Excise guidelines for the alcohol industry

In the alcohol industry, distillation is the separation or purification of mixtures of alcohol and water (for example, in wine or fermented grain mash) by using the different evaporation rates, or boiling points, of the water and the alcohol. As alcohol evaporates at a lower temperature, it vaporises first and, therefore, its separation will start before the water evaporates.

Distillation does not produce alcohol; it is merely a separating or refining process. Alcohol is created through fermentation. Therefore, prior to distillation you must have a base product which already contains alcohol. The distillation of an alcoholic base product produces spirit.

Spirit may contain a number of other components such as essential oils, esters, sulphur dioxide and other alcohols such as methyl, propyl, butyl and amyl. Some of these components are undesirable or undrinkable and must be substantially removed from the mixture. This process involves dividing spirit into a number of parts depending on when that part is produced during the distillation process. These parts may be separated during the initial distillation process or during a redistillation of low wines (spirits from the first distillation run).

The first components that are produced during distillation are known as heads. Heads are the highly volatile components with a lower boiling point than ethanol. The heads vaporise first and therefore condense first.

Heads consist mainly of low molecular weight material or highly volatile compounds. Heads may contain a number of poisonous components, including high levels of methanol, which can be hazardous to health.

Usually, the heads are not desired in the finished product and are run to a different receiver from the rest of the spirit. Once the heads have been produced they are followed by the heart.

The heart consists mainly of ethyl alcohol, some water, small amounts of heads, volatile components, acetate esters of fusel oils, and ethyl esters of fatty acids. This part of the spirit run is the most desirable part and is generally directed to a spirit receiver.

The final part of the spirit to come from the condenser is known as the tails. The tails comprise the least volatile compounds of higher molecular weight with a higher boiling point than ethanol. These compounds are undesirable in the finished spirit and are generally directed to a different receiver from the heart. The tails consist of what are called fusel oils.

Fusel oils are heavier molecular weight compounds, a proportion of which are required to give spirit much of its flavour, but are undesirable in excessive amounts. They generally comprise a mixture of isoamyl, butyl, propyl and heptyl alcohols that are produced as a by-product of fermentation.

The combination of the more undesirable parts of the heads and tails is referred to as feints. Feints are collected in a feints receiver and may be redistilled as they contain some ethyl alcohol.

11.2.2 HOW IS SPIRIT PRODUCED?

Spirit can be produced:

in a still
in a mobile still, or
by enhanced distillation.

11.3 POLICY AND PRACTICE

11.3.1 ABOUT STILLS

What is a still?

A still is an apparatus that uses vaporisation and condensation to separate component substances from liquid mixtures, usually by applying heat.

What controls apply to stills?

All stills come under our control if they have a capacity of:

over five litres ^[271] , or
less than five litres and are used to distil alcohol. ^[272]

The capacity refers to the volume of liquid that the still is capable of holding.

If you are not a licensed excise manufacturer you must have our permission, in regard to stills with a capacity of greater than five litres, regardless of what the equipment will be used for, to:

make a still
move or set up a still
sell or buy a still
import a still, or
have possession, custody or control of a still.

We keep a register of stills over five litres used for distilling spirit and for non-spirit distillation, such as in water or essential oils ^[273] distillation.

You will have committed an offence and penalties may apply if you do not have the appropriate permission.

Whether or not you are a licensed excise manufacturer you can buy, import, manufacture, dispose of, possess, own or sell a still without permission if:

the still has a capacity of five litres or less, and
it will not be used to distil alcohol.

You must have an excise manufacturer licence to distil spirits regardless of whether the still is less than or greater than 5 litres capacity. ^[274]

Feints

Feints are low quality spirits obtained during the distillation process. Feints are the low quality head and tail spirits components obtained during the distillation process.

If feints are not redistilled but are run to waste, they are normally collected over a period of time until you need to dispose of them. If you do not adequately account for them they may be subject to excise duty.

You must include all records relating to feints in distillation records.

Prior to disposal, you need to apply to us for:

permission to destroy the feints, and
remission of the duty payable on the feints.

Continuing approval to dispose of feints can be sought where disposal is ongoing.

To apply for approval contact us on 1300 137 290 or

write to us at
Australian Taxation Office

PO Box 3514

ALBURY NSW 2640

11.3.2 ABOUT MOBILE STILLS

What is a mobile still?

A type of mobile still is a transportable spinning cone column mounted on a truck for processing wine on site. It is designed primarily to:

collect wine flavours, and
reduce the alcohol content of wine.

What controls apply to mobile stills?

Mobile stills are subject to the stills controls described earlier in this chapter. ^[275]

Excise manufacture may only be carried on at premises specified in a manufacturer licence. ^[276] A licence to manufacture excisable goods issued under the Excise Act can specify multiple premises. ^[277]

If you are the owner or lessee of the premises where a mobile still is operating, and you retain spirit, you must have:

an excise storage licence to store the product, or
a relevant approval to use it for a concessional purpose such as fortification, and
records relating to the spirit.

If you are the mobile still operator, and you retain spirit under the terms of the contract, you must hold a movement permission to move the spirit from the premises at which the distillation occurred.

For more information refer to Chapter 5 - Movement permissions .

Measurement of inputs and outputs

A mobile still should have two flow meters as permanent attachments:

one meter to accurately measure input of wine into the mobile still, and
one meter to accurately register output of flavours or spirit from the wine charge.

You must keep accurate records of all inputs and outputs.

For more information on record keeping requirements refer to Section 11.3.5 - What records do I have to keep?

11.3.3 ABOUT ENHANCED DISTILLATION

Concentrated flavours and spirit are obtained from the treatment of alcoholic beverages by an enhanced distillation process.

Enhanced distillation is carried out using apparatus such as a spinning cone column or a cyclonic evaporator with separator and condenser. These are used to separate flavours from the original feedstock (flavours are carried in a spirit base). Enhanced distillation may also be used to extract further spirit, and allows evaporation to occur at a relatively low temperature.

The apparatus used in enhanced distillation are stills for the purposes of the excise law. They are therefore subject to the controls over stills.

Concentrated flavours

If spirit based concentrated flavours from the enhanced distillation process are used in the manufacture of other wine or other products for human consumption, you must have approval to use the product free of duty for such purposes. ^[278] If no approval has been obtained, or if the product is used for a purpose that cannot be approved, concentrated wine flavours are delivered into the Australian domestic market and are classifiable to subitem 3.10 in the Schedule to the Excise Tariff Act and duty is payable.

You must enter spirit based concentrated flavours on your excise return if they are used for an approved purpose (duty free) or otherwise delivered into the Australian domestic market.

Spirit

Spirit drawn off in an enhanced distillation process may be of various strengths. A spinning cone column typically produces a spirit stream of about 50% strength.

With our approval, you may use the spirit free of duty for fortifying wine ^[279] or for another approved purpose. If you have not obtained our approval, or if the product is to be used for a non-beverage purpose that cannot be approved, the spirit is delivered into the Australian domestic market and is classifiable to subitem 3.10 in the Schedule to the Excise Tariff Act and duty is payable.

If delivered for use as a beverage, the spirit is subject to duty as an other excisable beverage (OEB) exceeding 10% strength under subitem 3.2 in the Schedule to the Excise Tariff Act. If the spirit is used in the manufacture of an OEB not exceeding 10% strength then item 2 in the Schedule to the Excise Tariff Act is applicable.

Spirit delivered for use for an approved purpose or otherwise delivered into the Australian domestic market must be entered on your excise return.

Other products

Other products from an enhanced distillation process may include de-aromatised wine and de-alcoholised residue.

De-aromatised wine is typically about 1% below the strength of the original wine. As it is wine within the definitions of the WET legislation, it is not excisable.

De-alcoholised residue contains less than 1.15% alcohol by volume and is neither excisable nor subject to the WET.

11.3.4 ABOUT REVERSE OSMOSIS FILTRATION AND EVAPORATIVE PERSTRACTION

Reverse osmosis

Reverse osmosis filtration adjusts the alcohol or acidity levels of wine using semi-permeable membranes. For example, a wine with 15% alcohol content may be subjected to reverse osmosis to adjust its alcohol content to 11%.

The process of reverse osmosis is not distillation as it does not involve separation by vaporisation and condensation. However, it is important to recognise that it is a process other than fermentation.

The products of reverse osmosis are called the permeate and the retentate . The permeate is the stream that passes through the membrane and the retentate is the part remaining. The retentate retains wine characteristics, whereas the permeate usually does not.

Where the permeate does not have wine characteristics it may no longer be able to be described as a product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. Rather, it may be a product of the reverse osmosis process used to create it. Where this is the case, or where for example it is over 22% alcohol by volume, the permeate will not meet the definition of wine under the WET Act.

Where permeate is either blended back with the retentate to make an adjusted wine, or is destroyed, we will not require you to have an excise manufacturer licence or a concessional spirit permit. Otherwise, permeate that is over 1.15% abv and that fails to meet the definition of wine is an ' other excisable beverage ' under the Excise Tariff Act and is subject to excise control . You will therefore need an excise licence to produce the permeate or do anything further with it.

Evaporative perstraction

Instead of distillation, there may also be a second stage in the process of reducing the alcohol content of wine following reverse osmosis, whereby the wine permeate moves on to a membrane comprising small pores and two surfaces. Water runs along the outside surface of the membrane. Alcohol from the wine permeated evaporates at the pores of the surface of the membrane and passes through the membrane. On exit from the pores of the membrane, the alcohol condenses and dissolves or mixes into the water running along the outside surface of the membrane.

The result is that the water is alcoholised, generally (although not always) at less than 10% by volume.

The entire process (reverse osmosis followed by evaporative perstraction) can be performed by mobile or fixed apparatus of varying capacities and can be carried out on a winemaker's premises.

It is the Commissioner's view that the alcoholised water produced as a result of evaporative perstraction (commonly referred to as stripwater) is an excisable good ^[280] . Consequently, any production of stripwater must be licensed under the Excise Act.

11.3.5 WHAT RECORDS DO I HAVE TO KEEP?

It is good business practice to keep suitable and adequate records for your operations. Many of the records you will need to be able to account for your excisable goods are the same as the records that you would normally keep for your own business purposes.

You must keep records, as directed by us, and retain those records for the period directed. Your records must be available for us to inspect when requested. ^[281]

The information we would expect to see includes:

all receipts into your licensed premises
the amount of excisable alcohol products produced showing all inputs, outputs and waste
details of all excisable alcohol products held in your licensed premises
all deliveries from your licensed premises
details of all duty payments and excise returns , and
any refunds and remissions.

The specific form of records you maintain is dependent upon the type and scale of your operations. To assist you, we provide the following general overview of record keeping for distillery operations.

Receipts into your licensed premises

If you receive underbond excisable goods, e.g. strip water into your licensed premises, you need to take up the goods in your stock records and retain the movement documentation. Movement permissions are covered in Chapter 5.

Distillery operations - Raw materials

An audit trail commencing with raw material allows us to check stated production against known material usage.

Only principal raw materials need to be recorded, e.g.

Wine - for brandy and grape spirit production
Fermentable starch and sugar products - for fermentation processes associated with whisky and grain spirit production or rum and molasses spirit production
For each principal raw material, we recommend recording:
- Date
- Opening stock
- Quantity received
- Supplier name
- Quantity used
- Running balance

Distillery operations - Manufacture

The feedstock for the distillation process is an alcoholic product.

Wash , the alcoholic feedstock for whisky and grain spirit production, or for rum and molasses spirit production, is an excisable product and so you need to check fermentation records of any Wash you produce.
Wine , the alcoholic feedstock for brandy and grape spirit production, is not an excisable product if it is subject to Wine Equalisation Tax (WET). You do not have to keep specific excise records on the production of wine subject to WET.

You may record many details as you monitor the fermentation process. For excise purposes, we recommend recording:

Batch identification details, e.g. batch number, type
The quantity of fermentable product to be fermented (litres)
The original gravity of the fermentable product, prior to fermentation.
The quantity of fermented product (litres) transferred from the fermenter
The final strength of the fermented product

Similarly, you may record many details as you monitor the distillation process. For excise purposes, we recommend recording the following inputs:

Date of distillation
Still (if more than one still on the licensed premises)
Identifying number of the charge (consecutively numbered)
Type of alcohol feedstock, e.g. grape wine, sugar, grain.
Vessel identification number prior to input to still
Quantity of alcohol to the still (litres)
Strength of alcohol to the still
Litres of alcohol to the still (litres x strength = Lals)

For excise purposes, we recommend recording the following outputs:

Vessel identification numbers that the spirit components are piped to
Quantity of alcohol (litres) delivered to each of these vessels
Strength of alcohol delivered to each of these vessels
Litres of alcohol (litres x strength = Lals) delivered to each of these vessels

The calculation of distillation efficiency is as much about your good governance as it is about an excise obligation. The appropriate frequency of the distillation efficiency check will depend upon the nature of your distillation operations. It could be done on a batch by batch basis, weekly, monthly, or seasonally. Ideally everything charged to the still has had an opportunity to be run to a receiving vessel, i.e. so that both inputs and outputs can be accurately measured. The distillation efficiency calculation is:

Total output (litres of alcohol) X 100 = % efficiency

Total input (litres of alcohol) 1

Example 11A

A total of 120,000 litres of wash at a strength of 8.5%, totalling 10,200 Lals is transferred to the still. The still produces 10,000 Lals.

10,000 Lals ₌ 98.04% efficiency

10,200 Lals

If production efficiency falls below historical performance you should investigate the following:

leaks in the still or pipes
inaccurate readings
recording errors
bad security and pilfering, and
alcohol in the waste material.

Distillery operations - Bulk storage

An audit trail that traces underbond excisable product as it moves in and out of bulk vessels allows you to account for the excisable goods to our satisfaction. Bulk vessels include vats, tanks, casks, intermediate bulk containers and drums.

The transactions under this heading include:

Movements from the still to a vessel
Movements between vessels
Movements to the still
Movements out to packaging
Movements returned from packaging, e.g. decants, drainings
Under bond movements in or out
Feints destroyed
Manufacture e.g. mixing with other ingredients such as other spirit, caramel, water, colourings, flavourings, or denaturants.

For each vessel, we recommend:

Product identification details, e.g. type
Date, quantity in (litres) and temperature, strength, litres of alcohol (litres x strength)
Date, quantity out (litres) and temperature, strength, litres of alcohol (litres x strength)
Date in wood if maturing in wooden vessels, e.g. brandy, rum, whisky,
Excise clearance type, e.g. excise return, remission, under bond removal, or to packaging
Running balance
Losses and gains

Periodic stocktakes are as much about your good governance as they are about an excise obligation. We recommend regular bulk vessel stocktakes to:

establish the accuracy of stock records
detect omissions or errors in stock records, and
identify security issues such as theft, plant and equipment problems.

We recommend that you perform a full survey (volume and strength) of any bulk vessels, other than casks, if there has been no activity within the last three months.

Cask storage does not efficiently allow for accurate periodic stocktakes. Cask losses are normally only ascertained once the contents have been revatted.

As part of the stock reconciliation process, stock records are adjusted to reflect the stocktake results. While bulk losses are not normally subject to call up of duty, you must keep adequate records to account for these losses.

The calculation of maturation efficiency (i.e. cask losses) is as much about your good governance as it is about an excise obligation. The maturation efficiency calculation, expressed as a percentage is:

Lals removed from the cask(s) X 100 = % efficiency

Lals originally in the cask(s) 1

Example 11B

A cask was filled on 1 July 2008 with 237.6 Litres at a strength of 62.5%, totalling 148.5 Lals. The contents of the cask were revatted on 1 October 2012, measuring 216.5 Litres at a strength of 63.1% and totalling as 136.6 Lals

136.6 Lals ₌ 92.0% efficiency

148.5 Lals

If maturation efficiency falls below historical performance you should investigate the following:

porous timber
slack hoops
defective staves
loose bungs, or
theft

Distillery operations - Packaging

An audit trail that traces underbond excisable product from the bulk vessels through the packaging process and into packaged stock allows you to account for the excisable goods to our satisfaction.

For each packaging run, we recommend:

Date of packaging
Product identification details, e.g. rum, label strength 37.5%
Packaging unit size, e.g. 375ml bottle
Total quantity available for packaging (Lals)
Actual alcoholic strength
Total number of units packaged
Average fill per package
Product captured and returned to bulk storage, e.g. drainings, flushings (Lals)
Samples taken from the packaging line (Lals)

The calculation of packaging efficiency is as much about your good governance as it is about an excise obligation. The packaging efficiency calculation is:

Lals packaged X 100 = % efficiency

Net Lals available for packaging 1

Net Lals available for packaging is calculated as:

Total quantity available for packaging (Lals)
- less Product captured and returned to bulk storage (Lals)
- less Samples taken from the packaging line (Lals)

Lals packaged is calculated as:

Total number of units packaged X Packaging unit size X Label strength

Example 11C

A packaging run of whisky on 1 October 2012 recorded:

700ml bottles, 40.0% label strength

Actual alcoholic strength 40.0%

Total quantity available for packaging 4,000 Lals

Total number of units packaged 13,920 bottles

Average fill per package 701.5ml

Product captured and returned to bulk storage 50 litres at 28.0%a.v. = 14Lals

Samples taken from the packaging line (Lals) 20 bottles = 5.6 Lals

Lals packaged = 13,920 X 700ml X 40%a.v. = 3,897.6 Lals

Net Lals available for packaging = 4,000 less 14 less 5.6 = 3,980.4 Lals

Lals packaged X 100 = % efficiency

Net Lals available for packaging 1

3897.6 Lals X 100 = 97.9% efficiency

3980.4 Lals 1

If packaging efficiency falls below historical performance you should investigate.

Distillery operations - Packaged storage

An audit trail that traces underbond excisable product as it moves in and out of your packaged storage area allows you to account for the excisable goods to our satisfaction.

For each product line, we recommend:

Product identification details, e.g. type
Packaging unit size, e.g. 700ml bottle
Label strength
Date, unit quantity in
Date, unit quantity out
Excise clearance type, e.g. excise return, remission, under bond removal
Running balance
Losses and gains

Periodic stocktakes are as much about your good governance as they are about an excise obligation. We recommend regular stocktakes to:

establish the accuracy of stock records
detect omissions or errors in stock records, and
identify security issues such as theft, plant and equipment problems.

As part of the stock reconciliation process, stock records are adjusted to reflect the stocktake results. In some circumstances stocktake gains may be offset against unaccounted shortages when calculating duty payable on packaged stock losses.

For more offsetting stock shortages against stock surpluses refer to 6.3.8

Record keeping for mobile stills and other mobile technologies

We recommend the following records:

the type, litres, alcoholic strength, and Lals of the feedstock
details of the bulk vessels from which the feedstock is delivered
opening and closing flow meter readings for each operation
litres, alcoholic strength, and Lals of the outputs
details of bulk vessels to which the outputs are delivered.
litres, alcoholic strength, and Lals of spirit retained at the premises

11.3.6 PRODUCTION LOSSES

What are production losses?

You must be able to account for excisable goods, including any losses, while the goods are subject to excise control. ^[282]

Accurate records of any loss of product must be kept for the period directed. ^[283] They must be sufficient to enable comparison between current and historical losses for the same procedures.

Production losses include:

discrepancies in quantities of raw materials
any losses that occur after manufacture has taken place (that is when alcohol has been produced and spirit becomes accountable), or
when an excisable product is to be destroyed by tipping to waste.

We accept that some losses occur during production at various stages including:

maturation
filtration
transfer between storage tanks, and
packaging.

How do I calculate packaging losses?

Packaging losses are calculated as follows:

Header tank opening dip

less

header tank closing dip
volume of packaged product
volume of filter losses
volume of breakages and leakages
volume of samples drawn, and
volume of drainings and flushings.

equals packaging losses

Excise duty on minor losses that occur as a normal part of the production or packaging process do not need to be acquitted by means of a remission. However, these losses must be recorded and accounted for in your records.

You must apply for a remission for other losses, such as a bad batch or accidental loss within the storage area.

11.3.7 WHAT ARE MY RESPONSIBILITIES AS A MANUFACTURER?

If you are licensed to manufacture excisable alcohol products you are responsible for the safe custody of all those products that are under your control. ^[284]

You may be responsible for paying an amount equal to the excise duty that would have been payable on any stolen, missing or unaccounted for excisable alcohol products. ^[285]

Where, after we take stock of excisable alcohol products manufactured and the materials you use in the manufacturing process, it appears to us that not all the duty that should have been paid has been paid we can demand that you pay the amount that should have been paid. ^[286]

If you hold a manufacturer licence, you do not need a separate storage licence to store excisable alcohol products that you manufactured at those premises. You may also store excisable alcohol products that have been manufactured elsewhere by another entity and moved underbond into your licensed premises.

You are also responsible for ensuring that you comply with all conditions of your licence. ^[287]

For information about storage licences and conditions of licences refer to Chapter 2 - Licensing: Applications .

You must also:

ensure excisable alcohol products are only delivered into the Australian domestic market with appropriate authority, such as in accordance with a periodic settlement permission or Delivery authority ^[288]
pay the correct amount of excise duty ^[289]
get permission to move underbond excisable alcohol products ^[290]
ensure that your manufacture complies with the Excise Act and any conditions specified in your licence ^[291]
not manufacture excisable alcohol products at premises that are not specified in your licence ^[292]
give us access to your factory when requested ^[293]
keep your excisable alcohol products safe and accounted for to our satisfaction ^[294]
provide all reasonable facilities to enable us to exercise our powers under the Excise Act ^[295]
provide sufficient lighting, correct weights and scales, and all labour necessary for
- weighing material received into your factory
- weighing all excisable alcohol products manufactured in your factory, and
- taking stock of all material and excisable alcohol products contained in your factory. ^[296]

For more information about duty liability and methods of payment refer to Chapter 6 - Payment of duty .

For more information about obtaining permission to move underbond alcohol products refer to Chapter 5 - Movement permissions .

11.3.8 WHAT ELSE CAN WE DO?

Access

We have the right to enter your licensed premises at any time and can examine and take account of all the goods at the premises. ^[297] Note: we will usually only seek to enter your premises during normal business hours.

Stop vehicles

We can stop any vehicle leaving your licensed premises and check that there is proper documentation for excisable alcohol products leaving the premises. We can question the driver about any goods in the vehicle. We can direct that the vehicle is unloaded and goods taken to particular parts of the premises for further examination. We must not detain a vehicle for longer than is necessary to do the checking. ^[298]

Search vehicles

We can stop and search any vehicle (not just vehicles leaving a licensed premises) without a warrant if we have reasonable grounds for believing that the vehicle contains excisable alcohol products and that the vehicle has been used, is being used or will be used in the commission of an offence against the Excise Act (and certain offences in the Crimes Act 1914 ^[299] and Criminal Code ^[300] relating to accessory after the fact, attempt to commit an offence, aid and abet someone to commit an offence and conspiracy to commit an offence). ^[301]

Examine goods

We can open packages and examine, weigh, mark and seal any excisable goods that are subject to excise control and lock up, seal, mark or fasten any plant in or on your factory. ^[302]

We can also:

supervise the manufacture of excisable alcohol products ^[303]
take samples of materials, partly manufactured excisable alcohol products and excisable alcohol products subject to excise control, and alcohol products that we have reasonable grounds for suspecting are excisable alcohol products on which duty has not been paid. ^[304]

11.4 PROCEDURES

11.4.1 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on spirits and other excisable beverages contact us via:

the Business Portal

phone on 1300 137 290

fax at 1300 130 916 ,

email at alcohol@ato.gov.au , or

mail to
Australian Taxation Office

PO Box 3514

ALBURY NSW 2640

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.

11.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO DISTILLATION?

The following are the penalties that may apply after conviction for an offence.

Manufacture

If you manufacture excisable alcohol products without a manufacturer licence, 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 alcohol products. ^[305]

If you manufacture excisable alcohol products contrary to the Excise Act or any conditions specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units. ^[306]

If you manufacture excisable alcohol products at premises that are not specified in your licence, 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 alcohol products. ^[307]

Move, alter or interfere

If you move underbond excisable alcohol products without approval, 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 alcohol products. ^[308]

Note:

This includes moving underbond excisable alcohol products from your premises to any other location or for export.

If your movement of underbond excisable alcohol products does not comply with the permission to move the underbond excisable alcohol products, 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 alcohol products. ^[309]

If you move, alter or interfere with excisable alcohol products 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 alcohol products. ^[310]

Sell

If you sell excisable alcohol products on which duty has not been paid (unless it is an underbond sale), 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 alcohol products. ^[311]

Records

If you do not keep, retain and produce records in accordance with section 50 of the Excise Act, the penalty is a maximum of 30 penalty units.

Directions

If you do not comply with a direction in regard to what parts of the factory can be used for various matters, the penalty is a maximum of 10 penalty units. ^[312]

Stills

If you are not a licensed manufacturer you must have our permission, in regard to stills with a capacity of greater than five litres, to:

make a still
move or set up a still
sell or buy a still
import a still, or
have possession, custody or control of a still.

If you do not have our permission, the penalty is a maximum of 50 penalty units. ^[313]

Facilities etc.

If you do not provide all reasonable facilities for enabling us to exercise our powers under the Excise Act, the penalty is a maximum of 10 penalty units. ^[314]

If you do not provide sufficient lights, correct weights and scales, and all labour necessary for weighing material received into, and all excisable alcohol products manufactured in, your factory and for taking stock of all material and excisable alcohol products contained in your factory, the maximum penalty is 10 penalty units. ^[315]

If we mark or seal excisable alcohol products or fasten, lock or seal any plant in your factory and you alter, break or erase the mark, seal, fastening or lock, the maximum penalty is 50 penalty units. ^[316]

11.6 TERMS USED

Deliver into the Australian domestic market ^[317]

'Deliver into the Australian domestic market' is the term we use in this manual for when excisable alcohol products are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

Normally this will be by delivering the goods away from licensed premises but includes using those goods yourself (for example sales to staff).

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However there are several cases where issues closely related to it are considered. ^[318]

The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to exporting them.

Excisable alcohol products

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and listed in the Schedule to the Excise Tariff Act.

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.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market 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 ^[319] is the document that you use to advise us:

the volume of excisable alcohol products that you have delivered into the Australian domestic market during the period designated on your PSP, or
the volume of excisable alcohol products that you wish to deliver into the Australian domestic market following approval.

Penalty units

Refer to section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

Section 50 direction

This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, or proprietor of licensed premises, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us. The written instruction is incorporated into the conditions on the licence.

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.

11.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

11.7.1 Excise Act 1901

Section 25 - Only licensed manufacturers to manufacture excisable goods

Section 26 - Licensed manufacturers to manufacture in accordance with Act and licence

Section 27 - Licensed manufacturers to manufacture only at licensed premises

Section 39D - Conditions of licence

Section 46 - Supervision by officers

Section 49 - Facilities to officers

Section 50 - Record keeping

Section 51 - Collector may give directions

Section 52 - Weights and scales

Section 53 - Responsibility of manufacturers

Section 54 - Liability to pay duty

Section 58 - Entry for home consumption etc.

Section 60 - Persons to keep excisable goods safely etc.

Section 61 - Control of excisable goods

Section 61A - Permission to remove goods that are subject to CEO's control

Section 61C - Permission to deliver certain goods for home consumption without entry

Section 62 - Deficiency in duty

Section 77FF - Spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose - specific approvals

Section 77FK - Offence in relation to stills

Section 86 - Officers to have access to factories and approved places

Section 87 - Power to stop conveyances about to leave an excise place

Section 87AA - Searches of conveyances without warrant

Section 91 - Examine all goods

Section 92 - Seals etc. not to be broken

Section 106 - Samples

Section 117A - Unlawfully moving excisable goods

Section 117B - Unlawfully selling excisable goods

11.7.2 Crimes Act 1914

Section 4AA - Penalty units

Section 6 - Accessory after the fact

11.7.3 Criminal Code Act 1995

Section 11.1 - Attempt

Section 11.2 - Complicity and common purpose

Section 11.5 - Conspiracy

Excise guidelines for the alcohol industry

	Date:	Version:
	1 July 2013	Original document
	1 July 2015	Updated document
	7 September 2017	Updated document
You are here	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
	25 February 2022	Updated document
	1 July 2024	Current document

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