Excise guidelines for duty free shops

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Chapter 8 - Accounting for excisable goods

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 duty-free operator returns, and
• penalties that can apply to offences in relation to accounting for goods.

8.1 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 (for example, stock shortages).

This chapter explains when and how to pay excise duty.

8.2 Policy and practice

8.2.1 Do I have to account for excisable goods?

Where you have or had possession, custody or control of any excisable goods ^[147] (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
• the goods have otherwise been dealt with in accordance with the law (for example, moved under a movement permission or delivered to a relevant traveller)
• duty was not payable (for example, where a remission applied), or
• duty has been paid.

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

• given away for promotional purposes ^[148]
• stolen from licensed premises ^[149] , or
• delivered into the Australian domestic market under the mistaken belief that they were not excisable. ^[150]

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. ^[151]

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 8A A duty free shop is asked to account for their excisable alcohol products. They carry out a stocktake and there is a surplus of 50 bottles of Brand X gin @ 40% by volume of alcohol and a shortage of 200 bottles of Brand Y gin @ 40% by volume of alcohol. We will allow the duty free shop to offset the surplus and shortage. Therefore, there are 150 bottles that have not been accounted for. A demand will be issued for an amount equal to the excise duty payable on the 150 bottles. The duty free shop corrects book stock to take up the surplus floor stock of 50 bottles and, when the demand is paid, write off the shortage of 200 bottles. Example 8B A 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 store both imported and excisable goods, you cannot offset one against the other.

8.2.2 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:

• check whether your goods are excisable goods according to the Schedule to the Excise Tariff Act ^[152] and identify the correct duty rate
• work out the quantity of excisable goods subject to duty, in each tariff subitem,
• multiply the quantity of excisable goods by the rate of duty on the excisable goods, and
• 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, an extract of the Schedule is as follows:

Tariff Item	Subitem	Description of Goods	Rate from 2 August 2021
3		Spirits; Other excisable beverages exceeding 10% by volume of alcohol
	3.1	Brandy	$83.04* per litre of alcohol
	3.2	Other excisable beverages exceeding 10% by volume of alcohol	$88.91* per litre of alcohol

* Rate of duty as at 2 August 2021. For the current rates of duty, refer to the tables on our website at Excise duty rates for alcohol | Australian Taxation Office (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 (that is, you do not pay duty on the water contained within the product).

Alcohol quantity is measured in litres of alcohol, or Lals which is calculated by measuring the total volume and multiplying it by the strength.

Example 8C My Duty Free Shop in April 2021 has identified two cartons of Australian brandy and one carton of Australian gin missing following a stocktake. The brandy is classified under subitem 3.1 and the gin is an 'other excisable beverages exceeding 10% by volume of alcohol' classified to subitem 3.2 in the Schedule to the Excise Tariff Act. The dutiable quantity of alcohol in the two cartons, each containing 12 × 700 ml bottles of brandy, at 37.2% alcohol by volume is: 2 × 12 x 0.7 = 16.8 litres × 37.2% = 6.24 Lals The dutiable quantity of alcohol in the one carton which contains 12 × 700 ml bottles of gin, at 40.0% alcohol by volume is: 1 x 12 × 0.7 = 8.4 litres × 40% = 3.36 Lals

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 duty-free operator 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 8D The dutiable total for missing goods identified, by My Duty Free Shop, under subitem 3.1 in the Schedule to the Excise Tariff Act is 6.24 Lals and for goods under subitem 3.2 in the Schedule to the Excise Tariff Act is 3.36 Lals. On the duty-free operator return, My Duty Free Shop reports the dutiable totals as: Subitem 3.1 - 6.2 Lals Subitem 3.2 - 3.3 Lals Excise duty is worked out on the basis of the truncated totals.

(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 is subject to change. They are indexed twice a year in accordance with increases in the CPI (usually on 1 February and 1 August). ^[153] For ease of reference we provide tables with up to date duty rates, incorporating indexation changes, on our website at Excise duty rates for alcohol | Australian Taxation Office (ato.gov.au)

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

Example 8E On 18 August 2021 My Duty Free Shop discovers a shortage of underbond brandy and underbond gin. The brandy is classified to subitem 3.1 in the Schedule to the Excise Tariff Act. The gin is an 'other excisable beverages exceeding 10% by volume of alcohol' classified to subitem 3.2 in the Schedule to the Excise Tariff Act. The rate of duty that applies is the rate in force at the time the stocktake was conducted on 18 August 2021: subitem 3.1 - $83.04 per litre of alcohol subitem 3.2 - $88.91 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 8F Continuing on from the previous examples, on 18 August 2021 My Duty Free Shop discovers a shortage of two cartons each containing 12 × 700ml bottles of brandy at 37.2% alcohol by volume and one carton containing 12 × 700ml bottles of gin at 40.0% alcohol by volume. The brandy is classified to subitem 3.1 in the Schedule to the Excise Tariff Act and has a duty rate of $83.04 per litre of alcohol (as at 2 August 2021). Therefore, the duty payable is calculated as follows: 2 cartons × 12 bottles × 0.7 litres each = 16.8 litres 16.8 litres × 37.2% = 6.24 Lals 6.24 Lals truncated to one decimal point = 6.2 Lals 6.2 Lals × $83.04 = $514.848 $514.848 of duty is truncated to two decimal points = $514.84 The gin is classified to subitem 3.2 in the Schedule to the Excise Tariff Act and has a duty rate of $88.91 per litre of alcohol (as at 2 August 2021). Therefore, the duty payable is calculated as follows: 1 carton × 12 bottles x 0.7 litres each = 8.4 litres 8.4 litres × 40.0% = 3.36 Lals 3.36 Lals truncated to one decimal point = 3.3 Lals 3.3 Lals × $88.91= $293.403 $293.403 of duty is truncated to two decimal points = $293.40

(iv) Calculating total duty payable

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

Example 8G My Duty Free Shop needs to report deliveries for the period ended 30 April 2020. On their duty-free operator return, My Duty Free Shop reports their duty liability as: Line Tariff item Quantity Units Duty rate Excise amount 1 3.1 6.2 Lals $83.04 $514.84 2 3.2 3.3 Lals $88.91 $293.40 TOTAL         $808.24

8.2.3 What do I do if I have a dispute as to the duty?

You may deposit with us the amount of duty demanded if you dispute ^[154] :

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

The deposit of this duty is to be made on a duty-free operator return. The duty-free operator 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 six 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.

If the action is not commenced within six months or the court does not find in your favour the amount deposited is taken to be the correct amount of duty.

However, you may not commence court action if you have a taxation objection under Part IVC of the TAA against a private ruling and the matter of the objection ^[155] :

• relates to the amount or rate of duty, or
• the liability of the goods to duty, and
• the matter of the objection is also in dispute.

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.

8.3 Procedures

8.3.1 Destruction of deteriorated stock

If excisable goods under your control need to be destroyed for any reason (for example, old stock or damaged) there are special procedures that must be followed.

For more information see Chapter 9 - Remissions and exemptions.

8.3.2 How do I lodge duty-free operator returns and pay excise duty?

Information on how to lodge your duty-free operator return (NAT 10405) is within this link .

You can pay excise duties:

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

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 a duty-free operator return (NAT 10405): visit our website at www.ato.gov.au , or phone 1300 137 290 .

8.3.3 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 via the Online Services for Business or the other options as listed on the excise and EEG's contact webpage.

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.

8.4 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.

8.4.1 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 500 penalty units and five times the amount of duty on the excisable goods. ^[156]

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

8.4.2 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 five times the amount of duty on the excisable goods. ^[157]

8.4.3 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.

8.4.4 Evade

If you evade payment of any duty which is payable, the maximum penalty is five 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 penalty units. ^[158]

8.5.5 False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units. ^[159]

Latest update

January 2022

Section

Changes and updates

Throughout

This chapter was updated to take into account the law changes that impacted the tobacco industry, as a result of which, there is no longer excisable tobacco goods manufactured in Australia that would be subject to excise control in the duty free shop or warehouse. The update also reflects the current duty rate and updates the references from the old Business Portal to the new Online Services for Business. Updated to new format and style including footnotes.

Details of previous updates are available through the versions linked to in the table below.

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