Excise guidelines for the alcohol industry
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01 INTRODUCTION
1.1 PURPOSE
This chapter deals with:
- what excise is
- an overview of excise legislation relevant to alcohol
- who administers excise, and
- when you are involved in the excise system.
It provides a general introduction to excise as it relates to alcohol products .
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 (Excise Tariff Act) imposes excise on relevant goods manufactured [2] in Australia and the Excise Act 1901 (Excise Act) 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 & Or [3] s (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. [4]
Excise is imposed by the Excise Tariff Act on goods dutiable under the Schedule to that Act and manufactured in Australia. 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, relating to alcohol, is contained in the:
- Excise Tariff Act 1921 (Excise Tariff Act)
- Excise Act 1901 (Excise Act), and
- Excise Regulation 2015 (Excise Regulation).
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.
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| For more information on tariff proposals refer to 'Section 1.3.1 Excise Tariff Act' of this guide. |
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 dutiable under the Schedule to the Act and manufactured or produced in Australia. Excise duty is imposed at the time of manufacture 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 definition of manufactured or produced
The term 'manufacture' is defined in section 4 of the Excise Act and includes all processes (that is, operations or actions) used in the manufacture of excisable goods. The definition in the Excise Act is an inclusive one, that is, it includes some processes that might otherwise not generally be considered as manufacture. 'Produce' is not defined in the Excise Act or the Excise Tariff Act.
The Commissioner's view on the meaning of 'manufactured or produced' is set out in Excise Ruling ER 2012/1 Excise: the meaning of the expression 'manufactured or produced' for the purposes of the Excise Acts .
The phrase 'manufactured or produced' for the purposes of the Excise Act and Excise Tariff Act, requires that something new or different results from a process.
It will be a question of fact and degree as to whether the end product constitutes a new or different thing from that out of which it was made or results. This involves a process of evaluating and weighing a range of factors for the particular circumstance.
The Commissioner considers that the factors that may be taken into account in determining whether a new or different thing has been manufactured or produced for excise purposes include:
- The thing did not previously exist. The parts have been combined to form a thing that is distinct (for example, commercially distinct) from that out of which it is made.
- The thing that is brought into existence has new or different qualities, properties or combinations thereof from that out of which it is made or derived. It may be any quality that indicates a difference - qualities such as colour, shape, or chemical composition.
- A change in form (for example, change from solid to liquid, or liquid to gas) where a new or different thing has resulted from this change - for example it has new qualities, properties or combinations thereof
- Manufacture or production may involve the application of skill, knowledge or labour to a thing that brings into existence a new or different thing having a distinctive character or use
Having regard to the operation of the excise system, it is considered that the phrase 'manufactured or produced' for the purposes of the Excise Acts requires that something new or different having a distinctive character or use, results from a process, which is captured under the Excise Acts.
This means that 'manufactured or produced' in the sense contemplated by the Excise Acts does not include activities that amount to reasonable steps taken in the course of consuming existing excisable (or excise equivalent) products once they have found their way into home consumption. If the excise legislation has been complied with, appropriate duties will have been paid on the products that have been delivered into home consumption, and the delivery of those products will have been authorised. Any subsequent dealings with those products that are consistent with the manner in which consumption of those products would normally occur, falls outside the scope of the Excise Act.
It will be a question of fact and degree whether, in the particular circumstances, the activities undertaken by a person amount to reasonable steps taken in the course of consuming existing excisable goods. Factors that may be relevant in establishing whether the use of excisable goods that have found their way into home consumption amounts to the manufacture or production of a good for excise purposes include the scale of production, method of production, volume of goods produced and whether the products are used in making other distinct marketable goods. Issues such as quantification, packaging and the application of brand names could evidence the 'marketable' factor.
The Commissioner accepts that where a bartender uses duty-paid alcohol to prepare mixed alcoholic beverages (for example, cocktails) behind a bar upon a customer's request for immediate consumption, this will not amount to the manufacture or production of a good dutiable under the Schedule.
This would also apply in circumstances where a bartender uses duty-paid alcohol to prepare a mixed alcoholic beverage upon a customer's request, which is dispensed in a sealed single-serve takeaway container for consumption shortly thereafter. The single-serve container into which the beverage is dispensed should not be capable of medium to long term storage.
The schedule of excisable goods and the duty rates
The Schedule to the Excise Tariff Act includes a table that lists the goods that are subject to excise duty. 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 the alcohol products section of the table as of 5 August 2019:
| Tariff Item | Sub item | Unit | Description of Goods | Rate* |
| 1 |
|
| Beer |
|
| 1.1 | LAL | Beer not exceeding 3% by volume of alcohol packaged in:
| $43.53 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.2 | LAL | Beer not exceeding 3% by volume of alcohol packaged in:
| $8.71 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.5 | LAL | Beer exceeding 3% but not exceeding 3.5% by volume of alcohol packaged in:
| $50.700 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.6 | LAL | Beer exceeding 3% but not exceeding 3.5% by volume of alcohol packaged in:
| $27.26 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.10 | LAL | Beer exceeding 3.5% by volume of alcohol packaged in:
| $50.70 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.11 | LAL | Beer exceeding 3.5% by volume of alcohol packaged in:
| $35.71 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.15 | LAL | Beer not exceeding 3% by volume of alcohol produced for non-commercial purposes using commercial facilities or equipment | $3.06 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
| 1.16 | LAL | Beer exceeding 3% by volume of alcohol produced for non-commercial purposes using commercial facilities or equipment | $3.53 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15 | |
2 |
| LAL | Other excisable beverages not exceeding 10% by volume of alcohol | $85.87 per litre of alcohol | |
| 3 |
|
| Spirits; Other excisable beverages exceeding 10% by volume of alcohol |
|
| 3.1 | LAL | Brandy | $80.20 per litre of alcohol | |
| 3.2 | LAL | Other excisable beverages exceeding 10% by volume of alcohol | $85.87 per litre of alcohol | |
|
| 3.5 | LAL | Spirit that:
| Free |
|
| 3.6 | LAL | Spirit that:
| Free |
|
| 3.7 | LAL | Spirit that:
| Free |
|
| 3.8 | LAL | Spirit denatured according to a formula determined under section 77FG of the Excise Act 1901 , other than spirit for use as fuel in an internal combustion engine | Free |
| 3.10 | LAL | Spirits not elsewhere included | $85.87 per litre of alcohol |
You can find the current rates of duty, along with those applicable pre 5 August 2019 on our website .
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 proposals
Tariff proposals are a means of changing the Excise Tariff (rates can be adjusted up or down and 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.
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 within 12 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. [5]
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 alcohol products , and
- payment of duty for excisable alcohol products.
The Excise Act requires that alcohol not be manufactured outside our control. This is to ensure that the correct amount of duty is ultimately paid or the alcohol is 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 alcohol products
Before you can manufacture alcohol products you need a manufacturer licence granted under the Excise Act. [6]
Before you can store excisable alcohol products that you did not manufacture you need a storage licence granted under the Excise Act. [7]
Before you can remove excisable alcohol products on which duty has not been paid, you need permission granted under the Excise Act. [8]
Generally we will not grant permission to move excisable alcohol products on which duty has not been paid to a place that is not covered by either a manufacturer licence or a storage licence.
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| For more information about the excise licensing regime, refer to Chapter 2 - Licensing: Applications . |
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| For more information about movement permissions, refer to Chapter 5 - Movement permissions . |
Payment of duty for excisable alcohol products
The Excise Tariff Act imposes duty when excisable alcohol products are manufactured. 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 alcohol products.
In general terms, duty must be paid on the goods before they are delivered into home consumption (other than being delivered to another licensed premises). Permission may be granted to deliver the goods prior to paying the duty.
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| For more information about payment of duty refer to Chapter 6 - Payment of duty . |
1.3.3 Excise Regulation
The Excise Regulation sets out provisions in relation to excisable goods such as:
- refunds and remissions, and
- drawbacks.
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| For more information about remissions, refunds and drawbacks refer to Chapter 7 - Remissions, refunds, drawbacks 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 ATO when you are involved in the manufacture or storage of Australian manufactured alcohol products.
1.5 WHEN AM I INVOLVED IN THE EXCISE SYSTEM?
You are involved in the excise system if you:
- manufacture excisable alcohol products;
- store or own excisable alcohol products upon which excise duty has not been paid
1.6 WHAT DO I DO IF I NEED MORE INFORMATION?
If you need more information on excise, as it relates to alcohol, contact us via:
- the Online Services for Business
- phone 1300 137 290
- fax at 1300 130 916
- email at alcohol@ato.gov.au , or
- write to us at
- Australian Taxation Office
- PO Box 3514
- ALBURY NSW 2640
We will ordinarily respond to electronic requests within 15 business days and finalise private rulings within 28 days of receiving all necessary information. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.
1.7 TERMS USED
Excisable alcohol products
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, or an Excise Tariff alteration, and manufactured in Australia.
As these guidelines deal with alcohol products, we have used the term excisable alcohol products.
Excisable alcohol products include:
- beer
- spirits
- premixed drinks known as ready-to-drink (RTD) beverages
- brewed beverages that are not beer, and
- spirit for non-beverage use, including denatured spirit.
1.8 LEGISLATION (quick reference guide)
In this chapter, we have referred to the following legislation:
Section 4 - Definitions
Section 7 - General administration of Act
Section 25 - Only licensed manufacturers to manufacture excisable goods
Part IV - Manufacturer, storage, producer and dealer licences
Section 61A - Permission to remove goods that are subject to CEO's control
Section 114 - Time for commencing action
Section 1A - General administration of Act
Section 5 - Duties of excise
Section 6A - Indexation of rates of duty
The Schedule
1.8.3 Commonwealth of Australia Constitution
Section 90 - Exclusive power over customs, excise, and bounties
| Date: | Version: | |
| 1 July 2013 | Original document | |
| 1 July 2015 | Updated document | |
| 7 September 2017 | Updated document | |
| 21 February 2018 | Updated document | |
| 5 August 2019 | Updated document | |
| 4 June 2021 | Updated document | |
| 9 July 2021 | Updated document | |
| 23 December 2021 | Updated document | |
| You are here | 25 February 2022 | Updated document |
| 1 July 2024 | Current document |
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