.

2.2.2 WHAT IS A LICENCE?

A licence is an approval or authorisation to enable you to undertake activities as specified in the licence. If you undertake these activities without a licence or contravene your licence you are committing an offence and may be prosecuted.

A licence is issued to a specific entity and specifies the site where the activities may be undertaken. This may require you to have more than one licence.

Licences can be issued to:

• individuals
• partnerships and companies in their own right, and
• individuals and companies in their capacity as trustees.

There may be different licensing processes depending on the type of entity applying for the licence.

A licence is not transferable.

2.3 POLICY AND PRACTICE

2.3.1 WHAT TYPE OF LICENCE DO I NEED?

If you are a duty free shop operator, you will store and sell underbond excisable goods, in which case you will require a storage licence (with permission to sell duty free).

Before your storage licence is issued, you will also need a warehouse licence issued under the Customs Act.

For more information on Customs warehouse licences you should contact the Australian Customs Service (Customs) or visit the Customs website at www.customs.gov.au

Duty free shops are different from other licensed premises because they are allowed to display and sell goods that have not had excise paid on them. Your storage licence will specify the type of excisable goods you can store and the location. It will also specify the activities, if any, you can undertake in relation to those goods,[28] for example, sell duty free to:

• relevant travellers
• diplomats or consuls, and/or
• sea-going vessels of the Royal Australian Navy (RAN) or Australian Military Forces (AMF).

Paying duty and delivering goods into the Australian domestic market, supplying ship's stores or exporting by other means are not allowed unless specifically authorised in your licence. We will only approve these activities when there is a genuine business need, for example supplying ship's stores in a remote location where there is no alternative source.

2.3.2 WHAT ARE MY RESPONSIBILITIES AS A LICENCE HOLDER?

You are responsible for the secure storage of all excisable goods held on your premises or under your control and must keep or store excisable goods only at premises that are specified in your licence.[29]

You may be responsible for paying an amount equal to the excise duty that would have been payable on any stolen, missing or unaccounted for excisable goods.[30]

If you wish to destroy any excisable goods you must first obtain permission from us to do so.

You must not move excisable goods without approval from us. This includes moving excisable goods from your licensed premises to any other location or for export.[31]

For more information about obtaining permission to move excisable goods refer to Chapter 5 - Movement permissions.

You are also responsible for ensuring that you comply with the Excise Act and all conditions of your licence.[32]

You must keep, retain and produce records in accordance with a direction under section 50 of the Excise Act.

2.3.3 WHAT ELSE CAN WE DO?

Access

We have the right to enter your licensed premises at any time and can examine and take account of all the goods at the premises.[33]Note: we will usually only seek to enter your premises during normal business hours.

Stop vehicles

We can stop any vehicle leaving your licensed premises and check that there is proper documentation for excisable goods leaving the premises. We can question the driver about any goods in the vehicle. We can direct that the vehicle be unloaded and goods taken to particular parts of the premises for further examination. We must not detain a vehicle for longer than is necessary to do the checking.[34]

Search vehicles

We can stop and search any vehicle (not just vehicles leaving a licensed premises) without a warrant if we have reasonable grounds for believing that the vehicle contains excisable goods and that the vehicle has been used, is being used or will be used in the commission of an offence under the Excise Act (and certain offences in the Crimes Act 1914[35] and Criminal Code[36] relating to accessory after the fact, attempt to commit an offence, aid and abet someone to commit an offence and conspiracy to commit an offence).[37]

2.3.4 WHAT RECORDS DO I NEED TO KEEP?

Unlike other taxation laws, the Excise Act does not have a general record keeping provision. The Excise Act does provide that a licence holder shall:

1. keep such records and furnish such returns as directed
2. keep these records for the period directed, and
3. on demand, produce those records to us.[38]

Any such direction will be in writing and included with your licence. We can amend this direction at any time and will provide written notification of this to you.

We can inspect and take copies of any records kept as directed.

If you cease to hold an excise licence you must still keep all records of your previously licensed activities. Records must be kept for the period of time as directed.

2.3.5 HOW LONG IS MY LICENCE VALID FOR?

Your licence will state its expiry date. When first issued, the licence is valid until the next 30 September two years after the anniversary of the day it is granted.[39]

Example: 2AIf we grant a licence on 15 September 2007, it will expire on 30 September 2009.If we grant a licence on 15 October 2007, it will expire on 30 September 2010.

Upon renewal a licence is valid for a further three years starting from the day after the date of expiry of the existing licence, that is, 1 October three years from the year the existing licence expires.

2.3.6 IS MY LICENCE TRANSFERABLE?

Generally you cannot transfer your licence to another individual, business entity or premises. The proposed new licence holder must apply for a new licence. You must also request cancellation of your current licence if you are no longer carrying out an excise activity. It is important that you advise us of any change in advance of it taking effect.

The exception to the above rule arises when a licence holder dies. If this is the case, the licence is taken to be transferred to the person's legal personal representative. This allows for the finalisation of the affairs and, unless cancelled earlier, the licence is taken to be automatically cancelled 3 months after the licence holder dies.[40]

For more information about cancelling licences refer to Chapter 4 - Licensing: Suspension & cancellation.

2.3.7 CAN MY LICENSING INFORMATION BE DISCLOSED?

As well as the protection provided by the Privacy Act, the tax laws have secrecy provisions about using and disclosing taxpayer information. We can only look at, record, discuss or disclose information about you when it is a necessary part of our work, or where the law specifies that we may.

Subsection 159(3) of the Excise Act allows us to record or disclose information about you in certain circumstances. For example, the Excise Act specifically allows us to disclose information about you to the Australian Customs Service.

In relation to licensing information, the Excise Act specifically allows us to disclose information about:

• whether another person holds a current excise licence, and
• any conditions that apply to their licence.

Sub-section 159(3A) provides that such information may be disclosed:

• to a person dealing or proposing to deal with another person in relation to goods subject to excise control, and
• provided we are satisfied that disclosure is necessary for the purposes of ensuring the dealing or proposed dealing is in accordance with excise law.

If we decide that the disclosure is necessary, we must provide the information in writing to the person who requires it. If the matter is urgent, we may advise by phone. However, we must later confirm the information by letter or fax.

A disclosure may be initiated by us or by you when you request information.

Anyone who receives such information should use it only for the purpose for which it was given. Any other use may be unlawful.

Note: The Privacy Act 1988 (Privacy Act) imposes certain obligations on you concerning the privacy of information that you have received about an individual. Further information can be obtained from the Office of the Federal Privacy Commissioner.

Our decision in relation to the disclosure of protected information is not a reviewable decision. However you have the right to make a complaint to the Commonwealth Ombudsman about a range of administrative actions we take or the Privacy Commissioner if you think we have breached the Privacy Act in dealing with your personal information.

For information about your review rights refer to Chapter 10 - Reviews and objections.

2.4 PROCEDURES

2.4.1 HOW DO I REGISTER FOR EXCISE?

You must register for excise before you can be issued with a licence to store excisable goods.

While it is not compulsory to provide an ABN or TFN for registration, it will help us to process your application.

If you need an ABN, phone 1300 657 162 for a registration pack. You can send your completed ABN registration form with your completed excise registration application.

To register for excise, complete an Application for excise registration (NAT 7103).

2.4.2 HOW DO I APPLY FOR A LICENCE?

If you would like to apply for a licence, you should:

• contact us, and
• lodge an application form together with all the required supporting documents.

To contact us phone 1300 137 295.

Our staff will:

• discuss your particular circumstances with you
• give you advice about the appropriate licence or licences
• explain how to apply
• explain your ongoing obligations as a licence holder, and
• provide you with a licence application form.

There is no charge for an excise licence.

How do I lodge an application?

You need to complete the relevant form to apply for a storage licence. [41]

Before lodging your application form, make sure you have included the required supporting documents. Your application form contains information to help you work out which supporting documents you must provide. You may also need to complete other excise forms, depending upon your proposed activities.

Supporting documents include:

• an accurate plan of the premises that clearly indicates the area for storage
• a Consent to obtain information - individual (NAT 7112) form, or
• a Consent to obtain information - company (NAT 7106) form
• a Consent to criminal history record check (NAT 16358), and
• an application for permission to move underbond goods.

For more information about movement permissions refer to Chapter 5 - Movement permissions.

You should contact our Licensing staff on 1300 137 295 for advice about the forms and supporting documents that you will need to lodge.

To lodge your completed application form and supporting documents:

• fax them to us on (03) 9285 1168, or
• post them to
  
  Excise Licensing Group
  
  Australian Taxation Office
  
  GPO Box 4525
  
  MELBOURNE   VIC   3001

You must not store excisable goods before your licence has been granted.[42]

We will process your application within 28 days of the date we receive all required information.

2.4.3 HOW DO I CHANGE MY LICENCE DETAILS?

We can amend your licence for changes that do not involve a change of entity or physical location. This includes a change of:

• business name (that is your trading name)
• postal address, or
• street name or property address made by a relevant authority.

A change in composition of a partnership does not affect the continuity of that partnership. Any one or more of the partners may act on behalf of the partnership in notifying changes.[43]

You must advise us of any of these changes within 30 days. We will then provide you with an amended licence.

2.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on licensing matters contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

2.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO LICENCES?

The following are the penalties that may apply after conviction for an offence.

Keep or store

If you possess or have custody or control of excisable goods without permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[44]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.[45]

Records

If you do not keep, retain and produce records in accordance with a direction under section 50 of the Excise Act, the penalty is a maximum of 30 penalty units.

2.6 TERMS USED

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and at the time of writing is $110.

Relevant traveller

• A person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew (or the pilot or master) of an aircraft or ship,[46] or
• a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew (or the pilot) of, an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight.[47]

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

2.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

2.7.1 Excise Act 1901

Section 4 - Definitions

Section 6A - How this Act applies to partnerships

Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods

Section 39 - Applications for licences

Section 39D - Conditions of licence

Section 39E - Duration of licences

Section 39O - Death of licence holder

Section 50 - Record keeping

Section 54 - Liability to pay duty

Section 58 - Entry for home consumption etc.

Section 60 - Persons to keep excisable goods safely etc.

Section 61A - Permission to remove goods that are subject to CEO's control

Section 61C - Permission to deliver certain goods for home consumption without entry

Section 61D - Outwards duty free shops

Section 61E - Inwards duty free shops

Section 62 - Deficiency in duty

Section 86 - Officers to have access to factories and approved places

Section 87 - Power to stop conveyances about to leave an excise place

Section 87AA - Searches of conveyances without warrant

Section 91 - Examine all goods

Section 117 - Unlawful possession of excisable goods

Section 120 - Offences

Section 159 - Protection of confidentiality of information

2.7.2 Excise Tariff Act 1921

The Schedule

2.7.3 Crimes Act 1914

4AA - Penalty units

6 - Accessory after the fact

2.7.4 Criminal Code Act 1995

11.1 - Attempt

11.2 - Complicity and common purpose

11.5 - Conspiracy

03 LICENSING: Assessing applications

3.1 PURPOSE

3.2 INTRODUCTION

3.3 POLICY AND PRACTICE

3.3.1 LICENSING CRITERIA

3.3.2 WHAT ARE LICENCE CONDITIONS?

3.3.3 WHAT ARE SECURITIES?

3.3.4 ASSESSING YOUR APPLICATION TO RENEW YOUR LICENCE

3.4 PROCEDURES

3.4.1 WHAT HAPPENS IF MY LICENCE IS NOT GRANTED?

3.4.2 WHAT WILL HAPPEN IF MY LICENCE IS GRANTED?

3.4.3 HOW DO I RENEW MY LICENCE?

3.4.5 WHAT DO I DO IF I NEED MORE INFORMATION?

3.5 WHAT PENALTIES CAN APPLY FOR OFFENCES IN RELATION TO MAKING AN APPLICATION?

3.6 TERMS USED

3.7 LEGISLATION (quick reference guide)

3.7.1 Excise Act 1901

3.7.3 Excise Tariff Act 1921

3.7.5 Income Tax Assessment Act 1997

3.7.6 Income Tax Assessment Act 1936

3.7.5 Corporations Act 2001

3.7.7 Crimes Act 1914

3.1 PURPOSE

This chapter deals with:

• licensing criteria
• licence conditions
• securities
• assessing your application to renew your licence
• what happens if your licence is not granted
• what will happen if your licence is granted
• records you need to keep
• how to renew your licence, and
• penalties that can apply to offences in relation to making an application.

3.2 INTRODUCTION

The Excise Act provides us with the discretion whether to grant or refuse a licence. We base the decision on the information you supply.

However subsection 39A(2) provides that if we consider certain criteria exist they can be the basis for refusal.

In summary those criteria are:

• whether you or an associate are not 'fit and proper'
• whether you do not have, or have available to you, the skills and experience required to carry out the activity that would be authorised by the licence
• the physical security of the premises is not adequate
• the plant and equipment to be used at the premises is not suitable
• you will not have a market for the goods
• you would not be able to keep proper books of account for audit purposes
• the grant of a storage licence would delay liability for duty, or
• it is necessary to refuse to grant the licence to protect the revenue.

These criteria are explained in more detail below.

How any of these criteria affects a particular licence application depends on the facts in each particular case. There are, however, some criteria that are critical, for instance:

• you are not 'fit and proper', and
• protection of the revenue.

3.3 POLICY AND PRACTICE

3.3.1 LICENSING CRITERIA

(1) 'Fit And Proper' Person Or Company[48]

The nature of the entity applying for the licence will affect who is assessed as being fit and proper:

• if an individual, the individual is assessed
• if a partnership, each partner is assessed, and
• if a company, the company is assessed.

Persons other than the applicant can also be assessed as to whether they are fit and proper. These persons are:

• another person who would participate in the management or control of the premises that is the subject of the licence application
• if the applicant is a company, then any director, officer, or shareholder of the company that would participate in the management or control of the company, and
• certain associates of the applicant (associates can be people or companies).

What does fit and proper mean?

The term 'fit and proper' is not defined in the Excise Act or Excise Regulations. Fit and proper is dependant on the purpose of the legislation and the proposed activities of the person concerned. In general qualities of diligence, honesty and the likelihood of observance of the law are pivotal characteristics to be taken into account in considering fitness and propriety. In an Excise context we are assessing the suitability of the person applying for a licence to have access and control over excisable goods.

The Excise Act provides a definitive list of factors that we will take into account in determining whether a person or company is fit and proper. These factors generally relate to:

• any prosecution history
• solvency
• the honesty of information provided by the applicant
• compliance with tax obligations, and
• licensing history.

In assessing these factors we will consider whether your circumstances demonstrate that you will be diligent, honest, and likely to observe Excise laws.

A single factor will not necessarily be determinative on its own of whether a person or company is 'fit and proper'. It will depend on the facts and circumstances of each case.

The weight afforded to each factor in reaching a decision about whether a person or company is 'fit and proper' is a matter for us to decide. We are deciding whether the person or company is fit and proper, and will do so after considering all relevant information.

Some factors apply to both individuals and companies; others are specific to individuals or to companies.

Individual or company:

• whether, within a year of lodging the application, the person or company has been charged with:
  • an offence under the excise legislation, or
  • an offence under Commonwealth, State or Territory law punishable by imprisonment for one year or longer (for an individual), or by a fine of 50penalty units or more
• whether, within 10 years of lodging the application, the person or company has been convicted of:
  • an offence under the excise legislation, or
  • an offence under Commonwealth, State or Territory law punishable by imprisonment for one year or longer (for an individual), or by a fine of 50 penalty units or more
• the extent of the person's or company's compliance, within 4 years of lodging the application, with any law administered by us (e.g. income tax, GST)
• whether the person has held an excise licence which has been cancelled, or
• the person's or company's financial resources.

Individual only

• whether the person has participated in the management or control of a company that has had its excise licence cancelled
• whether the person is an undischarged bankrupt
• any misleading statement made in the application by the person, or
• where any false statement was made in the application - whether the person knew it was false.

False and misleading statements are discussed below in 'Where a person makes false or misleading statements in their application'.

Company only

• whether a receiver has been appointed over the property, or part of the property, of the company
• whether the company is under administration under the Corporations Act 2001 (Corporations Act)
• whether there is a current deed of company arrangement in place under Part 5.3A of the Corporations Act, or
• whether the company is being wound up.

Where a person makes false or misleading statements in their application[49]

It is important that you provide information that is accurate and complete. If your application (i.e. your completed application form, any supporting documentation and any oral statements made), contains false or misleading statements we will take this into account.

Misleading statements.

With regard to this element, the term 'mislead' is not defined in the Excise Act.The Australian Oxford Dictionary , 2004, 2^nd edn, Oxford University Press, Melbourne defines 'mislead' as follows:

1. cause (a person) to go wrong, in conduct, belief, etc.
2. lead astray or in the wrong direction.

A misleading statement does not have to successfully mislead us, but it can be taken into account if it was reasonably foreseeable that we could have been misled when assessing the application.

Misleading may be by omission as well as what has been said.

Example 3AYou advise us that you have installed a state of the art security system at your premises. While true, you failed to advise us that a design fault has resulted in repeated false alarms to the point where you have switched off the security system and have no intention of re-engaging it. The design fault cannot be remedied. The only security actually in operation at the premises is a rusty padlock.The information you provided, whilst not false, could lead us to believe that your premises are secure. This is misleading.

False statements

We can only take false statements into account if you knew they were false.[50]

In essence, a statement is false if it is not true. A false statement may be made expressly, or via omission. An example of the former is where you state you have no criminal convictions when in fact you have been convicted. An example of the latter would be to leave the question on your application form in relation to criminal convictions blank when in fact you have been convicted. In both instances, a false statement has been made.

Who are the associates that can be assessed under the for fit and proper person test?[51]

To avoid situations where people with a high risk of non-compliance are able to exercise control over licence holders, certain associates can be assessed under the fit and proper person test.

The word associate effectively takes it meaning from the Income Tax Assessment Act 1936 and is summarised below:

• An associate of a natural person (otherwise than in the capacity of trustee)includes:
  • a relative[52] of the individual, for example, their spouse, parent, sibling, uncle, aunt
  • a partner of the individual or a partnership in which the individual is a partner
  • if a partner of the individual is a natural person otherwise than in the capacity of trustee, the spouse or child of the partner
  • a trustee of a trust under which the individual or their associate benefits, or
  • a company under the control of the individual or their associate.[53]

Although an associate includes a spouse, a legally married spouse of a person who lives separately and apart on a permanent basis is not an associate.[54]

• An associate of a company includes:
  • a partner of the company or a partnership in which the company is a partner
  • if a partner of the company is an individual, the spouse or child of the partner
  • a trustee of a trust under which the company or their associate benefits
  • another entity (a company, partnership, trustee or an individual), or its associate(s) who controls the company, or
  • another company which is under the control of the company or the company's associate.[55]

The control of a company looks to whether another entity (including individuals):

• has sufficient influence over the company, or
• holds a majority voting interest in the company.

• An associate of a trustee includes an entity or an associate of the entity that benefits or is capable of benefiting either directly or indirectly under the trust.[56]
• For a partnership an associate includes each partner of the partnership or associate of the partner.[57]

(2) Skills And Experience[58]

The next criterion for licensing relates to skills and experience.

Skills and experience are not defined in the Excise Act or Excise Regulations. There is no Excise case law regarding skills and experience.

In forming an opinion as to whether you have the required skills and experience we will consider your ability to:

• carry out the activity requiring a licence
• conduct a business, and
• comply with excise obligations.

It is important to note that you, as the applicant, do not necessarily need to possess the skills and experience yourself provided that you can demonstrate that you will use another person's skills and experience, for example by hiring them or using a consultant. Should that be the case, we will assess the other person's skills or experience.

Example 3BMr X, as a Director of Z Duty Free Pty Ltd, applies for a storage licence with permission to sell duty free.Neither Mr X nor any of his staff have the skills and experience to comply with the company's excise obligations. This poses a risk that excisable goods may be sold without adequate record keeping, and may adversely affect revenue and compliance.Therefore, when assessing this element of subsection 39A(2) in isolation, Z Duty Free Pty Ltd would fail the requirements of skills and experience. However, a decision on granting a licence is made based on an assessment of all elements of subsection 39A(2).Z Duty Free Pty Ltd may choose to address the deficiency in skills and experience by such measures as appointing a manager who has the relevant skills and experience.

(3) Physical Security Of The Premises[59]

Physical security relates to measures that prevent unauthorised access to excisable goods and thus protects against theft or loss of goods and excise revenue.

In forming an opinion about the physical security at the premises, we will consider:

• the nature of the site
• the kinds and quantities of goods to be kept, and
• the procedures and methods adopted to ensure the security of goods .

Consideration of the nature of the site can include:

• construction (for example floor, walls, ceiling, windows and doors) and whether material is difficult to penetrate or remove
• barriers (for example fences or wire) to a standard that would prevent unauthorised access
• locks and bars
• alarms, security lighting, security guard patrols or closed-circuit TV cameras
• physical security of all warehouse facilities within the site, and
• fire alarms, smoke detectors, sprinklers etc.

Consideration of the kind and quantity of goods to be kept at the site can include:

• the ease with which goods can be handled, for example, cartons of cigarettes are easier to move than fuel in a large refinery tank
• the rate of excise duty applicable to the goods (goods that attract a greater rate of excise duty represent a greater revenue risk), and
• the greater the quantity of excisable goods to be dealt with, the higher the level of physical security that would be required.

Consideration of the security procedures and methods can include:

• gate security system that would identify all people entering and leaving the site, and confirm their right to do so
• gate security system that would identify the type and quantity of all goods entering and leaving the site
• surveillance system
• procedures to handle and retain information from surveillance system (if there is one)
• access control, for example by limited distribution of keys and access swipe cards or codes
• security responses when breaches are detected, for example back to base system, and
• an independent security audit function to oversee all of the above.

(4) Suitability Of Plant And Equipment[60]

Plant and equipment are considered suitable if they are capable of performing the intended tasks and will allow you to properly account for excisable goods and calculate the correct amount of excise duty.

(5) Market For The Goods[61]

In this criterion, we are primarily concerned with the presence of an available market within Australia. That market must be legal. Licensing is concerned with minimising the risk of excisable goods entering an illicit market in Australia and the resultant loss of revenue.

You must provide sufficient information to identify your proposed market.

You may be able to demonstrate that you have a market by, for example, supplying:

• evidence of contracts (including 'in principle' contracts) you have negotiated (for example, a contract to lease an area, at an International Airport, to be used as a duty free shop), or
• a business plan which outlines the market you have identified.

(6) Ability To Keep Proper Books Of Account[62]

This criterion is whether you can keep 'proper books of accounts and records' that enable us to audit those records. It is your ability to keep the required records that must be determined.

You may be asked to demonstrate:

• the recording systems you intend to use, whether they are manual or electronic
• where an electronic record keeping system is used, systems documentation showing details such as screens, reports available and security controls, and
• the internal documentation supporting the recording systems, ensuring that the recording systems will record sufficient detail.

(7) Delay Liability For Duty (Storage Licence Only)[63]

This criterion only relates to an application for a storage licence where the granting of the licence would delay liability for the duty.

It is our view that we may refuse to grant a storage licence where the granting of the licence would delay payment of duty beyond the point of storage occurring in the normalwholesale distribution of the goods.

This criterion is not relevant for duty free shops

(8) Protect the Revenue[64]

The term 'necessary to protect the revenue' is not defined in the Excise Act.

The meaning of 'protect the revenue' was considered by Deputy President Forgie in Martino and Australian Taxation Office).[65] She said:

' 50. ... The expression 'protect the revenue' is not defined in the Act and I am not aware of any authorities that have considered it. The word 'revenue' has been considered in Stephens v Abrahams (1902) 27 VLR 753 by Hodges J. ....Hodges J took:

'... the 'revenue' to be moneys which belong to the Crown, or moneys to which the Crown has a right, or moneys which are due to the Crown,

51. The ordinary meanings of the word 'protect' include 'keep safe, take care of' . . . and they would seem to be the senses in which the word is used in the expression 'protect the revenue'. Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally.

52. What is meant by the word 'necessary'? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447:

'As to the word 'necessary' it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way.'

While this case was in relation to tobacco, the finding is equally applicable to duty free shops. 'Protect the revenue' therefore means ensuring that the Commonwealth receives the full amount of excise duty that is ultimately payable and we do not spend more Commonwealth funds than necessary to carry out our responsibilities.

3.3.2 WHAT ARE LICENCE CONDITIONS?

Licence conditions form part of your licence. They are restrictions, limitations or modifying circumstances. They may define permissible activities and require you to take certain actions if defined circumstances arise. If you fail to comply with a condition, we may suspend or cancel your licence.[66]

All excise licences are subject to certain conditions imposed by:

• the Excise Act, and
• us ('special conditions').

We are able to add, vary or modify special conditions even after the licence has been granted.[67] We will notify you in writing if we do so and provide you with an amended licence that includes the amended conditions.

Conditions imposed under the Excise Act

You must advise us in writing within 30 days if:[68]

• you or any person participating in the management or control of a licensed company or premises is charged with or convicted of:
  • an offence against a provision of the Excise Act, or
  • an offence against a law of the Commonwealth, a State or a Territory that is punishable by imprisonment for a period of one year or longer or by a fine of 50 penalty units or more
• you become bankrupt
• a person not listed in the licence application starts to participate in the management or control of the licensed premises or company, as the case may be
• there is a change in the membership of a partnership that holds a licence
• a company that holds a licence comes under receivership, administration or begins to be wound up
• there is a change that substantially affects the physical security of the licensed premises or plant and equipment used in relation to excisable goods at the premises, or
• you hold a storage licence and you cease to keep and store goods at the licensed premises.

Special conditions

We can also impose special conditions on your licence if we find it necessary to protect the revenue or ensure compliance with the Excise Act.[69] Examples of conditions that have been imposed under this provision are:

• the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee
• limits to the volume of tobacco product you can access annually, and/or
• undertake regular stocktakes, ensure that underbond stock is readily identifiable and quantifiable and report on LAGs goods (liquids, aerosols and gels).

The examples of special conditions given above are only for illustrative purposes. The decision to impose special conditions is considered on a case by case basis.

You can apply to have these special conditions varied, revoked or added. We will consider and advise you of our decision.

If you are not satisfied with any decision we make about a special condition, you can ask for a review by lodging an objection.[70]

For more information about your review rights refer to Chapter 10 - Reviews and objections.

3.3.3 WHAT ARE SECURITIES?

We can use special conditions as a mechanism to increase the level of protection of the revenue or to ensure compliance with the Excise Act. However, prior to granting the licence we may also require you to provide a security to achieve the same result. Even if we don't require a security prior to the granting of the licence, we may ask for a security at a later time. We can also ask you to increase the value of any security you may already have given.[71]

A security can be a bond, guarantee, cash deposit or similar financial product for an amount of money which may be forfeited if there is a failure to comply with the Excise Act. It is not necessary for a liability to arise as a result of the failure to comply, for the security to be forfeit. There is no statutory limit to the amount of a security but the amount is generally set by reference to the level of revenue at risk.

We cannot apply these securities against other tax debts.

We review securities every three years, at which time they may be extended, revised or cancelled.

The decision to require a security is not reviewable under the objection process. However, there may be other avenues for review, for example you may seek an informal review of our decision.

For information about your review rights refer to Chapter 10 - Reviews and objections.

3.3.4 ASSESSING YOUR APPLICATION TO RENEW YOUR LICENCE

Licences are only valid for a specified period. Renewal of a licence is not automatic and you must apply to renew your licence before it expires. In assessing an application to renew a licence we consider the same criteria that exist for cancelling a licence. That is, if reasons exist for us to cancel your licence (assuming that it had not expired) then we cannot renew your licence.

For more information about the criteria for cancelling a licence refer to Chapter 4 - Licensing: Suspension & cancellation.

If you have applied before the date of expiration on your licence but we have not made a decision by this date, the licence remains in force until such time as we do make a decision.

If we refuse your licence renewal, you may object against the decision.

For more information about your review rights refer to Chapter 10 - Reviews and objections.

As an alternative to non-renewal of a licence, we may:

• alter existing conditions on your licence
• impose new conditions, or
• require you to provide a financial security.

If you have not applied to renew your licence then the licence expires on 30 September and you can no longer carry out excise related activities.

3.4 PROCEDURES

3.4.1 WHAT HAPPENS IF MY LICENCE IS NOT GRANTED?

If we do not grant a licence, we will notify you of the decision and provide you with an explanation for our decision.

If you are not satisfied with our decision, you can ask for a review by lodging an objection within 60 days of the day we notify you.[72]

For more information about your review rights refer to Chapter 10 - Reviews and objections.

3.4.2 WHAT WILL HAPPEN IF MY LICENCE IS GRANTED?

If we grant you a licence, we will post it to you. All special conditions will form part of the licence.  We will also provide you with an establishment number for the premises specified on your licence. This will be needed in some of your dealings with us.

You may receive a visit or phone call from us to see whether you understand your obligations or need further assistance to comply.

3.4.3 HOW DO I RENEW MY LICENCE?

We will send you an invitation to renew your licence at least six weeks before the licence expires. We will also send an application form containing your details. You must verify the details on the application, provide any required information, sign and return it to us before your licence expires.

Your existing licence will remain valid until we make a decision about your application for renewal.[73]

Licences are renewed for a period of three years.

Example 3CYour licence is due to expire on 30 September 2008 (the expiry day). On 1 September 2008 you apply to renew the licence. We have not decided the application by the end of 30 September 2008.The licence continues in force automatically past 30 September 2008 until we decide the application.On 15 October 2008 we decide to renew the licence. The renewed licence expires on 30 September 2011.

 

If you wish to renew your licence but you have not received an invitation to renew within four weeks of the date of expiry you need to contact us.

3.4.5 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on licensing matters contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

3.5 WHAT PENALTIES CAN APPLY FOR OFFENCES IN RELATION TO MAKING AN APPLICATION?

The following are the penalties that may apply after conviction for an offence.

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.[74]

3.6 TERMS USED

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

3.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

3.7.1 Excise Act 1901

Section 16 - Right to require security

Section 17 - Form of security

Section 18 - General security may be given

Section 19 - Cancellation of bonds

Section 20 - New sureties

Section 21 - Form of security

Section 22 - Effect of security

Section 39 - Applications for licences

Section 39A - It is in the Collector's discretion whether to grant licence

Section 39B - Determining whether a natural person is fit and proper

Section 39C - Determining whether a company is fit and proper

Section 39D - Conditions of licence

Section 39DA - Changing licence conditions on own initiative

Section 39F - Renewal of licences

Section 39G - When the Collector may suspend a licence

Section 39Q - Review of decisions

Section 50 - Record keeping

Section 120 - Offences

3.7.3 Excise Tariff Act 1921

Section 5 - Duties of excise

The Schedule

3.7.5 Income Tax Assessment Act 1997

Section 995-1 - Definitions

3.7.6 Income Tax Assessment Act 1936

Section 318 - Associates

3.7.5 Corporations Act 2001

Section 9 - Dictionary

Part 5.3A - Administration of a company's affairs with a view to executing a deed of company arrangement

3.7.7 Crimes Act 1914

4AA - Penalty units

04 LICENSING: Suspension and cancellation

4.1 PURPOSE

4.2 INTRODUCTION

4.3 POLICY AND PRACTICE

4.3.1 WHAT HAPPENS IF I CEASE MY EXCISE BUSINESS?

4.3.2 WHEN CAN YOU SUSPEND AND/OR CANCEL MY LICENCE?

4.4 PROCEDURES

4.4.1 SERVICE OF NOTICES

4.4.2 WHAT DO I DO IF I NEED MORE INFORMATION?

4.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO SUSPENSIONS AND CANCELLATIONS

4.6 TERMS USED

4.7 LEGISLATION (quick reference guide)

4.7.1 Excise Act 1901

4.7.2 Excise Tariff Act 1921

4.7.3 Crimes Act 1914

4.1 PURPOSE

This chapter deals with:

• what happens when you cease your business
• when your licence can be suspended or cancelled
• service of notices, and
• penalties that can apply to offences in relation to suspensions and cancellations.

4.2 INTRODUCTION

Your licence remains in force until it expires or is cancelled. However, activities approved under your licence may be restricted if we suspend your licence. Suspension may be a temporary measure or may lead to the cancellation of your licence.

We can cancel your licence if:

• you ask us to do so (for example, where you intend to cease business), or
• we make a decision to do so because one or more of the following criteria are present:
  • you or an associate are not 'fit and proper' as an individual or company
  • a director, officer or shareholder who participates in the management or control of the company is not a 'fit and proper' person
  • a person who participates in the management or control of the premises is not a 'fit and proper' person
  • you do not have, or have available to you, the skills and experience required to carry out the activity authorised by the licence
  • the physical security of the premises is inadequate
  • the plant and equipment used at the premises are such that there is inadequate protection of the revenue in relation to the goods at the premises
  • you have no market for the goods covered by the licence
  • you are not keeping proper books of account for audit purposes
  • you have breached a condition of your licence
  • you have made a false or misleading statement to us[75]
  • suspension is necessary for the protection of the revenue, or
  • suspension is necessary to ensure you comply with excise law.

4.3 POLICY AND PRACTICE

4.3.1 WHAT HAPPENS IF I CEASE MY EXCISE BUSINESS?

Your licence conditions require you to notify us within 30 days if you permanently cease activities that require an excise licence. To finalise your excise obligations you must request in writing a cancellation of your licence.

Before we can cancel your licence we must be satisfied that you no longer have any excisable goods. To be satisfied of this we may:

• arrange a final audit of goods at the licensed premises, and
• work out if you are liable to pay any excise duty.

Although your licence conditions require you to notify us within 30 days of cessation of activities, you are encouraged to notify us at the earliest opportunity. This will enable us to assist you to check your records and any stock on hand prior to closure of the site for excise purposes.

If you want to sell your business with the stock included, we can coordinate your licence cancellation with the licence approval for the new owner. (This does not mean that the new owner will automatically be granted a licence). This will ensure the premises and goods are covered by a licence at all times.

If you do not intend to sell the goods with your business, you can:

• pay any outstanding excise duty on goods held at the licensed premises and then dispose of them as you wish, or
• move the goods to another licence holder's premises, provided you have permission from us to move goods to those premises.[76]

We will cancel your licence by giving you written notice.[77]

4.3.2 WHEN CAN YOU SUSPEND AND/OR CANCEL MY LICENCE?

What is the difference between suspension and cancellation?

Suspension of a licence is a temporary measure we may take that limits the activities you can undertake during the period of suspension. It could be followed by cancellation of the licence or revocation of the suspension. Cancellation is a permanent measure which has the effect of prohibiting you from undertaking the activities for which you were previously licensed.

When can you suspend or cancel my licence?

We can suspend or cancel your licence if we have reasonable grounds for believing:[78]

• you are not 'fit and proper' as an individual or company *
• a director, officer or shareholder who participates in the management or control of the company is not a 'fit and proper' person *
• a person who participates in the management or control of the premises is not a 'fit and proper' person *
• you are an associate of a person or a company that is not 'fit and proper'*
• you do not have, or have available to you, the skills and experience required to carry out the activity authorised by the licence *
• the physical security of the premises is inadequate *
• the plant and equipment used at the premises are such that there is inadequate protection of the revenue in relation to the goods at the premises *
• you have no market for the goods covered by the licence *
• you are not keeping proper books of account for audit purposes
• you have breached a condition of your licence
• you have made a false or misleading statement to us
• suspension is necessary for the protection of the revenue *, or
• suspension is necessary to ensure you comply with excise law.

* For an explanation of these criteria, please refer to section 3.3.1 - Licensing criteria in Chapter 3 - Licensing: Assessing applications.

The criteria which have not been the subject of previous considerations are covered below:

• you are not keeping proper books of account for audit purposes. For this criterion, we are assessing your actual record keeping practices during the licence period and whether they are in an adequate state for an audit to represent your business activity.
• you have breached a condition of your licence. A breach means you have not complied with a condition. In deciding whether or not to suspend we will take into account the following:
  1. the severity of the breach
  2. the circumstances surrounding the breach, and
  3. what the condition is (i.e. the risk it is addressing).
• you have made a false or misleading statement to us. In considering your initial application the false or misleading statements we take into account are in your application. Once you have been granted a licence we can take into account any statements (including for example in a return, letter or response to a question) you have made in relation to your excise activities.
• suspension is necessary to ensure you comply with excise law. Where we consider that you are not complying with your obligations under the Excise Act, for example, if you have not been complying with a condition in respect of your permission.[79]

What happens if you suspend my licence?

If we believe your conduct warrants consideration of suspension of your licence we will generally advise you of our concerns and provide you with an opportunity to rectify the issues identified.

If we decide to suspend your licence, this will be done by serving a Notice of suspension. The notice may be served on you, or given to a person who appears to participate in the management or control of the licensed premises.

a Notice of suspension will state that, if you want to stop the cancellation of your licence, you must provide us with a written statement, within seven days of the notice being served, giving reasons why your licence should not be cancelled. We will include our reasons for deciding to suspend your licence with the Notice of suspension.

The notice will also state when the suspension takes affect, which could be immediately.

When your licence is suspended,[80] unless you have written permission from us, it is against the law to keep or store excisable goods at licensed premises.

During the period of suspension we may give you written permission to:[81]

• keep or store goods at your licensed premises
• carry out a process at your premises, or
• move goods from your premises to another place.

As a result of a suspension, we may:

• require the owner (you or a third party) of excisable goods to move the goods from your premises to another place
• require payment of any costs incurred by us as a result of the suspension
• carry out a stocktake so that the total excise liability is known, and
• take control of your licensed premises and any excisable goods stored at these premises.

If we suspend your licence we have 28 days to cancel your licence.  During this period we can revoke the suspension if you satisfactorily address the issues which led to the suspension.  If we revoke a licence suspension we will do so in writing. We may impose additional conditions or allow you to resume your excise activities under the existing conditions.

All decisions relating to the suspension of a licence are reviewable by lodging an objection.

For more information about your review rights refer to Chapter 10 - Reviews and objections.

What happens if you cancel my licence?

We can cancel your licence for the same reasons we can suspend your licence.

We can cancel your licence without previously suspending your licence. This may occur where we consider the issues require immediate action. For example systemic delivery of excisable goods without payment of required duty.

If we cancel your licence we will serve you with a Notice of cancellation.If we cancel your licence, you are not permitted to store excisable goods. You are also not permitted to move excisable goods without our permission.

The notice may be served on you, or given to a person who appears to participate in the management or control of the licensed premises. We will include our reasons for deciding to cancel your licence with the Notice of cancellation.

At the same time, we will serve the owner of the excisable goods (whether that is you or someone else) notice in writing to either:

• pay the duty on the goods, or
• move the goods to another place in accordance with our permission.

This notice is served in the same manner as the Notice of cancellation.

If the owner does not comply with the notice to pay duty or move the goods, we may remove them from the owner's control. If, after six months, the owner has not:

• lodged a written claim for the goods, and
• paid the duty and other movement and storage related expenses

then we may sell or dispose of the excisable goods.[82]

If we cancel your licence, you must retain all records that you have been directed to keep, for the period you have been directed.

If you are not satisfied with our decision to cancel your licence or dispose of your excisable goods, you can request a review of our decision by lodging an objection.[83]

For more information about your review rights refer to Chapter 10 - Reviews and objections.

Can I apply for another licence if I have had a licence cancelled?

Yes, you can apply for another licence. However we will take the reasons for the cancellation into account when considering any new application.

4.4 PROCEDURES

4.4.1 SERVICE OF NOTICES

Notices of suspension or cancellation and directions to deal with excisable goods will be served either:[84]

• personally or by post[85] on you, or
• personally on a person who, at the time the notice is served, appears to participate in the management or control of the licensed premises.

4.4.2 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on suspension or cancellation of a licence contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

4.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO SUSPENSIONS AND CANCELLATIONS

The following are the penalties that may apply after conviction for an offence.

Keep or store

If you store excisable goods when your storage licence is suspended, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[86]

Remove

If your licence has been cancelled or expired you must not remove excisable goods on which duty has not been paid. The penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[87]

4.6 TERMS USED

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and spirits.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

4.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

4.7.1 Excise Act 1901

Section 39G - When the Collector may suspend a licence

Section 39J - Method of suspension

Section 39K - Activities that are prohibited during suspension

Section 39L - Cancellation of licences

Section 39M - Removal of goods on cancellation etc. of licence

Section 39N - Removal of goods by Collector on cancellation etc. of licence

Section 39P - Service of notices

Section 39Q - Review of decisions

Section 50 - Record keeping

Section 61D - Outwards duty free shops

Section 61E - Inwards duty free shops

4.7.2 Excise Tariff Act 1921

The Schedule

4.7.3 Crimes Act 1914

4AA - Penalty units

05 MOVEMENT PERMISSIONS

5.1 PURPOSE

5.2 INTRODUCTION

5.3 POLICY AND PRACTICE

5.3.1 WHAT DIFFERENT PERMISSION TYPES ARE THERE?

5.3.2 CAN I GET A MOVEMENT PERMISSION?

5.3.3 WHAT IS INCLUDED IN A MOVEMENT PERMISSION?

5.3.4 DOES THE RECEIVING PREMISES HAVE TO BE LICENSED?

5.3.5 WILL I NEED TO PAY A SECURITY?

5.3.6 WHAT HAPPENS WHEN MY MOVEMENT PERMISSION IS GRANTED?

5.3.7 WHAT ARE MY RESPONSIBILITIES?

5.3.8 WHAT HAPPENS IF MY APPLICATION IS NOT APPROVED?

5.3.9 WHEN AND HOW CAN A MOVEMENT PERMISSION BE REVOKED OR CANCELLED?

5.4 PROCEDURES

5.4.1 HOW DO I APPLY FOR A MOVEMENT PERMISSION?

5.4.2 HOW DO I AMEND MY CONTINUING MOVEMENT PERMISSION?

5.4.3 WHAT DO I DO IF I NEED MORE INFORMATION?

5.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO MOVEMENT PERMISSIONS?

5.6 TERMS USED

5.7 LEGISLATION (quick reference guide)

5.7.1 Excise Act 1901

5.7.2 Excise Tariff Act 1921

5.7.3 Crimes Act 1914

5.7.4 Acts Interpretation Act 1901

5.1 PURPOSE

This chapter deals with:

• why you need a movement permission
• different movement permission types
• whether you can get a movement permission
• what is included in a movement permission
• whether the receiving premises have to be licensed
• whether you will need to pay a security
• what happens when your movement permission is granted
• your responsibilities
• what happens if your application for a movement permission is not approved
• when and how a movement permission can be revoked or cancelled>
• how to apply for a movement permission
• how to amend a continuing movement permission, and
• penalties that can apply to offences in relation to movement permissions.

5.2 INTRODUCTION

Under the excise system, control of goods from the time of creation to the point of authorised delivery of the goods into the Australian domestic market, or export, lies with the Commissioner. To maintain this control, the Excise Act requires that excisable goods are not to be moved without permission.[88]

We refer to this form of permission as a movement permission. It is a permission we provide in writing that authorises you to move specified goods from one specified place to another.[89] This permission may be subject to conditions.

The permission holder retains responsibility for any excise liability arising on the excisable goods until they are taken up into the stock of the new premises.

5.3 POLICY AND PRACTICE

5.3.1 WHAT DIFFERENT PERMISSION TYPES ARE THERE?

Depending on your circumstances, you may apply for a permission to move specified excisable goods once (single permission) or excisable goods of a particular kind on a continuing basis (continuing permission). Continuing permissions are used where you have a need to move excisable goods in a regular pattern (for example, a delivery each week to the same premises). A single permission is used when movements are not to a continuing or regular pattern to the same premises.

There are four types of movement permission:

• Single movement permission (non-export) - a permission to move specified excisable goods from one specified place to another specified place (effective for one movement)
• Continuing movement permission (non-export) - a permission to move excisable goods of a kind specified from one specified place to another specified place on a continuing basis
• Single movement permission (export) - a permission to move specified excisable goods to a place of export (effective for one movement), or
• Continuing movement permission (export) - a permission to move excisable goods of a kind specified to a place of export on a continuing basis.

An export movement permission is not an authority to export. You must obtain this separately from Customs. Excisable goods being exported by relevant travellers do not need a movement permission.

5.3.2 CAN I GET A MOVEMENT PERMISSION?

If you have a licence to store excisable goods, you can be granted a movement permission.

5.3.3 WHAT IS INCLUDED IN A MOVEMENT PERMISSION?

Each movement permission we approve contains three parts:

1. The permission

This specifies

• the permission holder.

2. The conditions

Movement permissions can be subject to conditions that are necessary to protect the revenue or ensure compliance with the Excise Act. In general, the conditions listed below are considered necessary to do that.

As a standard condition, you must provide to both the despatching and receiving premises a consecutively numbered document with each movement of goods that specifies:

• the despatching premises and destination
• the date of despatch
• the number and type of packages
• a description of the goods
• a statement that the goods are underbond, and
• any other information necessary to permit the goods to be dealt with at the destination.

A condition can also have a restriction limiting the volume of goods that can be moved within a specific period of time, or at any one time.

3. The schedule

This specifies:

• the premises from which the goods can be removed
• the premises to which the goods can be moved
• the goods by tariff item that can be moved under the permission, and
• for single movement permissions, the period or dates in which the goods may be moved.

If you own both the licensed premises between which goods are being moved, the schedule may not specify all these details but only that any movement of goods between premises licensed to you is approved.

The type of goods may be expressed generally (for example 'excisable goods', or 'excisable tobacco products') or specifically, by tariff item number or description.

A single movement permission will specify the kind and quantity of the goods that can be moved, for example 20 (outer cartons) x 20 (inner packs) x 250 cigarettes = 100,000 sticks classified to subitem 5.1 in the Schedule to the Excise Tariff Act.

5.3.4 DOES THE RECEIVING PREMISES HAVE TO BE LICENSED?

Generally, the receiving premises should be licensed. However, we may authorise underbond movement of goods to an unlicensed 'specified place', for example a waste destruction facility.

5.3.5 WILL I NEED TO PAY A SECURITY?

Prior to granting a movement permission, we may also require you to provide a security to protect the revenue or ensure compliance with the Excise Act. Even if we don't require a security prior to the granting of the movement permission, we may ask for a security at a later time. We can also ask you to increase the value of any security you may already have given.[90]

A security can be a bond, guarantee, cash deposit or similar financial product for an amount of money which may be forfeited if there is a failure to comply with the Excise Act. It is not necessary for a liability to arise as a result of the failure to comply, for the security to be forfeit. There is no statutory limit to the amount of a security but the amount is generally set by reference to the level of revenue at risk.

As part of assessing your application for a movement permission, we will decide whether you must provide a security. We will take into account:

• whether you currently hold an excise licence
• whether the despatching and receiving premises are licensed
• the type of goods involved
• the amount of the liability on the goods
• the tax compliance record of
  • the applicant for the permission
  • the despatching premises
  • the receiving premises, and
• the susceptibility of the goods to be lost or diverted into home consumption without the payment of duty.

We cannot apply these securities against other tax debts.

We review securities linked to continuous movement permissions every three years, at which time they may be extended, revised or cancelled. Compliance with a single movement permission is assessed on completion of the movement of the excisable goods covered by the permission.

The decision to require a security is not reviewable under the objection process. However, there may be other avenues for review, for example, you may seek an informal review of our decision.

For information about your review rights refer to Chapter 10 - Reviews and objections.

5.3.6 WHAT HAPPENS WHEN MY MOVEMENT PERMISSION IS GRANTED?

When your movement permission is granted, it will be sent to you. You can then move your goods in accordance with the schedule. You will need to keep appropriate records to track the movement of your goods.

5.3.7 WHAT ARE MY RESPONSIBILITIES?

Where you have had possession, custody or control of goods we may request you (the permission holder) to account for the goods. If you are able to demonstrate that the goods have been lawfully moved under a movement permission, this will be considered a satisfactory accounting. It is important that you keep good records of any movements of goods from your premises.

If you cannot satisfactorily account for the goods, we may demand an amount equal to the duty that would have been payable on the goods.[91]

The permission holder is accountable for the goods:

• from the time they are removed from the despatching premises, and
• until they are delivered to the receiving premises.

Accountability then transfers to the receiving premises. If there is a discrepancy between the quantity shown in the delivery documentation and the physical quantity received you should contact us.

In the exceptional case where the goods are moved to unlicensed premises, accountability for the goods remains with you, as the permission holder.

5.3.8 WHAT HAPPENS IF MY APPLICATION IS NOT APPROVED?

If we do not approve your application for a movement permission, or to amend your existing movement permission, we will notify you in writing. If you are not satisfied with our decision, you can ask us to review it. You will not be able to move the goods to the place nominated in the application.

For information about your review rights refer to Chapter 10 - Reviews and objections

5.3.9 WHEN AND HOW CAN A MOVEMENT PERMISSION BE REVOKED OR CANCELLED?

A continuing permission remains in effect until it is cancelled.[92]

We can cancel your movement permission if:

• you ask us to do so
• we consider that there is a risk to the revenue, or
• we have cancelled the licence of the receiving or despatching premises.

If we decide to cancel your movement permission, we will notify you in writing. The cancellation will take effect from the time:

• you are served with the cancellation notice, or
• specified on the cancellation notice.

A decision to revoke or cancel a movement permission is not a reviewable decision. However, there may be other avenues for review, for example, you may seek an informal review of our decision.

For information about your review rights refer to Chapter 10 - Reviews and objections.

5.4 PROCEDURES

5.4.1 HOW DO I APPLY FOR A MOVEMENT PERMISSION?

To apply for a movement permission, you should complete the relevant form, available on our website.

If you do not have control of the proposed receiving premises (licensed or unlicensed), we require you to obtain a letter from the operator of these premises stating that they will accept responsibility for the underbond goods when received. The application forms contain details of the statement required from the operator of the receiving premises.

If you need to deliver goods to new premises within specified periods please ensure that you allow sufficient time for your application to be determined. Generally, we will make a decision on your application within 28 days unless we need further information.

5.4.2 HOW DO I AMEND MY CONTINUING MOVEMENT PERMISSION?

If you wish to amend your existing continuing movement permission (for example, change the schedule of receiving premises), you must send us either:

• a new application form with the amending details, or
• a letter including the permission number and necessary changes.

If you wish to add new receiving premises to your existing permission, you must also provide us with a letter from the operator of the receiving premises accepting responsibility for the underbond goods when received. The application form contains details of the statement required from an operator of the receiving premises.

We will consider your request and send you a new or amended permission if approved. In the meantime you cannot move goods outside your current permission.

5.4.3 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on movement permissions contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

5.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO MOVEMENT PERMISSIONS?

The following are the penalties that may apply after conviction for an offence.

Move

If you move excisable goods without a movement permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[93]

If you move excisable goods contrary to your movement permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[94]

5.6 TERMS USED

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

Relevant traveller

• A person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew (or the pilot or master) of an aircraft or ship,[95] or
• a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew (or the pilot) of, an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight.[96]

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

5.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

5.7.1 Excise Act 1901

Section 4 - Definitions

Section 16 - Right to require security

Section 17 - Form of security

Section 18 - General security may be given

Section 19 - Cancellation of bonds

Section 20 - New sureties

Section 21 - Form of security

Section 22 - Effect of security

Section 60 - Persons to keep excisable goods safely

Section 61A - Permission to remove goods that are subject to the CEO's control

Section 61D - Outwards duty free shops

Section 61E - Inwards duty free shops

Section 117A - Unlawfully moving excisable goods

5.7.2 Excise Tariff Act 1921

The Schedule

5.7.3 Crimes Act 1914

4AA - Penalty units

5.7.4 Acts Interpretation Act 1901

Section 33 - Exercise of powers and duties

06 MAKING DUTY FREE SALES: OUTWARDS

6.1 PURPOSE

6.2 INTRODUCTION

6.3 POLICY AND PRACTICE

6.3.1 OUTWARDS DUTY FREE SHOPS - OFF-AIRPORT

6.3.2 OUTWARDS DUTY FREE SHOPS - ON-AIRPORT

6.3.3 WHAT HAPPENS WHEN THE TRAVELLER DOES NOT EXPORT GOODS?

6.3.4 PREVENTION OF COLLUSION

6.4 PROCEDURES

6.4.1 EXPORTING LIQUID, AEROSOL & GELS DUTY FREE GOODS

6.4.2 WHAT DO I DO IF I NEED MORE INFORMATION?

6.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO DUTY FREE SHOPS?

6.6 TERMS USED

6.7 LEGISLATION (quick reference guide)

6.7.1 Excise Act 1901

6.7.2 Excise Regulations 1925

6.7.4 Customs Act 1901

6.7.6 Crimes Act 1914

6.1 PURPOSE

This chapter deals with:

• making outwards duty free sales
• conditions travellers must be made aware of
• what happens when goods are not exported
• exporting liquid, aerosol & gels duty free goods, and
• penalties that can apply to offences in relation to duty free shops.

6.2 INTRODUCTION

In general terms, outwards duty free shops will not pay duty. However, excise duty will be payable when excisable goods are not taken overseas or are unable to be accounted for e.g. stock shortages.

This chapter focuses on the rules that you need to follow when making duty free sales from an outwards duty free shop.

6.3 POLICY AND PRACTICE

6.3.1 OUTWARDS DUTY FREE SHOPS - OFF-AIRPORT

Off-airport outward duty free shops are usually located away from the airport. However, they could also be physically located at an airport, before the Customs processing point.

You are not permitted to sell or deliver duty free goods unless the purchaser is a 'relevant traveller' able to show you a ticket or other approved document showing an international flight or voyage.[97]

You must follow specific procedures in the invoicing, packaging and sealing of goods. Sales made from outwards off-airport duty free shops must use the sealed bag method of delivery.

The number or other identification of the traveller's ticket, or similar approved travel documentation, must be recorded on the sales invoice.

You must not deliver the goods to the traveller earlier than 30 days before the traveller is due to depart.[98]

Sales to 'relevant travellers'

Sealing goods

You must enclose goods purchased by a 'relevant traveller' in a package:[99]

1. sealed so that the goods cannot be removed without the seal being broken
2. clearly marked to show:
   1. that it contains goods that were sold in a duty free shop, and
   2. the name of that shop; and
3. if that package is of a size that will be carried as hand baggage in the cabin of the aircraft or ship the package must be transparent enough for the goods to be easily identifiable.

Invoice preparation

When you deliver goods from your shop for export by a relevant traveller you must prepare, in triplicate, an invoice, being one of a series of sequentially numbered invoices, specifying:[100]

1. name and usual residential address of the relevant traveller
2. the following particulars of the intended relevant flight or voyage:
   1. date of departure
   2. airport or wharf of departure
   3. in the case of a relevant flight - flight number or other designation of the flight
   4. in the case of a relevant voyage - name of the ship and the number or other destination of the voyage
   5. number or other identification of the traveller's ticket or similar approved travel document
3. a precise description of the goods, including:
   1. quantity, in figures, of each item of the goods
   2. the total number, in words, of items on the invoice
   3. the sale value, in figures, of each item or quantity of items, and
   4. the total sales value of those items and quantities of items.

You must prepare the invoices in a way that would make it impracticable to add other items to the description. For hand prepared invoices, a line should be drawn from the last item to the far right of the page and then diagonally to the bottom left hand corner and then across the page to the bottom right hand column.

Distribution of invoices

You must:[101]

1. place one copy with the goods inside the sealed transparent package and positioned so that the invoice can be read without the package seal being broken
2. place one copy in a waterproof envelope attached securely to the outside of the package, and
3. retain one copy for your records.

Procedures to be followed at the airport

Goods carried in the cabin

When a relevant traveller takes packages in the cabin of the aircraft or ship (i.e. taken by hand into the departure lounge on the way to the cabin of the aircraft or ship) you must,[102]

1. ensure that the package is examined to ascertain whether the seal has been broken or tampered with; and
2. if the package has not been tampered with, ensure that the attached invoice copy is removed.

Duty Free Security staff, who are employed by duty free shop operators, remove the invoices. This is also called 'plucking' dockets.

Goods checked in as hold baggage

When a relevant traveller does not take packages in the cabin of the aircraft or ship, (i.e. they are checked in as hold baggage) you must, at the point of surrender of the goods:[103]

1. ensure that the package is examined to check whether the seal has been broken or tampered with, and
2. if the package has not been tampered with, ensure that the attached copy invoice is removed from the package.

This may be done by airline staff in conjunction with Duty Free Security operatives.

This arrangement does not relate to procedures to be followed for liquid, aerosol and gels (LAG's) goods sold duty free by outwards off-airport duty free stores.

For more information on LAG's, see Section 6.4.1 - Exporting liquid, aerosol and gels duty free goods.

At monthly intervals, Duty Free Security will send to you a list of all dockets retrieved. You must then compare this list with your sales records and pay customs and/or excise duty for those dockets which are not listed as retrieved.

The report generated by you is known as the Missed Dockets Return.

For more details see 'Missed dockets' later in this section.

Discrepancies at the airport

If a discrepancy is detected such as: [104]

1. a package is not sealed or has been tampered with
2. the invoice enclosed in the bag does not correspond with the attached outside invoice
3. there is no enclosed invoice or attached outside invoice
4. the package contains goods that are not as specified in the enclosed or attached invoice, or
5. the package does not contain the goods that are specified on the attached invoice

you must provide us with:

1. the name of the relevant traveller
2. particulars of the intended exportation of the goods by the relevant traveller on the relevant flight or voyage such as:
   1. date and time of departure
   2. relevant flight number and destination of the flight
   3. relevant voyage, name of the ship and number or destination of the voyage
3. the nature of the discrepancy.

You should include shortages detected in this way on your next Missed Dockets Return and pay the appropriate excise duty.

Mail order and telephone sales

You or your staff (including the proprietor and the proprietor's servants and agents) can agree to sell duty free goods through mail order or over the phone as long as:[105]

1. the person is a relevant traveller
2. details of their intended travel have been given, and
3. the agreement is subject to the condition that the sale takes place in the shop (that is the relevant traveller must pick the goods up from the shop).

Prior to the delivery of goods you must sight the ticket for the relevant flight which must match with the details provided at the time the agreement was entered into.[106]

Sales to ships' crew - additional requirements

Sales to ships' crew (relevant travellers) are required to be reported by facsimile to the Tax Office prior to departure of the vessel to enable verification of the exports by Customs.

This requirement is specified as a condition on your permission to sell duty free goods to relevant travellers.

Conditions travellers must be made aware of

You must ensure that relevant travellers are made aware of any conditions of a permission with which the traveller is required to comply.[107]

Travellers must, when they take possession of the goods, sign an approved form acknowledging their obligations concerning the export of the goods.[108]

Obligations of the relevant traveller are they:

• shall not remove, alter or otherwise interfere with an invoice attached outside the sealed package[109]
• shall not break the seals or otherwise tamper with the integrity of the package[110]
• when taking a sealed package into a departure area or checking in a sealed package as baggage shall:[111]
  • present the package sealed and with the outside invoice attached, and permit examination of the package and removal of the invoice by the duty free shop proprietor's agent.[112]

Sales to Diplomats, Consuls, Navy etc

In some circumstances, your permission may allow you to make sales to persons or organisations who are not relevant travellers. This includes sales to diplomats, consuls and the Royal Australian Navy.

If you make sales to the Navy, diplomats or consuls you may be entitled to a remission of the excise duty.[113] You should retain relevant documentary orders as proof of this entitlement.

For more information see Chapter 9: Remissions and exemptions.

Record keeping and reporting

What records need to be kept?

You must keep, and make available to us when requested, records as directed.[114]

These will typically include proof of export of goods that have been delivered to a relevant traveller. This may be the electronic record of invoice numbers removed and provided to you by Duty Free Security.[115]

You may also be required to notify us of all sales made to which your permission applies.[116]

Further records to keep may include:

• copy of the sales invoice
• photocopy of the travel documents attached to the sales invoice
• stock records for excisable products
• underbond delivery notes for goods received from suppliers
• underbond delivery notes for goods removed
• copies of approved single movement permissions (SMP) for movement in and out of your licensed premises
• copies of approved remissions
• orders for goods delivered as excise free goods in prescribed circumstances such as diplomatic and consular sales
• documentation relating to your physical stocktakes.

What reports need to be prepared?

You must provide the following reports to us:

Prior to departure

If we direct you to, you must provide the following sales information [117] prior to the date of departure of the flight or voyage: [118]

1. name of shop
2. name of relevant traveller
3. details in relation to relevant flight or voyage:
   1. date and time of departure, and
   2. flight number or name of ship and voyage number
4. full description of any item included in the sale with a sale value of $500 or more
5. the total number of items of the goods included in the sale
6. total number of specially sealed packages referred to in paragraph 79(7)(d) of the Excise Regulations in which the goods included in the sale are packed,
7. the total number of the specially sealed packages:
   1. that are able to be carried in the cabin of the aircraft or ship, and
   2. that are not able to be carried in the cabin of the aircraft or ship, and
8. the invoice numbers in respect of all invoices relating to the sale.

Proof of export

This report of the invoice numbers of copy invoices, removed from the package of goods delivered to relevant travellers, can be obtained from Duty Free Security. You should provide this report to us, as an electronic record, within 10 working days after the date of departure of the relevant traveller.[119]

Missed dockets

Within 21 working days after the end of the month you must lodge a return stating:[120]

1. the name of the duty free shop
2. the invoice number of each invoice:
   1. which has been prepared as set out in 'Invoice preparation' in this section
   2. with a date of the proposed departure that is in that month, and
   3. for which a copy has not been removed as set out in 'Procedures to be followed at the Airport' in this section
3. full invoice details as set out in 'Invoice preparation' in this section, and
4. the amount of excise duty payable in respect of the goods to which the invoice relates.

This is done by completing a Duty-free operator return (NAT 10405) and sending it to us either by:

• fax to 1300 726 895, or
• mail to:
  
  Duty-free operator returns
  
  PO Box 5423
  
  WOLLONGONG NSW 2520

You must pay to us the sum of the amounts of excise duty payable, at the rate in force when the goods were delivered to the relevant traveller.[121]

Duty-free operator returns and rates of duty can be found on our website atwww.ato.gov.au

6.3.2 OUTWARDS DUTY FREE SHOPS - ON-AIRPORT

On-airport outward duty free shops are located after the Customs processing point.

Sale or delivery of duty free goods is only permitted to a 'relevant traveller'[122] who is able to show a ticket or other approved documentation that shows an international flight or voyage.[123]

You must follow specific procedures in the invoicing of goods.

Sales to 'relevant travellers'

Invoice preparation

When you make a sale to a relevant traveller you must prepare, in duplicate, an invoice, being one of a series of sequentially numbered invoices, specifying:[124]

1. the following particulars of the intended relevant flight or voyage:
   1. date of departure
   2.  flight number or other designation of the relevant flight
2. a precise description of the goods, including:
   1. quantity, in figures, of each item of the goods
   2. the sale value, in figures, of each item or quantity of items, and
   3. the total sales value of those items and quantities of items.

Aircraft crew (or the pilot) are also eligible to purchase goods from you when they comply with the definition of 'relevant traveller'. In addition to the above, you must also record on the sales invoice[125]:

1. the name and usual residential address of the relevant traveller, and
2. the airport of departure.

You must prepare the invoices in a way that would make it impracticable to add other items to the description.[126]

Distribution of invoices

You must:[127]

1. give one copy to the relevant traveller, and
2. retain one copy for your records.

 

Mail order and telephone sales

You or your staff (including the proprietor and the proprietor's servants and agents) can agree to sell duty free goods through mail order or over the phone as long as:[128]

1. the person is a relevant traveller
2. details of their intended travel have been given, and
3. the agreement is subject to the condition that the sale takes place in the shop, that is the traveller picks the goods up in the shop.

Prior to handing the goods to the traveller, you must sight the ticket for the relevant flight which must match with the details provided at the time the agreement was entered into.[129]

Record keeping and reporting

What records need to be kept?

You must keep, and make available to us when requested, records as directed.[130]

You may also be required to notify us of all sales made to which your permission applies.[131]

These records may include:

• sales of excisable product
• stock records for excisable products
• underbond delivery notes for goods received from suppliers
• underbond delivery notes for goods removed
• copies of approved Single movement permissions (SMP) for movement in and out of your licensed premises
• copies of approved remissions, and
• documentation relating to your physical stocktakes.

What reports need to be prepared?

You are not required to provide any particular reports however you may be directed to supply specific returns. If this is the case you will receive a specific direction to do so.

6.3.3 WHAT HAPPENS WHEN THE TRAVELLER DOES NOT EXPORT GOODS?

The traveller's responsibilities and duties

If a traveller does not export the goods on the relevant flight or voyage they must, by noon of the next working day after the scheduled departure time:

• notify you:[132]
  1. if the traveller intends to export the goods on a subsequent flight or voyage, departing not more than 48 hours after the initial scheduled time, they must notify you of that intention along with the flight or voyage numbers and date and intended time of departure, or
  2. if the traveller no longer intends to travel they must notify you no later than the close of business on the second working day after the initial scheduled departure time, and return the goods to your shop, and
• if having notified you that they intend departing on a flight or voyage after 1) above, and they do not export the goods they must:[133]
  3. notify you that the goods have not been exported, not later than noon on the next working day after the specified date of departure, and
  4. return the goods to your shop no later than the close of business of the second working day after the specified date of departure.

Your responsibilities and duties

You must:

• take returned goods back into stock (to be able to account for the sales invoice),[134] or
• advise us of goods that were not exported via the Duty-free operator return that you are obliged to submit monthly,[135] and
• pay us the sum of the amounts of excise duty specified in the return.[136]

For more information about how to calculate and pay excise duty see Chapter 8 - Accounting for excisable goods.

6.3.4 PREVENTION OF COLLUSION

You or your staff must not collude with passengers to obtain duty free goods. You must not enter into an arrangement with a traveller where goods delivered to the traveller under the permission are to:[137]

1. be transferred to you upon return of the relevant traveller to Australia, or
2. remain with you.

Any such collusion may result in the revocation of your permission and/or a court imposed penalty.

6.4 PROCEDURES

6.4.1 EXPORTING LIQUID, AEROSOL & GELS DUTY FREE GOODS

On 31 March 2007 the Department of Transport and Regional Services introduced restrictions on the volume of liquid, aerosol and gaseous (LAG's) goods that an international passenger can take on board a flight in carry on luggage. This means that any LAG's goods over 100 millilitres must be packed in baggage that is checked in and therefore transported in the hold of the plane. Effectively, this means spirits.

This change in airport security impacts on outwards off-airport duty free stores as the outwards on-airport and inwards duty free stores operate either after the Customs barrier (outwards on-airport), or before it (inwards duty free), in which case the security risk is not an issue.

What is the LAG's change and how does it affect my operations

Any LAG's sold to a relevant traveller by an outwards off-airport duty free store must be sealed in a separate bag to other duty free purchases. You must complete a sales invoice in the same manner as all other sales although if the relevant traveller has other non-LAG duty free purchases (i.e. cigarettes) then a separate docket must be completed for both bags.

The traveller must place the sealed LAG's bag into their luggage that is to be checked into the hold of the plane. They should remove the docket attached to the exterior of the sealed bag and, once inside the airport and past the Customs checkpoint, they must give the docket to the Duty Free Security operatives.

Missed dockets for LAG's should be treated in the same manner as missed dockets for other non-LAG goods.

This is currently an administrative arrangement agreed to by us and Customs to ensure that the security changes that have been implemented do not adversely impact the outwards off-airport duty free operators. Proposals for legislative changes are being developed to support this arrangement.

6.4.2 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on making duty free sales contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

6.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO DUTY FREE SHOPS?

The following are the penalties that may apply after conviction for an offence.

Move, alter or interfere

If you move, alter or interfere with excisable goods that are subject to excise control, without permission, the penalty is a maximum of two years in prison or the greater of 500penalty units and 5 times the amount of duty on the excisable goods[138]

Note:

This includes moving underbond excisable goods from your premises to any other location or for export.

If your movement of underbond excisable goods does not comply with the permission to move the underbond excisable alcohol products, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[139]

Deliver

If you deliver excisable goods into the Australian domestic market contrary to your permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods[140]

Records

If you do not keep, retain and produce records in accordance with a direction under section 50 of the Excise Act, the penalty is a maximum of 30 penalty units.

Evade

If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units.[141]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.[142]

6.6 TERMS USED

Deliver into the Australian domestic market[143]

'Deliver into the Australian domestic market' is the term we use in this manual for when excisable goods are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

Normally this will be by delivering the goods away from licensed premises but includes using those goods yourself (for example sales to staff).

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However there are several cases where issues closely related to it are considered.[144]

The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to exporting them.

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

International flight

An international flight is defined as a flight, whether direct or indirect, by an aircraft between a place in Australia from which the aircraft takes off and a place outside Australia at which the aircraft lands or is intended to land.[145]

International voyage

An international voyage is defined as:

• a voyage, whether direct or indirect, by a ship between a place in Australia and a place outside Australia.[146]

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

Proprietor

In relation to an outwards duty free shop, is the holder of the warehouse licence that relates to the outwards duty free shop.[147]

Relevant traveller

• A person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew (or the pilot or master) of an aircraft or ship,[148] or
• a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew (or the pilot) of, an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight.[149]

Remission

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.

For more information about remissions see Chapter 9 - Remissions and exemptions.

Section 50 direction

This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, or proprietor of licensed premises, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us.

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

Warehouse licence[150]

Has the same meaning as it has in the Customs Act 1901 which states:

'Warehouse' means a place that a person or partnership is licensed under section 79 to use for warehousing goods.[151]

6.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

6.7.1 Excise Act 1901

Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods

Section 50 - Record keeping

Section 58 - Entry for home consumption etc.

Section 59 - Payment of duty

Section 60 - Persons to keep excisable goods safely etc.

Section 61 - Control of excisable goods

Section 61A - Permission to remove goods that are subject to CEO's control

Section 61C - Permission to deliver certain goods for home consumption without entry

Section 61D - Outwards duty free shops

Section 120 - Offences

6.7.2 Excise Regulations 1925

Regulation 50 - Circumstances under which refunds, rebates and remissions are made

Regulation 50A - Other circumstances under which refunds, rebates and remissions are made

Regulation 79 - Outwards duty free shops

6.7.4 Customs Act 1901

Section 4 - Definitions

6.7.6 Crimes Act 1914

4AA - Penalty units

07 MAKING DUTY FREE SALES: INWARDS

7.1 PURPOSE

7.2 INTRODUCTION

7.3 POLICY AND PRACTICE

7.3.1 INWARDS DUTY FREE SHOPS

7.4 PROCEDURES

7.4.1 WHAT DO I DO IF I NEED MORE INFORMATION?

7.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO DUTY FREE SHOPS?

7.6 TERMS USED

7.7 LEGISLATION (quick reference guide)

7.7.1 Excise Act 1901

7.7.2 Excise Regulations 1925

7.7.4 Customs Act 1901

7.7.5 Customs Regulations 1926

7.7.6 Crimes Act 1914

7.1 PURPOSE

This chapter deals with:

• making inwards duty free sales
• conditions travellers must be made aware of
• penalties that can apply to offences in relation to duty free shops.

7.2 INTRODUCTION

In general terms, inwards duty free shops will not pay duty. However, excise duty will be payable when excisable goods are unable to be accounted for e.g. stock shortages.

This chapter focuses on the rules that you need to follow when making duty free sales from an inwards duty free shop.

7.3 POLICY AND PRACTICE

7.3.1 INWARDS DUTY FREE SHOPS

An inwards duty free shop is authorised to sell airport shop goods which can be excisable or customable goods. The Tax Office provides authorisation for excisable goods while Customs is responsible for authorisations dealing with imported goods.

Inwards duty free shops sell to relevant travellers who have just completed an international flight from a place outside Australia and are purchasing excisable product prior to clearing the Customs barrier.

Purchases of excisable goods by inward travellers form part of the (Customs) passenger concession. Provided the excisable goods are within the passenger concession limits they remain free of duty.[152]

Specific controls on inwards duty free shops exist so that sales can only be made to relevant travellers.

Identifying a 'relevant traveller'

You must not sell goods to a person in your shop unless the person:[153]

• is a relevant traveller[154], and
• shows a ticket or other document that confirms that they have arrived in Australia on an international flight.

Mandatory signage

You must prominently display signs that clearly state:[155]

1. the amounts of alcohol and tobacco products that may be entered for home consumption, by a relevant traveller, free of excise duty, and
2. the conditions (if any) under which, for the purposes of the Excise Acts, a traveller needs to comply in relation to their purchase.

These signs must be authorised in writing, by us, at the time the licence is issued.

Mail order and telephone sales

You may arrange sales by mail order or phone. You can do so as long as:[156]

1. the person is, or intends to be, a relevant traveller
2. they give details of their intended arrival in Australia (including the flight number or other destination of the international flight)
3. you inform the traveller of
   1. the amounts of alcohol and tobacco that may be entered free of excise duty, and
   2. the conditions (if any) under which, for the purposes of the Customs Acts, a traveller is to comply in relation to the purchase of the goods, and
4. the agreement is subject to the condition that the sale takes place in the shop, that is the traveller picks the goods up in the shop.

Prior to handing the goods to the traveller, you must sight the ticket for the relevant flight confirming the details provided at the time the agreement was entered into.[157]

Record keeping and reporting

What records need to be kept?

You must keep records as specified and may be required to notify us of all sales made to which your permission applies.[158]

These records may include:

• sales of excisable product
• stock records for excisable products
• underbond delivery notes for goods received
• underbond delivery notes for goods removed
• copies of approved single movement permissions (SMP) for movement in and out of your licensed premises
• copies of approved remissions, and
• documentation relating to your physical stocktakes.

What reports need to be prepared?

You are not required to prepare any special reports.

7.4 PROCEDURES

7.4.1 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on making duty free sales contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

7.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO DUTY FREE SHOPS?

The following are the penalties that may apply after conviction for an offence.

Move, alter or interfere

If you move, alter or interfere with excisable goods that are subject to excise control, without permission,the penalty is a maximum of two years in prison or the greater of 500penalty units and 5 times the amount of duty on the excisable goods[159]

Note:

This includes moving underbond excisable goods from your premises to any other location or for export.

If your movement of underbond excisable goods does not comply with the permission to move the underbond excisable alcohol products, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods.[160]

Deliver

If you deliver excisable goods into the Australian domestic market contrary to your permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods[161]

Records

If you do not keep, retain and produce records in accordance with a direction under section 50 of the Excise Act, the penalty is a maximum of 30 penalty units.

Evade

If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units.[162]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.[163]

7.6 TERMS USED

Airport shop goods

Excisable airport shop goods are:

• alcoholic beverages, and
• tobacco products.[164]

Deliver into the Australian domestic market

[165]'Deliver into the Australian domestic market' is the term we use in this manual for when excisable goods are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

Normally this will be by delivering the goods away from licensed premises but includes using those goods yourself (for example sales to staff).

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However there are several cases where issues closely related to it are considered.[166]

The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to exporting them.

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

International flight

An international flight is defined as:

• a flight, whether direct or indirect, by an aircraft between a place in Australia from which the aircraft takes off and a place outside Australia at which the aircraft lands or is intended to land[167]; or
• a flight, whether direct or indirect, by an aircraft between a place outside Australia from which the aircraft took off and a place in Australia at which the aircraft landed.[168]

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

Relevant traveller

• A person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew (or the pilot or master) of an aircraft or ship,[169] or
• a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew (or the pilot) of, an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight.[170]

Remission

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.

For more information about remissions see Chapter 9 - Remissions and exemptions.

Section 50 direction

This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, or proprietor of licensed premises, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us.

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

7.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

7.7.1 Excise Act 1901

Section 50 - Record keeping

Section 58 - Entry for home consumption etc.

Section 61 - Control of excisable goods

Section 61A - Permission to remove goods that are subject to CEO's control

Section 61C - Permission to deliver certain goods for home consumption without entry

Section 61D - Outwards duty free shops

Section 61E - Inwards duty free shops

Section 120 - Offences

7.7.2 Excise Regulations 1925

Regulation 81 - Inwards duty free shops

Schedule 1 - Prescribed circumstances (regulation 50A)

7.7.4 Customs Act 1901

Section 4 - Definitions

7.7.5 Customs Regulations 1926

Regulation 94 - Declaration in respect of airport shop goods

7.7.6 Crimes Act 1914

4AA - Penalty units

08 ACCOUNTING FOR EXCISABLE GOODS

8.1 PURPOSE

8.2 INTRODUCTION

8.3 POLICY AND PRACTICE

8.3.1 DO I HAVE TO ACCOUNT FOR EXCISABLE GOODS?

8.3.2 HOW DO I WORK OUT THE AMOUNT OF DUTY TO PAY?

8.3.3 WHAT DO I DO IF I HAVE A DISPUTE AS TO THE DUTY?

8.4 PROCEDURES

8.4.1 DESTRUCTION OF DETERIORATED STOCK

8.4.2 HOW DO I LODGE EXCISE RETURNS AND PAY EXCISE DUTY?

8.4.3 WHAT DO I DO IF I HAVE MADE AN ERROR ON MY EXCISE RETURN?

8.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

8.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO ACCOUNTING FOR EXCISABLE GOODS?

8.6 TERMS USED

8.7 LEGISLATION (quick reference guide)

8.7.1 Excise Act 1901

8.7.2 Excise Tariff Act 1921

8.7.3 Crimes Act 1914

8.1 PURPOSE

This chapter deals with:

• accounting for excisable goods
• how to work out the amount of duty to pay
• what to do if you have a dispute as to the duty
• destruction of deteriorated stock
• how to lodge excise returns and pay excise duty
• what to do if you have made an error on your excise return, and
• penalties that can apply to offences in relation to accounting for goods.

8.2 INTRODUCTION

In general terms, duty free shops will not pay duty. However, excise duty will be payable when excisable goods are not taken overseas or are unable to be accounted for e.g. stock shortages.

This chapter explains when and how to pay excise duty.

8.3 POLICY AND PRACTICE

8.3.1 DO I HAVE TO ACCOUNT FOR EXCISABLE GOODS?

Where you have or had possession, custody or control of any excisable goods[171] (subject to our control), you have to be able to satisfactorily account for them.

If we ask you to account for excisable goods, and you cannot satisfactorily do so, then you may be required to pay an amount equal to the duty. If we require this payment you will be given a written demand. The amount you are required to pay is calculated using the rate of duty in force on the day the demand is made.

When requested to account for excisable goods you must be able to show that:

• the goods are still at your premises
• duty has been paid
• duty was not payable (for example, where a remission applied), or
• the goods have otherwise been dealt with in accordance with the law (for example, moved under a movement permission).

Excisable goods will not have been accounted for satisfactorily just because they were:

• given away for promotional purposes[172]
• stolen from licensed premises,[173] or
• delivered into the Australian domestic market under the mistaken belief that they were not excisable.[174]

We may also demand payment from you if you have failed to keep excisable goods safely (for example, if you have a break-in and a theft occurs, you will be required to pay an amount equal to the excise duty that would have applied to the excisable goods that have been stolen).

Our decision to demand payment is a reviewable decision.[175]

For information about your review rights refer to Chapter 10 - Reviews and objections

In determining whether you have accounted for the excisable goods, we may allow you to offset any stock shortages and surpluses.

Example 8AA duty free shop is asked to account for their excisable tobacco products. They carry out a stocktake and there is a surplus of 4000 sticks of Brand X and a shortage of 10000 sticks of Brand Y.We will allow the duty free shop to offset the surplus and shortage. Therefore, there are 6000 sticks that have not been accounted for.A demand will be issued for an amount equal to the excise duty payable on the 6000 sticks.The duty free shop corrects book stock to take up the surplus floor stock of 4000 sticks and, when the demand is paid, write off the shortage of 10000 sticks.

 

Example 8BA duty free shop is asked to account for their excisable alcohol products. They carry out a stocktake and there is a surplus of 25 bottles of Brand A Australian rum at 38% by volume of alcohol, and a shortage of 10 bottles of Brand B Australian whisky at 38% by volume of alcohol.We will allow the duty free shop to offset the surplus and shortage. Therefore, there are no bottles that have not been accounted for but there is a surplus of 15 bottles.The licence holder corrects book stock to take up the surplus floor stock of 25 bottles of rum and write off the shortage of 10 bottles of whisky.

 

If you have a storage licence, with permission to sell duty free, and stock excisable alcoholic goods and tobacco products, you may only offset tobacco against tobacco and alcohol against alcohol. If you store both imported and excisable goods, you cannot offset one against the other.

8.3.2 HOW DO I WORK OUT THE AMOUNT OF DUTY TO PAY?

To work out how much duty you need to pay you will need to:

1. check whether your goods are excisable goods according to the Schedule to the Excise Tariff Act[176] and identify the correct duty rate
2. work out the quantity of excisable goods subject to duty, in each tariff subitem,
3. multiply the quantity of excisable goods by the rate of duty on the excisable goods, and
4. add up the total for each subitem to work out total duty to be paid.

(i) Classifying excisable goods

The Schedule to the Excise Tariff Act (Schedule) lists those goods that, if manufactured in Australia, are subject to excise. The Schedule also contains the rate of duty applicable to the goods. For excisable alcohol and tobacco products, an extract of the Schedule is as follows:

Tariff Item	Subitem	Description of Goods	Rate
3		Spirits; Other excisable beverages exceeding 10% by volume of alcohol
	3.1	Brandy	$63.99* per litre of alcohol
	3.2	Other excisable beverages exceeding 10% by volume of alcohol	$68.54* per litre of alcohol
5		Tobacco, cigars, cigarettes and snuff
	5.1	In stick form not exceeding in weight 0.8 grams per stick actual tobacco content	$0.25450* per stick
	5.5	Other	$318.14* per kilogram of tobacco content

* Rate of duty as at 1 August 2008. For the current rates of duty, refer to the Schedule under Excise Tariff Working Pages on our website at www.ato.gov.au

(ii) Working out quantities of excisable goods 

Duty for excisable alcohol products is levied on the quantity of alcohol in the goods and not on the quantity of the goods themselves.

Alcohol quantity is measured in litres of alcohol, or Lals.

Duty for excisable tobacco products is levied on the quantity of the goods themselves.

Tobacco quantity is measured in sticks (e.g. cigarettes) or kilograms of tobacco content.

Precision requirements for calculations and reporting

When calculating quantities of excisable alcohol products, the acceptable level of precision for working out volumes or litres of alcohol (Lals) is two decimal places.

When completing your excise return, the dutiable quantity in Lals for goods classified to a particular tariff item or subitem in the Schedule to the Excise Tariff Act may be truncated to one decimal place. Truncation to one decimal place means that anything after the first decimal place is disregarded.

 

Example 8CThe dutiable total for excisable alcohol products to be duty paid by My Duty Free Shop under subitem 3.1 in the Schedule to the Excise Tariff Act is 56.79 Lals and for excisable alcohol products to be duty paid under subitem 3.2 in the Schedule to the Excise Tariff Act is 84.61 Lals.On the excise return, My Duty Free Shop reports the dutiable totals as:Subitem 3.1 56.7 LalsSubitem 3.2 84.6 LalsDuty is worked out on the basis of the truncated totals.

 

When calculating the quantity of tobacco content in kilograms you should calculate to two decimal places.

(iii) Calculating duty payable on excisable goods

The rate of duty is set in the table in the Schedule to the Excise Tariff Act. The rates of duty on excisable alcohol and tobacco products are subject to change. They are indexed twice a year in accordance with increases in the CPI (usually on 1 February and 1 August).[177] For ease of reference we provide a 'working tariff', incorporating indexation changes, on our website at www.ato.gov.au

The rate of duty you use is the rate contained in the working tariff for the subitem.

 

Example 8DOn 3 August 2008 My Duty Free Shop discovers a shortage of underbond brandy.The brandy is classified to subitem 3.1 in the Schedule to the Excise Tariff Act.The rate of duty that applies is the rate in force on 3 August 2008 - $63.99 per litre of alcohol.

 

The amount of duty payable is then calculated by multiplying the quantity of excisable product by the applicable rate of duty.

 

Example 8EContinuing on from Example 8D, My Duty Free Shop also discovers on 3 August 2008 that 10 bottles of brandy, each 700 ml and with a strength of 37%, are missing.The brandy is classified to subitem 3.1 in the Schedule to the Excise Tariff Act and has a duty rate of $63.99 per litre of alcohol.Therefore, the duty payable is 10 x 0.7 x 37% = 2.5 lals x $63.99 = $159.97

 

(iv) Calculating total duty payable

Duty payments are notified to us by including details on your excise return. Excisable goods classified to different items or subitems in the Schedule to the Excise Tariff Act  must be shown separately on your excise return on what are referred to as lines.

 

Example 8FMy Duty Free Shop needs to report deliveries for the period ended 10 August 2008.On their excise return, My Duty Free Shop reports their deliveries and duty liability as: Line  Tariff item  Quantity  Units  Duty rate  Excise amount  1  3.1  56.7  Lals  $63.99  $3,628.23  2  3.2  84.6  Lals  $68.54  $5,798.48 TOTAL          $9,426.71

 

8.3.3 WHAT DO I DO IF I HAVE A DISPUTE AS TO THE DUTY?

If you dispute:[178]

• the amount of duty
• the rate of duty, or
• the liability of goods to duty (for example, whether the goods are excisable)

you may deposit with us the amount of duty demanded.

The deposit of this duty is to be made on an excise return. The excise return should be accompanied by a letter which sets out the details of the dispute.

These disputes do not apply to changes brought about by a tariff proposal.

The deposit you made will be the proper duty unless you commence court action against us, within 6 months after you make the deposit, and that action is determined in your favour.

If any action is determined in your favour, any excess of the deposit over the proper duty will be refunded to you along with payment of interest, calculated at 5% p.a.

Delivery of the goods and payment of interest do not apply in cases where we are of the opinion that any evasion of the excise duty under the Excise Act has been committed or attempted.

8.4 PROCEDURES

8.4.1 DESTRUCTION OF DETERIORATED STOCK

If excisable goods under your control need to be destroyed for any reason (e.g. old stock or gone mouldy) there are special procedures that must be followed.

For more information see Chapter 9: Remissions and exemptions.

8.4.2 HOW DO I LODGE EXCISE RETURNS AND PAY EXCISE DUTY?

To lodge your excise return (NAT 4285):

• fax it to us on 1300 131 456, or
• post it to
  
  Excise Returns Processing Unit
  
  PO Box 9100
  
  WOLLONGONG  NSW  2500.

You can pay excise duties:

• by electronic funds transfer, including direct credit and BPAY
• in person at a Post Office, or
• by mail (cheque or money order).

We do not accept credit card payments.

If you pay the excise duty at a Post Office, you must use a payment advice. To obtain a payment advice booklet, phone us on 13 72 26 or, for further information, 1800 815 886 and supply us with your Australian Business Number (or Excise Identification Number) and client account number.

To obtain an excise return (NAT 4285): visit our website at www.ato.gov.au, or phone 1300 137 295.

 

For more information about completing your excise return refer to the Excise return instructions (NAT 15436).

8.4.3 WHAT DO I DO IF I HAVE MADE AN ERROR ON MY EXCISE RETURN?

You may correct errors in your excise return or add new lines by lodging an amending excise return and referencing the number of your original return.

If your amendment results in a shortfall in excise duty paid, you must pay the additional duty when you lodge the amending return.

If your amendment results in an overpayment of excise duty, you may apply for a refund or treat the amount as a credit and offset it against the duty you are liable to pay in your next excise return.

An amending return can only be used to change product details.

If you wish to change other information in your original excise return (for example, your individual details) you must lodge a new excise return form as the amending excise return form does not cater for changes to this section. The new return must contain the amended details and refer to the original return. You should also request cancellation of the original return.

To obtain an Amending excise return (NAT 4286): visit our website at www.ato.gov.au, or phone 1300 137 295.

For more information about completing your Amending excise return refer to the: Amending excise return instructions (NAT 15772).

8.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on accounting for excisable goods contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

8.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO ACCOUNTING FOR EXCISABLE GOODS?

The following are the penalties that may apply after conviction for an offence.

Move, alter or interfere

If you move, alter or interfere with excisable goods that are subject to excise control, without permission, the penalty is a maximum of two years in prison or the greater of 500penalty units and 5 times the amount of duty on the excisable goods[179]

 

Note:

This includes moving underbond excisable goods from your premises to any other location or for export.

Deliver

If you deliver excisable goods into the Australian domestic market contrary to your permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods[180]

Records

If you do not keep, retain and produce records in accordance with a direction under section 50 of the Excise Act, the penalty is a maximum of 30 penalty units.

Evade

If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units.[181]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.[182]

8.6 TERMS USED

Deliver into the Australian domestic market[183]

'Deliver into the Australian domestic market' is the term we use in this manual for when excisable goods are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

Normally this will be by delivering the goods away from licensed premises but includes using those goods yourself (for example sales to staff).

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However there are several cases where issues closely related to it are considered.[184]

The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to exporting them.

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Excise return

An excise return [185] is the document that you use to advise us the volume of excisable goods that have been delivered into the Australian domestic market.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

Remission

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.

For more information about remissions see Chapter 9 - Remissions and exemptions.

Section 50 direction

This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, or proprietor of licensed premises, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us.

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

8.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

8.7.1 Excise Act 1901

Section 50 - Record keeping

Section 58 - Entry for home consumption etc.

Section 60 - Persons to keep excisable goods safely etc.

Section 61 - Control of excisable goods

Section 61C - Permission to deliver certain goods for home consumption without entry

Section 120 -  Offences

Section 154 - Deposit of duty

Section 162C - Review of decisions

8.7.2 Excise Tariff Act 1921

Section 6A - Indexation of rates of duty

The Schedule

8.7.3 Crimes Act 1914

4AA - Penalty units

09 REMISSIONS and EXEMPTIONS

9.1 PURPOSE

9.2 INTRODUCTION

9.3 POLICY AND PRACTICE

9.3.1 WHEN CAN I APPLY FOR A REMISSION OF EXCISE DUTY?

9.3.2 WHEN ARE EXCISABLE GOODS EXEMPT FROM EXCISE DUTY?

9.4 PROCEDURES

9.4.1 HOW DO I APPLY FOR A REMISSION?

9.4.2 HOW DO I GET A PERIODIC SETTLEMENT PERMISSION (PSP)?

9.4.3 WHAT DOES MY PSP INCLUDE?

9.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

9.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO REMISSIONS AND EXEMPTIONS?

9.7 LEGISLATION (quick reference guide)

9.7.1 Excise Act 1901

9.7.2 Excise Regulations 1925

9.7.3 Crimes Act 1914

9.1 PURPOSE

This chapter deals with:

• when you can apply for a remission
• when excisable goods are exempt from excise duty
• who can access excisable goods free of excise duty
• how to apply for a remission
• how to get a Periodic settlement permission (PSP)
• what a PSP includes, and
• penalties that can apply to offences in relation to remissions and exemptions.

9.2 INTRODUCTION

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture.

In some circumstances the excise duty may be subject to a complete or partial remission.[186]

9.3 POLICY AND PRACTICE

9.3.1 WHEN CAN I APPLY FOR A REMISSION OF EXCISE DUTY?

You can apply for a remission of excise duty payable on your excisable goods if the following circumstances apply while the goods are subject to excise control:

1. Where the excisable goods have deteriorated or been damaged, pillaged, lost or destroyed, or become unfit for human consumption[187]

   'Pillaged' means to strip of money or goods by open violence, as in war; plunder.[188] This does not cover simple cases of theft.

   For more information about payment of duty see Chapter 8 - Accounting for excisable goods.

   Example 9AA carton of bottled brandy is dropped inside the duty free shop damaging the contents. The duty free shop applies for a remission of duty on the damaged goods. On receiving approval, the duty free shop destroys the damaged goods and retains records of the destruction.

    

   Example 9BOther excisable beverages containing milk products remain unsold in a duty free shop and have deteriorated to a point where they are unfit for human consumption. The duty free shop applies for a remission of duty on the beverages. On receiving approval, the duty free shop destroys the unsaleable stock and retains records of the destruction.

   However, if excisable goods are lost then the same circumstances will apply as described above for goods that are pillaged.

2. Where the goods are not worth the amount of excise duty payable on the goods.[189]

    

   Example 9CA carton of spirits is water damaged and the packaging and labels of the bottles is severely affected. They would only be able to be sold at a greatly reduced price, which is less than the excise duty that would be payable on the spirits. The duty free shop applies for a remission of duty on the beverages. On receiving approval, the duty free shop destroys the unsaleable stock and retains records of the destruction.

    

3. The excisable goods are for sale to diplomatic or consular missions and the goods are to be delivered under your Periodic settlement permission (PSP).[190]

   The PSP allows you to deliver these goods into the Australian domestic market. (For example, the terms of the PSP may require the manufacturer to submit an Excise remission (NAT 4289) to us, after delivery of the cigarettes.)

   You should only accept orders on the official stationery, or official order, of eligible people or organisations. You must keep a copy of this documentation.

   Example 9DA duty free shop receives an order from a diplomatic mission for cigarettes, for official use. The duty free shop delivers the cigarettes, into the Australian domestic market (to the diplomatic mission), under the terms of their Periodic settlement permission.The duty free shop submits an Excise remission (NAT 4289) by the date determined by their PSP and retains copies of the order and remission approval.

9.3.2 WHEN ARE EXCISABLE GOODS EXEMPT FROM EXCISE DUTY?

Excisable goods are exempt from duty if they are:

• sold for use as ship's or aircraft's stores,[191] or
• subject to remission without application.[192]

What are ship's and aircraft's stores?

Ship's and aircraft's stores are goods for the use of passengers or crew on international journeys or for the service of ships or aircraft on international journeys (e.g. cigarettes for sale to passengers on board a cruise liner).

There are limits on the quantities of excisable tobacco products that are not liable to excise duty as ship's or aircraft stores:[193]

• excisable alcohol beverages other than beer must not be sold to a passenger or crew other than by the glass or by nip
• cigarettes must be sold to passengers or crew in individual packets of not more than 25 sticks or individual tins of not more than 50 sticks
• loose tobacco (e.g. pipe tobacco) must be sold in quantities of not more than 120 grams
• cigars must be sold in individual packets, tins, or boxes of not more than 25 cigars. 

If you supply ship's or aircraft's stores underbond, you must obtain a movement permission to move the goods from the licensed premises to the place of export.

When are excisable goods subject to remission without application?

Excisable goods are subject to remission without application (this effectively means they are exempt from duty) when they are sold by duty free shops for official use but not for trade by[194] the personnel of sea-going vessels of the Royal Australian Navy (RAN) or Australian Military Forces (AMF).

Some restrictions apply to excisable goods for the RAN and AMF:

• The goods must be for consumption by the personnel of sea-going vessels of the RAN or the AMF when:
  • such vessels are in full commission, and
  • the products are consumed on such vessels[195]
• Only certain excisable goods are eligible for this concession, including:
  • tobacco
  • cigars
  • cigarettes
  • ale, port and other beer
  • brandy
  • whisky
  • rum
  • gin, and
  • liqueurs.
• RTDs (for example pre-mixed rum and cola or other mixers in bottles/cans) do not qualify for this concession.

To supply excisable goods under these circumstances, you must first ensure the receiver meets the relevant criteria. For example, you should only accept orders, stating that the goods are for official use, on the official stationery, or official order, of eligible people or organisations. You must keep a copy of this documentation.

You do not have to apply for a remission and you do not have to include these products on an excise return.

9.4 PROCEDURES

9.4.1 HOW DO I APPLY FOR A REMISSION?

An application for a remission must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested.[196]

For remission circumstances 1, 2, or 3 (outlined in Section 9.3.1 - When can I apply for a remission of excise duty?), your application must be submitted within 14 days of the date on which the excise duty was paid. However, this time may be extended to within 12 months of payment depending on your circumstances.[197]

To ensure the excisable goods do not find their way into the Australian domestic market we may wish to inspect or supervise the disposal of the goods. If underbond goods must be destroyed off site, you must apply for a movement permission to move them from the licensed premises to the place of destruction.

Unless excisable goods have been accidentally destroyed, you should contact us before moving or destroying any that are subject to remission. We will provide you with direction and advise if the goods are to be inspected or the destruction supervised.

For more information about movement permissions refer to Chapter 5 - Movement permissions.

To apply for a remission, send us a completed Excise remission (NAT 4289). You can use the Excise remission instructions (NAT 15769) to help you complete this form.

If you are not satisfied with our decision to refuse your remission, you can request a review of our decision by lodging an objection within 60 days.

For more information about your review rights refer to Chapter 10 - Reviews and objections.

9.4.2 HOW DO I GET A PERIODIC SETTLEMENT PERMISSION (PSP)?

If you apply for a storage licence with permission to sell duty free, you can use your application form to indicate whether you need a PSP. You do not need to complete a separate PSP application.

If you originally chose not to have a PSP, contact us and provide us in writing with your:

• licence details (if you have one), and
• reasons for applying for a PSP.

If we approve your PSP, we will notify you in writing within seven days of receiving your request.

A PSP is not transferable to another person and remains in force until revoked.

We may also:

• refuse to grant a PSP
• impose conditions on a PSP, or
• cancel a PSP.

Failure to comply with a condition may result in the cancellation of the PSP.[198] In such an instance, we would take into account a variety of factors, including your compliance history.

A decision to refuse or to cancel a PSP is not reviewable under the objection process. However, there may be other avenues for review, for example, you may seek an informal review of our decision.

For information about your review rights refer to Chapter 10 - Reviews and objections.

For more information about PSPs, contact us by phoning 1300 137 295.

9.4.3 WHAT DOES MY PSP INCLUDE?

Your PSP in relation to excisable goods will include:

1. permission to deliver excisable goods into the Australian domestic market
2. conditions, such as:
   • the type of goods that may be delivered from each premises,
   • quantity limits (if any)
   • record-keeping requirements
3. a schedule listing:
   • one or more premises from which deliveries may be made.

9.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on remissions and exemptions or PSPs contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

9.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO REMISSIONS AND EXEMPTIONS?

The following are the penalties that may apply after conviction for an offence.

Deliver

If you deliver excisable goods into the Australian domestic market contrary to your permission, the penalty is a maximum of two years in prison or the greater of 500penalty units and 5 times the amount of duty on the excisable goods.[199]

Evade

If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units.[200]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.[201]

9. 6 TERMS USED

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

Excisable goods include:

• tobacco
• cigarettes
• beer, and
• spirits.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Excise return

An excise return[202] is the document that you use to advise us the volume of excisable goods that have been delivered into the Australian domestic market.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

9.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

9.7.1 Excise Act 1901

Section 58 - Entry for home consumption etc.

Section 60 - Persons to keep excisable goods safely etc.

Section 61C - Permission to deliver certain goods for home consumption without entry

Section 78 - Remissions, rebates and refunds

Section 120 - Offences

Section 160A - Ship's stores and aircraft's stores

9.7.2 Excise Regulations 1925

Regulation 50 - Circumstances under which refunds, rebates and remissions are made

Regulation 50A - Other circumstances under which refunds, rebates and remissions are made

Regulation 51 - Requirements for remission, rebate or refund

Regulation 52 - Application for remission, rebate or refund

Regulation 53 - Period for making of application

Schedule 1 - Prescribed circumstances (regulation 50A)

9.7.3 Crimes Act 1914

Section 4AA - Penalty units

10 REVIEWS & OBJECTIONS

10.1 PURPOSE

10.2 INTRODUCTION

10.3 POLICY AND PRACTICE

10.3.1 WHAT ARE INFORMAL REVIEWS?

10.3.2 CAN I OBJECT AGAINST ANY DECISION?

10.3.3 WHEN CAN I SEEK AN EXTERNAL REVIEW?

10.4 PROCEDURES

10.4.1 HOW DO I REQUEST AN INFORMAL REVIEW?

10.4.2 HOW DO I LODGE AN OBJECTION?

10.4.3 HOW DO I REQUEST AN EXTERNAL REVIEW?

10.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

10.5 LEGISLATION (quick reference guide)

10.5.1 Excise Act 1901

10.5.2 Excise Regulations 1925

10.5.3 Taxation Administration Act 1953

10.1 PURPOSE

This chapter deals with:

• the types of review you can ask for
• what decisions you can object to
• how to request an informal review
• how to lodge an objection, and
• how to request an external review.

10.2 INTRODUCTION

We will provide you with a clear explanation of any decision we make about your excise affairs. If you need more information about our decisions, contact us using the details we provide when we advise you of our decision.

If you're not satisfied with a decision we've made, you can ask for it to be reviewed by:

• informal review[203]
• objection,[204] or
• external review.[205]

Where there is more than one review option, we will explain how these differ. For example, some reviews look at questions of law and others involve checking that we followed the correct process in reaching our decision. Which review option is best will depend on your situation.

10.3 POLICY AND PRACTICE

10.3.1 WHAT ARE INFORMAL REVIEWS?

Under the Taxpayers' Charter, you can seek an informal (internal) review where you believe that we have made a mistake, not complied with the law, or interpreted or applied the law incorrectly.

Your dissatisfaction with our decision may be treated as an informal review, both prior to or after receiving notification of the decision in writing.

An informal review does not waive or defer your rights to object to the decision.

However, if you choose to pursue an informal review, awaiting the outcome of the informal review may prejudice your right to object to the decision and, ultimately, your right for external review. For example, the time allowed to lodge an objection may have expired by the time an informal review is finalised.

This is particularly crucial if the original decision attracts only a 60-day objection period.

10.3.2 CAN I OBJECT AGAINST ANY DECISION?

No, you can only lodge an objection against those decisions contained in sections 39Q and 162C of the Excise Act and regulation 247 of the Excise Regulations 1925. These include decisions:

• made under the licensing provisions of the Excise Act[206] such as:
  • refusal to grant a licence
  • imposing and varying conditions on a licence, or
  • suspension, cancellation or refusal to renew a licence
• to demand an amount in relation to goods not satisfactorily accounted for[207]
• relating to a remission of duty,[208] or
• in relation to a duty free shop permission to sell to a relevant traveller.[209]

However, if you informally ask us to review a decision we will try to resolve any problems as quickly as possible. If we have made a mistake, we want to fix it at the least cost to both of us.

10.3.3 WHEN CAN I SEEK AN EXTERNAL REVIEW?

For decisions in relation to an objection, or where there is no right of objection, you may be able to apply to the Federal Court or Federal Magistrates Court under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act).

10.4 PROCEDURES

10.4.1 HOW DO I REQUEST AN INFORMAL REVIEW?

To request an informal review, use the contact details we provide to contact the person or area of the Tax Office handling your case. The review will be conducted by a tax officer who was not involved in making the original decision.

We will advise you of the outcome of our review within 28 days of receiving all the information we need. If we cannot finalise the review within 28 days or we need more information from you, we will contact you within 14 days to obtain the information we need or negotiate an extended reply date.

10.4.2 HOW DO I LODGE AN OBJECTION?

You can lodge an objection by completing an objection form or writing your own objection document. Your objection must:

• be in writing
• lodged within 60 days after you receive the notice of the decision, and
• set out a full and detailed account of the grounds for the objection.[210]

If you are a registered user you can lodge your objection through the business portal at www.bp.ato.gov.au.

You can also lodge your objection:

• by faxing it to 1300 650 128
• by e-mailing it to ExcAdvice@ato.gov.au
• in person, at your nearest Tax Office, or
• by posting it to
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

If you do not lodge your objection within 60 days we will not consider your objection, unless you provide the reasons for late lodgment. We will consider these reasons before continuing with the objection process.

If we refuse additional time to lodge an objection, you may have this decision reviewed by the Administrative Appeals Tribunal (AAT).

We will make a decision about your objection within 56 days of receiving all the necessary information. If we need more information or we cannot make a decision within 56 days, we will contact you within 14 days to obtain the information we need or to negotiate an extended reply date.

If you are dissatisfied with the objection decision, there are further review rights available to you. You can:

• apply to the AAT for a review of the decision, or
• appeal against the decision to the Federal Court.

To obtain a copy of our objection forms and for more information about how to lodge an objection, refer to How to lodge an objection on our website at www.ato.gov.au

For more information about what to do if you believe your legal rights or the standards outlined in the Taxpayers' Charter have not been met, refer to If you're not satisfied (NAT 2556).

10.4.3 HOW DO I REQUEST AN EXTERNAL REVIEW?

We suggest you obtain legal advice if you are considering using external review options provided by the AAT or Federal Court.

10.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on reviews and objections contact us as follows:

• phone 1300 137 295
• fax (03) 9285 1168, or
• write to us at
  
  Australian Taxation Office
  
  PO Box 3001
  
  PENRITH NSW 2740

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

10.5 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

10.5.1 Excise Act 1901

Section 39Q - Review of decisions

Section 61A - Permission to move goods that are subject to CEO's control

Section 162C - Review of decisions

10.5.2 Excise Regulations 1925

Regulation 247 - Review of decisions

10.5.3 Taxation Administration Act 1953

Section 14ZU - How taxation objections are to be made

Part IVC - Taxation objections, reviews and appeals

11 OFFENCES

11.1 PURPOSE

11.2 INTRODUCTION

11.3 OFFENCES

11.4 PENALTIES

11.5 INFRINGEMENT NOTICES

11.6 APPLICATION OF THE CRIMINAL CODE

11.7 TERMS USED

11.8 LEGISLATION (quick reference guide)

11.8.1 Excise Act 1901

11.8.2 Crimes Act 1914

11.8.3 Criminal Code Act 1995

11.1 PURPOSE

This chapter deals with:

• offences under the Excise Act
• penalties
• infringement notices, and
• application of the Criminal Code.

11.2 INTRODUCTION

This chapter is a general discussion on offences. It is not meant as legal advice and you are encouraged to seek independent legal advice in relation to your own individual circumstances.

There are a number of acts or omissions under the Excise Act that are offences.

A conviction for an offence may result in a penalty as provided for within the Excise Act. The penalty provided may be in the form of penalty units, a term of imprisonment or an amount of money calculated by a set formula.

11.3 OFFENCES

Certain acts or omissions are offences under the Excise Act for which penalties are prescribed.

For penalties to apply to an offence (except where an infringement notice has been issued), you must first be convicted of the offence in a court of law following prosecution.

Certain offences under the excise legislation are strict liability offences as defined in section 6.1 of the Criminal Code (Schedule to the Criminal Code Act 1995). Essentially, strict liability means that the offence consists of the physical act or omission only. It is not necessary for the court to find that you knowingly committed, or were reckless or negligent in relation to the act or omission.

Some sections of the Excise Act prescribe the following two levels of offence for similar conduct:

• a higher penalty applies to an act or omission intentionally or recklessly committed (i.e where there is a 'fault' element), and
• a lower penalty applies to the same act or omission on a strict liability basis (i.e. where no 'fault' element needs to be proven).

Section 26 of the Excise Act prescribes that licensed manufacturers are to manufacture in accordance with the Act and their licence.

1. A licensed manufacturer must not intentionally manufacture excisable goods knowing, or being reckless as to whether, the manufacture contravenes this Act or the manufacturer licence.
   
   Penalty: 2 years imprisonment or 500 penalty units.
2. A licensed manufacturer must not manufacture excisable goods in contravention of this Act or the manufacturer licence.
   
   Penalty: 100 penalty units.
3. Strict liability applies to sub-section (2).

11.4 PENALTIES

The Excise Act contains many provisions that include a penalty at the foot of the section or subsection. This means that if you are convicted of an offence against the particular provision then you can receive a penalty not exceeding the penalty mentioned.[211] The penalty listed is thus the maximum penalty but the courts can impose a lesser penalty.

As indicated above certain offences provide for alternative penalties, for example subsection 33(1) of the Excise Act provides for a penalty of 2 years imprisonment or 500 penalty units.

For some offences if a person is convicted of that offence then the courts can impose both penalties.[212]

Where an offence also causes goods to be forfeited,[213] conviction by the courts results in the forfeited goods being condemned.[214] This means they are no longer your property and we can dispose of the goods as we see fit.

11.5 INFRINGEMENT NOTICES

We may issue an infringement notice[215] as an alternative to prosecution for unlawfully possessing, or unlawfully selling excisable goods.[216] An infringement notice imposes a penalty of 20 penalty units.

To issue an infringement notice, we must have a reasonable belief that you have committed the offence. Notices must be issued within 12 months of the commission of the offence.[217]

In the event of non-payment, prosecution action may be brought against you.

You cannot be prosecuted for the same offence where an infringement notice has been issued unless the infringement notice is withdrawn.

We can withdraw an infringement notice and if we do so after you have paid the penalty we must refund that to you.

11.6 APPLICATION OF THE CRIMINAL CODE

Chapter 2 of the Criminal Code applies to offences against the Excise Act. However, Parts 2.5 and 2.6, which are in Chapter 2, do not apply.[218] In some courts, Excise prosecutions are able to be treated as criminal matters while in other courts they are treated as civil matters. This has an effect on issues such as the burden and standard of proof required.

11.7 TERMS USED

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

11.8 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

11.8.1 Excise Act 1901

Section 5 - Penalty at foot of sections

Section 6B - Application of the Criminal Code

Section 116 - Forfeiture

Section 117 - Unlawful possession of excisable goods

Section 117B - Unlawfully selling excisable goods

Section 127A - Alternative penalties

Section 128 - Penalties in addition to forfeitures

Section 129A - Purpose and effect of this Part (Part XA - penalty instead of prosecution)

Section 129B - When an infringement notice may be issued

Section 129C - Matters to be included in an infringement notice

Section 129D - Due date for penalty

Section 129E - Effect of payment of penalty

Section 129F - Withdrawal of infringement notice

11.8.2 Crimes Act 1914

Section 4AA - Penalty units

Section 4D - Penalties

11.8.3 Criminal Code Act 1995

Section 6.1 - Strict liability

Chapter 2 - General principles of criminal responsibility

Copyright Commonwealth of Australia 2008 Published by: Australian Taxation Office The information in this publication is current at August 2008. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for a more recent version on our website at www.ato.gov.au or contact us. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General's Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca

FOOTNOTES