EXC 2006/13 - Explanatory statement
Australian Government
Excise Act 1901
1. This Explanatory Statement is provided in accordance with section 26 of the Legislative Instruments Act 2003.
2. Excise (Class of persons-health care practitioners) Determination 2006 (No. 4) is required due to amendments to the Excise legislation effected by Excise Laws Amendment (Fuel Tax Reform and Other Measures) Act 2006, Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Act 2006 and Excise Amendment Regulations 2006 (No. 3).
3. The amendments are the result of the Review of the Schedule to the Excise Tariff Act 1921 (the Review) initiated by Treasury on 2 June 2005 with the release of an industry discussion paper and a targeted consultation process. The principal objects of the Review were to streamline the Schedule to the Excise Tariff Act 1921 (the Excise tariff) and make it more user-friendly, make excise law clearer and less complex, and improve the integrity of the excise system.
4. Up to 30 June 2006 undenatured or denatured spirit has been delivered duty-free with or without a permit under Divisions 2 to 4 of Part VI, and Part VIII of the Excise Regulations 1925 and Parts IV to IV of the Spirits Regulations 1926. These provisions are outdated and unnecessarily complex.
5. In addition, administrative practice has developed to allow certain categories of persons having a professional use for undenatured spirit and representing a low compliance risk to access limited quantities of duty-free spirit for those purposes without a permit. This administrative arrangement has reduced the burden on both clients and the Tax Office by doing away with the need for a large number of concessional spirits permits where there is no significant risk to the revenue. Section 77FE formalises this administrative practice and enables its scope to be extended to broader classes of clients where there is no significant risk to the revenue.
6. Under section 77FE, the CEO (Commissioner of Taxation) may determine, by legislative instrument, a class of persons for the purposes of subitem 3.6 of the Excise tariff and nominate a maximum quantity of spirit for persons of that class. A member of a determined class of persons may access spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose free of duty under subitem 3.6 without requiring a permit issued by the Tax Office.
7. The expression 'an industrial, manufacturing, scientific, medical, veterinary or educational purpose' brings together the categories of use for which concessional spirit has been accessed up to 30 June 2006 under the relevant regulations.
8. In the Commissioner's view, such use:
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- would ordinarily be in the course or furtherance of carrying on an enterprise (within the meaning of that expression in the A New Tax System (Australian Business Number) Act 1999); and
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- excludes the on-supply of the spirit (which is not 'use') or use for an excisable purpose (i.e. in an alcoholic beverage or as fuel).
9. In determining a class of persons, the CEO will be satisfied that:
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- persons in that class have a legitimate use for duty-free spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose;
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- up to the specified quantity limit, access to spirit duty-free by those persons without a permit presents no significant risk to the revenue; and
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- the persons can verify by documentary evidence presented to a supplier of spirit that they are members of the class.
10. Paragraphs 1.36, 2.56 and 2.62 of the Explanatory Memorandum to the amending Bills provide commentary on the intended operation of section 77FE.
11. The instrument determines that health care practitioners are a class of persons and provides for a maximum quantity of spirit that may be delivered to members of this class.
12. The instrument is made under section 77FE of the Excise Act 1901.
Date of effect13. The instrument commences on 1 July 2006.
Purpose and operation of the instrument14. Health care practitioners may access spirit under subitem 3.6 of the Excise tariff for an industrial, manufacturing, scientific, medical, veterinary or educational purpose.
15. Health care practitioners are defined in the instrument as:
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- a doctor, dentist, pharmacist, registered nurse or other health care practitioner registered under the law of a State or Territory; or
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- an acupuncturist, herbalist, homeopath or naturopath certified as exempt from the operation of Part 3-3 of the Therapeutic Goods Act 1989 (refer to subsection 34(2) of that Act).
16. The supplier of spirit to a person under the determination must be satisfied of the bona fides of the recipient.
17. For the purposes of presenting evidence of eligibility to a supplier of spirit, a health care practitioner may provide:
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- a copy of his or her registration certificate;
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- his or her registration number with the relevant statutory board; or
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- a certificate showing exemption from the operation of Part 3-3 of the Therapeutic Goods Act 1989. Certificates are issued by practitioner associations. If a practitioner's association does not issue certificates, a practitioner may apply for a specific approval (see following paragraph).
18. Health care practitioners using spirit containing more than 200 litres of alcohol a year are required to apply for approval to receive the spirit under subitem 3.7 of the Excise tariff. Guidelines for the granting of an approval are contained in the legislative instrument Excise concessional spirit approvals guidelines 2006 (No. 1).
19. It may be possible for a health care practitioner to qualify as a member of more than one class of persons determined by the CEO under section 77FE. In such a case, without a permit the person may access only up to the maximum quantity of spirit nominated for one of those classes of persons. The maximum quantity for a class of persons cannot be aggregated with the maximum quantity for another class of persons.
20. Section 77FH provides a mechanism for the Tax Office to ensure that duty-free spirit accessed under the determination is used for a proper purpose. Persons receiving spirit under subitem 3.6 may be required to account for their use of the spirit, showing that it has been used for an industrial, manufacturing, scientific, medical, veterinary or educational purpose. If the person fails to account to the satisfaction of the Tax Office, a written demand may be made giving rise to a liability to pay an amount equal to the duty that would have been payable if the determination had not been made. A demand is a reviewable decision.
Impact of the instrument21. Up to 30 June 2006 under the administrative arrangement referred to in paragraph 5 above, health care practitioners except pharmacists could access duty-free spirit up to 60 litres a year for use in their practice; pharmacists could access up to 120 litres a year. The instrument provides a legislative basis for this treatment and increases the permitted quantity of spirit.
22. The instrument simplifies administration for the Tax Office and lessens the compliance burden for this group of clients.
Consultation23. On 1 June 2006 the Tax Office initiated a 2-week public consultation process on the legislative instruments arising from the Review, with the Assistant Treasurer approving the consultation prior to the related legislation being passed by Parliament.
24. The instruments and explanatory statements were published on the ATO website www.ato.gov.au in the form of drafts for consultation. The instrument, together with this explanatory statement, was included in that process.
25. Selected parties in the alcohol industry were contacted and invited to comment on the content, form and language of the determination and explanatory statement.
30 June 2006
Commissioner of Taxation
Subject References:
Excise
Excise Tariff
concessional spirit
concessional spirit specific approvals
Legislative References:
A New Tax System (Australian Business Number) Act 1999
TOC
Excise Act 1901
section 77FF
section 77FH
Excise Laws Amendment (Fuel Tax Reform and Other Measures) Act 2006
the Act
Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Act 2006
the Act
Excise Regulations 1925
Divisions 2 to 4 of Part VI
Part VIII
Excise Amendment Regulations 2006 (No. 3)
the Regs
Spirits Regulations 1926
Parts IV to IV
Therapeutic Goods Act 1989
subsection 34(2)
Part 3-3
EXC 2006/6 - Excise concessional spirit approvals guidelines 2006 (No. 1)
EXC 2006/8 - Excise (Class of persons-veterinary practitioners) Determination 2006 (No. 5)
EXC 2006/11 - Excise (Class of persons-educational institutions) Determination 2006 (No. 1)
EXC 2006/12 - Excise (Class of persons-medical institutions) Determination 2006 (No. 3)
EXC 2006/13 - Excise (Class of persons-health care practitioners) Determination 2006 (No. 4)
EXC 2006/14 - Excise (Class of persons-government institutions) Determination 2006 (No. 2)
Other References:
Review of the Schedule to the Excise Tariff Act: industry discussion paper, Treasury, 2 June 2005
Explanatory Memorandum to the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006, Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006