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 2015 (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	$79.77* per litre of alcohol
3		Spirits; Other excisable beverages exceeding 10% by volume of alcohol
	3.1	Brandy	$74.50* per litre of alcohol
	3.2	Other excisable beverages exceeding 10% by volume of alcohol	$79.77* per litre of alcohol
	3.10	Spirits not elsewhere included	$79.77* per litre of alcohol

*Rate of duty as at 3 March 2015 the current rates of duty, refer to the Schedule under Excise Tariff Working Pages on our website at www.ato.gov.au

Indexation of the duty rate

The rates of excise are set in the Schedule to the Excise Tariff Act. Prior to 1 February 2014, both alcohol and tobacco duty rates were indexed on 1 February and 1 August each year by reference to the All Groups Consumer Price Index published by the Australian Bureau of Statistics, in accordance with section 6A of the Excise Tariff Act.

Alcohol continues to be indexed as described above in accordance with section 6A but on and from 1 March 2014, tobacco is indexed by reference to the AWOTE (Average Weekly Ordinary Time Earnings) figures produced bi-annually by the Australian Bureau of Statistics in accordance with section 6AA of the Excise Tariff Act.

The AWOTE figure is published twice a year, in February and August. The indexation of duty rates for tobacco now occurs on 1 March and 1 September each year.

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

We publish new rates in the Commonwealth Gazette and, for ease of reference, we provide a 'working tariff' which shows up-to-date rates taking account of the indexation increases. Use the following link: Excise tariff working pages

Tariff proposals

Tariff 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 Australian Taxation Office (ATO) 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 Border Force (Customs) is responsible for administration of the Customs Act and Customs Tariff Act.

You must have a warehouse 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

ATO

Yes

Imported alcohol and tobacco products

Yes

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 at www.border.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.

You will also need permission to sell duty free goods from Border Force if you wish to sell imported goods duty free to relevant travellers.

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.border.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 - duty free shops.

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 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 (referred also as to home consumption - see below) 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 2015

Part 5 - 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 2015

Regulation 6 - Airport Shop Goods

1.9.5 Commonwealth of Australia Constitution

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

Excise guidelines for duty free shops

	Date:	Version:
	1 July 2006	Original document
You are here	1 July 2015	Updated document
	7 January 2022	Updated document
	1 July 2024	Current document

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