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

Chapter 1 - Excise in the Tax Office

This document has been archived.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

Section 1 Introduction

1.1 Acronyms used in this chapter

AIG Alcohol Industry Group

WET Wine equalisation tax

1.2 About this guide

The information in this publication is current at February 2006.

The publication is an expression of the Commissioner's opinion on the operation of alcohol excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Division 358 of Schedule for Section 37 of the Taxation Administration Act 1953. The law does not provide for legally binding rulings on alcohol excise legislation.

This guide is a reference tool for the alcohol industry and for employees of the Tax Office who are responsible for legislative supervision of the alcohol industry.

The policy set out in this guide is Tax Office policy. It may not be the policy of other Commonwealth, state or territory government bodies that the alcohol industry may deal with.

This guide is primarily concerned with excise as it applies to alcohol and alcoholic beverages that are produced or manufactured in Australia. It does not deal with similar goods that are manufactured outside Australia and then imported.

For further details about using imported spirits in the manufacture of excisable goods, see chapter 7, section 4.10.

This guide is not intended to advise on manufacturing processes and should only be used as a guide to compliance with excise requirements and legislation.

This guide makes no attempt to address every possible way and circumstance in which excise legislation might apply. With regard to the information contained in this guide:

• clients must choose whether and how to apply this information to their own specific circumstances, and
• clients who rely on the information contained in this guide and in so doing make genuine errors will be considered to have taken reasonable care.

This guide is concerned largely with the various Acts and associated regulations that relate to alcohol and touches briefly on wine equalisation tax. However clients should be aware that other legislation exists that is not administered by the Tax Office and which may affect clients in the alcohol industry, for example:

• Food Standards Code
• Trade Practices Act
• Therapeutic Goods Act
• Health Act
• Liquor Licensing Acts in each of the States and Territories, and
• Trade Measurement Act (that is weights and measures requirements in each state and territory).

The Tax Office cannot give advice on how legislation administered by other commonwealth or state agencies affects clients.

If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. 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 dor this is by checking for a more recent version on our website at www.ato.gov.au .

1.3 How to use this guide

Because there are many aspects to consider in the manufacture and use of excisable goods this guide has been designed to assist those already engaged in the alcohol industry, as well as those contemplating entering the industry for the first time. If you are a distiller or brewer you should refer to the chapters that are relevant to your circumstances.

For example, if you intend to apply for a licence to manufacture beer, you will have to consult the following chapters to gain an understanding of your responsibilities under excise legislation:

• Chapter 2: Alcohol licensing
• Chapter 3: Excise liability and payment of duty
• Chapter 4: Movement permissions
• Chapter 5: Record keeping
• Chapter 6: Beer, and
• Chapter 11: Measuring strength and volume of alcoholic beverages.

1.4 Forward

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

Section 2 Excise Overview

Excise duty is a commodity-based tax currently imposed on the following domestically produced goods:

• alcoholic beverages (not including wine)
• tobacco products
• petroleum products, and
• coal (duty free rate as at 10/2/2005).

Excise has been defined by the High Court of Australia as 'an inland tax on a step in the production, manufacture, sale or distribution of goods' [ Ha & Anor v. State Of New South Wales & Ors; Walter Hammond & Associates Pty Limited v. State Of New South Wales & Ors (1997) 0805C - HCA at paragraph 9,146 ALR 355 at 361].

Excise matters can be regulated and imposed only by the Commonwealth Government under the powers accorded to it under the Constitution.

The excise system and collection of excise duty is administered by the Tax Office. Amendments to excise legislation and major policy changes are dealt with by Treasury.

The excise system relies on voluntary compliance. The Tax Office expects that licensed manufacturers and persons entrusted with excisable goods will carry out their responsibilities honestly, appropriately and on time.

In accordance with the Taxpayers' Charter , the Tax Office assesses a licensee's performance in an impartial, fair and professional manner, presuming that licensees try to deal honestly.

The Taxpayers' Charter is complemented by The Compliance Model , which explains the Tax Office's attitude to compliance. http://connect/sb/content.asp?doc=/content/kdNet/SbjCmplMdl.htm

Section 3 Excise Background

Briefly, the history of excise in Australia is as follows:

• Around 1792 the NSW Army Corps conducted trade using rum as currency.
• 1799 saw the introduction of the first collection of excise on spirits.
• A government brewery was set up in Sydney in 1802.
• In 1838 the first excise duties were imposed in South Australia on locally produced spirit.
• The Victorian government in 1892 imposed an excise on beer, although a lower rate applied to beer made only from barley-malt and hops.
• With federation in 1901, control of excise passed from the States to the Commonwealth Government and the whole Australian market was opened to licensed alcohol producers on payment of uniform excise duties.

Customs administered all excise matters until February 1999 and current excise legislation reflects the historical administration by Customs.

Excise duties are fixed rates of duty (for example $ per litre of alcohol) as opposed to ad valorem rates of duty (% of $ value). Current rates may be seen at Excise rates of duty . Due to the level of the rates, excise duty comprises a significant part of the final product price which the consumer pays.

In order to ensure that the correct amount of excise duty is paid, highly regulated physical and documentary controls are in place from the time of manufacture of excisable goods until the time of payment of the excise duty.

This guide outlines the excise legislation and the processes and controls that make up the excise system in the Tax Office.

Section 4 The Alcohol Industry Group Within Excise

The Alcohol Industry Group (AIG) was set up in February 1999 with the transfer of the excise administration and revenue collection function from Customs to the Tax Office. The processing of payments is carried out by a separate group - the Excise Returns Processing Unit in Wollongong.

The Wine Equalisation Tax (WET) Business Unit was introduced with the implementation of tax reform on 1 July 2000 and became part of the AIG in May 2001.

In addition to administering the legislation contained in the Excise, Distillation, Spirits and WET Acts and associated regulations, the AIG's other roles include:

• being a single point of contact to clients
• liaising with clients, industry and other agencies to identify and implement ways to improve our administrative systems
• providing technical advice and support
• issuing licences to alcohol clients
• granting permissions to move under bond goods
• administration of the Concessional Spirits Permit Scheme
• administration of the refunds, remissions, drawbacks and rebates regime
• risk assessment and management, and
• compliance management.

Section 5 Legislative References

In this guide, unless otherwise stated, a reference to the:

• Excise Act is a reference to the Excise Act 1901
• Excise Acts is a reference to the Excise Acts as defined in section 4 of the Excise Act 1901
• Excise Regulations is a reference to the Excise Regulations 1925
• Excise Tariff Act is a reference to the Excise Tariff Act 1921
• Distillation Act is a reference to the Distillation Act 1901
• Distillation Regulations is a reference to the Distillation Regulations 1926
• Spirits Act is a reference to the Spirits Act 1906
• Spirits Regulations is a reference to the Spirits Regulations 1926
• Taxation Administration Act is a reference to the Taxation Administration Act 1953
• WET Act is a reference to the A New Tax System (Wine Equalisation Tax) Act 1999
• WET Regulations is a reference to A New Tax System (Wine Equalisation Tax) Regulations 2000, and
• Collector is a reference to the Chief Executive officer (CEO) or an authorised officer - section 4 Excise Act 1901 .

Throughout this guide, except where excise legislation is quoted, the words Tax Office are used to indicate Collector, CEO and Commissioner.

ATO references:
NO NAT 14790-04.2006