Excise guidelines for the alcohol industry
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13 CONCESSIONAL SPIRIT
13.1 PURPOSE
This chapter deals with how excise law applies to concessional spirit and discusses:
- what is concessional spirit
- what is undenatured spirit
- what is denatured spirit
- the concessional spirit distribution network
- requirements for concessional spirit manufacturers
- requirements for concessional spirit suppliers
- requirements for concessional spirit end users
- how concessional spirit is classified
- spirit used in fortifying Australian wine or grape must
- spirit used for industrial, manufacturing, scientific, medical, veterinary or educational purposes
- spirit denatured to a formula approved by the Commissioner
- recycling / redistillation of concessional spirit
- tolerances on quantities delivered / received
- how to apply for a permit
- how to amend or renew a permit, and
- how to apply for a denaturing formula to be approved.
13.2 INTRODUCTION
13.2.1 WHAT IS CONCESSIONAL SPIRIT?
Concessional spirit is spirit that may be delivered into the Australian domestic market at a free rate of duty when:
- used for specific purposes, i.e. spirit used:
- in fortifying Australian wine or Australian grape must
- for an industrial, manufacturing, scientific, medical, veterinary or educational purpose, or
- denatured in accordance with a formula determined by the Commissioner.
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| Use in the manufacture of excisable beverages or fuel is not a use that qualifies for a free rate of duty. |
Concessional spirit is generally very high strength spirit. It is usually supplied at a strength of approximately 96% alcohol by volume. It may be distilled from various feedstock. Spirit distilled from different raw materials will retain some of its own specific characteristics, but will generally be of a neutral nature due to the high strength at which it is distilled.
What is undenatured spirit?
Undenatured spirit is drinkable and may be supplied for approved purposes, for example, for the manufacture of foodstuffs, internal medicines, vaccines etc.
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| For more information about using undenatured spirit refer to Section 13.4.3 - Spirit denatured to a formula determined by the Commissioner. |
What is denatured spirit?
Denatured spirit is spirit processed by adding approved substances (denaturant) to make it unfit for human consumption.
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| For more information about using denatured spirit refer to Section 13.4.3 - Spirit denatured to a formula determined by the Commissioner. |
13.3 POLICY AND PRACTICE
13.3.1 HOW IS CONCESSIONAL SPIRIT CLASSIFIED?
The following table lists the subitems in the Schedule to the Excise Tariff Act under which concessional spirit is classified. If you are a manufacturer or concessional spirit supplier, you will need to know this in order to complete your excise return.
Subitem | Description of goods |
3.5 | spirit for fortifying Australian wine or Australian grape must |
3.6 | spirit for use by a class of persons determined by the Commissioner for industrial, manufacturing, scientific, medical, veterinary or educational purposes |
3.7 | spirit that a person has specific approval from the Commissioner to use for an industrial, manufacturing, scientific, medical, veterinary or educational purpose. |
3.8 | spirit denatured in accordance with a formula approved by the Commissioner |
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| You can get a copy of the latest version of the Schedule to the Excise Tariff Act by visiting our website at www.ato.gov.au |
Essentially this means:
- Subitem 3.5 - allows for the fortification of Australian wine or grape must provided the purchaser/user holds a concessional spirit permit
- Subitem 3.6 - Members of the class of persons specified (Health care practitioners, veterinary practitioners, medical institutions, government institutions, educational institutions) may take delivery of a volume of spirit necessary to meet their industrial, manufacturing, scientific, medical, veterinary or educational needs without holding a concessional spirit permit.
- Subitem 3.7 - allows for the sale of spirit for other specified purposes but requires the purchaser to hold a concessional spirit permit.
- Subitem 3.8 - allows for the sale of denatured spirit to be sold without the need for the purchaser to hold a concessional spirit permit provided it is denatured to an approved formula.
13.3.2 CONCESSIONAL SPIRIT DISTRIBUTION NETWORK
What is the concessional spirit distribution network?
This network is made up of:
- spirit manufacturers
- licensed suppliers, and
- end users holding an appropriate excise permit.
What licences do I need to have?
The following examples indicate the type of excise licences that may be required:
Activity | Licence |
Manufacture spirit | manufacturer |
Reduce the strength of spirit | manufacturer |
Add colourings or other chemicals, including denaturants | manufacturer |
Distribute spirit to end users | manufacturer or storage |
Repackage spirit | storage |
Export spirit | storage |
User of spirits | None, unless spirit is used in the manufacture of another excisable product |
What are the requirements if I am a concessional spirit manufacturer?
An excise manufacturer licence allows you to:
- manufacture concessional spirit
- store concessional spirit, and
- sell concessional spirit.
You can use imported spirit in the manufacture of concessional spirit, [365] subject to the following conditions:
- you must hold a customs warehouse licence issued under the Customs Act and an excise manufacturer licence issued under the Excise Act
- the imported spirit must undergo a process of manufacture in Australia, [366] and
- the spirit manufactured must be for use for a purpose listed in 13.3.1.
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| You must keep records, as directed, for the period directed and make them available to us on request. |
You must:
- lodge an excise return to enter concessional spirit delivered into the Australian domestic market, or
- hold an underbond movement permission to deliver the spirit to another licensed premises or specified place.
In the case of imported spirit, you must hold a customs warehouse license to store the imported goods underbond in premises licensed under section 79 of the Customs Act, until such time as the imported spirit undergoes a process of manufacture in Australia at which time the resulting excisable product is subject to excise control.
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| For more information about:
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What are the requirements if I am a concessional spirit supplier?
Concessional spirit suppliers distribute concessional spirit to end users, particularly by repackaging bulk spirit into smaller retail packs to suit client needs.
You need to be licensed as the resale of concessional spirit is not an approved purpose under the concessional spirit scheme. You may be licensed as a manufacturer or storage premises depending on the activities you undertake.
Before supplying spirit, you must establish the bona fides of each end user of concessional spirit where the spirit is classified to subitems 3.5, 3.6 or 3.7 in the Schedule to the Excise Tariff Act.
The following documentation is considered sufficient:
- a current concessional spirits permit - for a concessional spirits permit holder (subitems 3.5 and 3.7 in the Schedule to the Excise Tariff Act) copy of fax allowed
- registration certificate or registration number as a practitioner, or
Therapeutic Goods Act 1989
(TGA) exemption certificate, for a purchaser in the following exempt classes*:
- medical practitioners (pharmacists, doctors, chiropractors, dentists, osteopaths, physiotherapists, registered nurses) or other health care practitioners registered under State or Territory law
- acupuncturists, herbalists, homeopaths and naturopaths that are registered under the National Health Act 1953 or hold a TGA exemption certificate, and
- veterinary practitioners registered under State or Territory law
- official letterhead or purchase order for the following exempt classes*:
- medical institutions
- educational institutions and
- government agencies.
Medical, educational and government institutions are defined in the relevant legislative determinations. [367]
*For subitem 3.6 in the Schedule to the Excise Tariff Act
You must keep records, as directed, for the period directed and make them available to us on request. [368]
The records for concessional spirit suppliers would be details of:
- quantity and alcoholic strength of all spirits received and/or produced
- your individual sales or distribution records showing, where applicable, the
- name and address of your customer
- evidence that your customer is in an approved class of professional people or institution or is a permit holder
- cumulative sales you have made to customers subject to annual limits
- quantity and alcoholic strength of spirits you have sold or distributed, and
- levels and alcoholic strength of your stock on hand,
- details of all spirit from the time of receipt, through break bulk to final repackaging (for suppliers who repack spirit received in bulk containers), and
- details of all losses or gains relating to repacking operations plus the final number and size of the repackaged product.
We recommend you conduct monthly stocktakes and maintain a running balance of spirits on hand.
You must:
- lodge an excise return to enter concessional spirit delivered into the Australian domestic market, or
- hold an underbond movement permission to deliver the spirit to another licensed premises or specified place.
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| For more information about:
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| Resellers who act as agents or brokers will not need a manufacturer or storage licence as long as they do not physically take possession of spirit. However, they require a periodic settlement permission that allows the delivery of the concessional spirit from licensed premises to an approved end user. |
What are the requirements if I am a concessional spirit end user?
To be eligible to receive concessional spirit (other than denatured spirit) as an end user, you must:
- hold a current permit, [369] or
- be included in an eligible class of persons determined by the Commissioner.
You must keep your records of receipts and usage, and make them available to us on request.
Permits are valid for a period of one year from the date of initial issue. On renewal, permits may be valid for up to five years from the date on which they are renewed. The permit shows the maximum quantity of spirit that may be delivered each year.
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| There is no charge for a concessional spirits permit. |
We have the right to require a security [370] or request a fresh security when we consider it to be necessary to protect the revenue or ensure compliance with your excise obligations. [371] Securities cannot be requested for denatured spirit that you have received that has been classified to subitem 3.8 in the Schedule to the Excise Tariff Act.
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| If we require a security, we calculate the amount on the estimated average monthly excise that would apply to the goods if excise duty was payable. We use the rate at subitem 3.10 in the Schedule to the Excise Tariff Act. |
If you are a permit holder, you should carry out regular stock takes and keep a record of stock on hand. You are not required to maintain any prescribed recording system, however, you should keep records sufficient to satisfactorily account for your use of the spirit in accordance with an approved purpose. [372]
You are also responsible for the control and safe keeping of concessional spirit once the spirit has been received into your stock. We don't normally insist on any particular security arrangements other than normal good commercial practice. However, concessional spirits should be stored securely.
What are the requirements if I am a concessional spirit supplier and a concessional spirit end user?
You must comply with the requirements mentioned above for a concessional spirit supplier and a concessional spirit end user. You must include all quantities of spirit, delivered from your underbond stock for your concessional spirit approved purposes, on your excise returns.
13.4 CONCESSIONAL SPIRIT USE
13.4.1 SPIRIT USED IN FORTIFYING AUSTRALIAN WINE OR GRAPE MUST
What is wine fortification?
Wine fortification means increasing the level of alcohol by adding spirit to:
- wine during or after fermentation, or
- grape must during or after fermentation.
Fortification is also taken to include circumstances where brandy is mixed with sugar and used to sweeten sparkling wine (commonly known as expedition liqueur).
If you use spirit to fortify Australian wine or Australian grape must you must have a concessional spirit permit.
Do I need ATO approval to fortify?
You must obtain our permission to use spirit that you have produced (to produce spirit you require an excise manufacturer licence), or intend to purchase free of duty for use in fortifying Australian wine or Australian grape must. If we grant approval we will issue to you a concessional spirit permit.
What records do I need to keep?
You should keep the following records and make them available to us when requested: [373]
- all documents:
- recording any receipt of fortifying spirit
- relating to storage of fortifying spirit, or
- relating to use of fortifying spirit
- supplier delivery documents (consignment note, delivery docket and so on), and
- working documents, such as operations and cellar notes.
An audit trail that traces the fortifying spirit as it moves in and out of bulk vessels allows you to account for the excisable goods to our satisfaction. Bulk vessels include vats, intermediate bulk containers (IBC) and drums.
The transactions under this heading include:
- Receipt of fortifying spirit
- Movements between vessels
- Movements out to fortification
For each vessel, we recommend
- Product identification details, e.g. type
- Date, quantity in (litres) and temperature, strength, litres of alcohol (litres × strength)
- Date, quantity out (litres) and temperature, strength, litres of alcohol (litres × strength)
- Fortification number
- Running balance
- Losses and gains
Your records need to include the following details for each fortification:
- date and fortification identification number
- details of the wine or grape must, including:
- litres of wine / kilograms of grape must
- Baum é (sugar content) of unfermented juice
- Baum é of fermented wine, and
- alcoholic strength of wine
- details of spirits used including
- litres used
- alcoholic strength
- litres of alcohol (Lals) used
- details of fortified wine, including
- litres of fortified wine produced
- alcoholic strength of fortified wine, and
- Baum é content of fortified wine.
You do not need to create additional records, as the necessary details should be part of your normal commercial documentation.
How do I account for my use?
You may be asked to account to us for the use of fortifying spirit accessed free of duty under subitem 3.5 of the Schedule to the Excise Tariff Act. [374] You should be able to do so if you have accurately retained the records described above.
If you cannot account satisfactorily for the use of spirit, we can demand payment of an amount equal to the excise you would have been liable to pay if the spirits had not been given concessional (excise-free) treatment. This applies, regardless of whether you have a concessional spirits permit or an excise licence.
You should phone us on 1300 137 290 to advise of any:
- significant spillage
- theft of spirits from your premises or in transit from your supplier
- excessive losses.
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| For information on taxes that may apply to fortified wine refer to Chapter 14 - Wine . |
13.4.2 SPIRIT USED FOR INDUSTRIAL, MANUFACTURING, SCIENTIFIC, MEDICAL, VETERINARY OR EDUCATIONAL PURPOSES
Approval can be granted for a wide variety of industrial, manufacturing, scientific, medical, veterinary or educational purposes. These include the following:
- fortification of imported wines
- manufacture of
- medicines
- vaccines
- printing inks
- foodstuffs
- sterilisation of equipment, and
- preservation of specimens.
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| The resale of spirits and the manufacture of excisable beverages or fuel, using spirits, are not approved purposes. |
Please refer to Appendix A at the end of this Chapter for a list of activities that have previously been approved.
How is this spirit classified?
Spirit used for these purposes is classified to one of the following sub-items in the Schedule to the Excise Tariff Act:
Subitem | Description of goods |
3.6 | spirit for use by a 'class of persons' determined by the Commissioner within quantity limits for industrial, manufacturing, scientific, medical, veterinary or educational purposes |
3.7 | spirit that a person has specific approval from the Commissioner to use for an industrial, manufacturing, scientific, medical, veterinary or educational purpose. |
Who can receive spirit without a permit?
The Excise (Concessional spirits - class of persons) Determination 2014 (No.1) provides for following 'class of persons':
- Health care practitioners
- Veterinary practitioners
- Medical institutions
- Government institutions
- Educational institutions
Members of the class of persons specified may take delivery of a volume of spirit necessary to meet their industrial, manufacturing, scientific, medical, veterinary or educational needs without applying for a permit.
(Note: in the case of institutions it refers to the institution as a whole).
Health care practitioner is given a very broad definition under the determination [383] and means:
- a doctor, dentist, pharmacist, registered nurse or other health care practitioner registered under the law of a State or Territory; or
- an acupuncturist, herbalist, homeopath or naturopath certified as exempt from the operation of Part 3-3 of the Therapeutic Goods Act 1989.
We can issue a determination which will specify the particular class or category and may set a limit on the volume of concessional spirit purchased without a permit. If you receive spirit under this arrangement, you may only use the spirit for industrial, manufacturing, scientific, medical, veterinary or educational purposes.
The spirit supplied may be undenatured or denatured using a formula that is not on our approved list. [375] To receive this type of concessional spirit you must self-assess:
- whether you are entitled to receive spirit under any of the determinations, and
- that you can comply with the terms of the determination.
You must also provide identification to the supplier to show you are eligible under a determination.
Your supplier:
- needs to be satisfied you fit into a class of persons identified in the determinations, and
- will retain appropriate evidence of this, such as Therapeutic Goods Administration (TGA) approvals or Australian Medical Association registration.
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| For information on the Excise (Class of person) determination, go to our website at www.ato.gov.au/excise and follow the links to 'concessional spirits'. |
Who needs a permit?
You will need to apply for a permit to access concessional spirit if you are not covered by the determination.
Spirit received with a permit generally does not have any denaturant added to it unless you specifically request it or we impose it as a condition of the permit.
We have published guidelines that must be taken into account when deciding whether to give an approval. [376]
We may give approval, subject to conditions [377] including limits on quantity, for use of concessional spirit for the manufacture of non-beverage products, such as:
- foodstuffs
- vinegar
- essences and flavours
- internal medicines, or
- mouthwashes.
We do not give approval for concessional spirit to be used:
- in the manufacture of excisable beverages or
- as fuel in internal combustion engines.
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| For more information about the excise treatment of:
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What additional requirements apply to essences?
If you are using spirit to manufacture an essence, you must be able to show that the essence:
- is a concentrated flavour, and
- is for culinary purposes, for example in baking or as an additive to chocolate, or
- will be used in small proportions to flavour non-alcoholic or non-excisable alcoholic beverages, for example soft drinks, cordials etc, and
- will not be used as a direct substitute for the original spirit.
Essences may also be used in the manufacture of products subject to the Wine Equalisation Tax (WET), provided the requirements of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) are met.
In considering an application for spirit for use in manufacturing an essence, we will look at whether the product is:
- marketed in packaging that resembles packaging for an alcoholic beverage
- packaged in six packs or similar multiple packaging types
- required by state legislation to be sold through licensed liquor outlets or is subject to state liquor licensing laws
- marketed with instructions about how it can be used as an alcoholic beverage
- packaged for retail sale in sizes greater than 50ml (or 100 ml for vanilla essence), irrespective of who in the marketing chain does the packaging, or
- sold in package sizes greater than 50ml, with no demonstrated culinary use.
What records do I need to keep?
If you receive concessional spirit classifiable to subitem 3.6 or subitem 3.7 in the Schedule to the Excise Tariff Act, you must keep sufficient records to account satisfactorily for your use. [378] You do not need to create additional records, as the necessary details should be part of your normal commercial documentation. If the spirit is used:
- as an input into manufacture, your manufacturing records should be sufficient to track and quantify spirit usage.
- as a consumable, your dispensing records should be sufficient to track and quantify spirit usage.
This would include:
- all documents:
- recording any receipt of concessional spirit
- relating to storage of concessional spirit, or
- relating to use of concessional spirit
- supplier delivery documents (consignment note, delivery docket and so on), and
- working documents, such as operations notes.
An audit trail that traces the concessional spirit as it moves in and out of bulk vessels, awaiting use for an approved purpose, allows you to account for the excisable goods to our satisfaction. Bulk vessels include vats, intermediate bulk containers (IBC) and drums.
The transactions under this heading include:
- Receipt of fortifying spirit
- Movements between vessels
- Movements out to fortification
For each vessel, we recommend:
- product identification details, e.g. type
- date, quantity in (litres) and temperature, strength, litres of alcohol (litres × strength)
- date, quantity out (litres) and temperature, strength, litres of alcohol (litres × strength)
- approved purpose and any reference number eg stores requisition number
- running balance
- losses and gains
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| If you cannot satisfactorily account for use of the spirit we may issue a demand for payment. The demand would be for an amount equal to the duty that would have been payable on the spirit if:
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What special record keeping applies to pharmacists supplying ships?
If you are a pharmacist who supplies spirit to a ship as first aid supplies, we accept that you have satisfactorily accounted for your use of spirit, if:
- you supply no more than 3 litres of undenatured ethanol to a particular ship per year
- the ship's agent or ship's provedore supplies you with an order signed by the ship's captain and quoting Marine Orders, Part 10 (Order No. 13 of 2001)
- the order documentation contains:
- the name of the ship and Lloyds number
- the voyage number and date, and
- the captain's name
- you record the details of the order in your register and provide the agent with a delivery advice
- the agent signs for receipt of the spirit
- the agent delivers the spirit to the captain on board the ship
- the captain signs the delivery advice for receipt of the spirit
- the agent returns the signed delivery advice to you, and
- you retain the signed delivery advice.
13.4.3 SPIRIT DENATURED TO A FORMULA DETERMINED BY THE COMMISSIONER
Spirit is denatured so that it may be used for a specified purpose while reducing the risk that it will be used to manufacture excisable beverages or fuel.
An entity denaturing spirit needs to have a manufacturer licence.
How is spirit denatured to an approved formula classified?
Spirit denatured to an approved formula is classified to subitem 3.8 in the Schedule to the Excise Tariff Act. This spirit is no longer subject to excise control from the time it is delivered into the Australian domestic market, at a free rate of duty, by the supplier. No permit is required.
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| Denatured spirit must not be used in the manufacture of fuel without an appropriate excise manufacturer licence. Ethanol denatured for use as fuel for internal combustion engines is subject to excise duty and is classified to subitem 10.20 in the Schedule to the Excise Tariff Act. |
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| For more information about fuel ethanol see Excise guidelines for the fuel industry available on our website at www.ato.gov.au |
What does the Commissioner consider when approving denaturing formulas?
We take into account the following factors when deciding if spirit is sufficiently denatured:
Factors | Details |
Degree of difficulty in removing the denaturant from spirit | Based on:
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Effectiveness of the denaturant (at a minimum strength of 5%) as a deterrent from use as a beverage, when diluted with other beverages, such as water or soft drink | Due to:
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Factors such as price and marketing | The degree of risk is partially dependent on the price differential between spirit and fuel. The high cost of fuel is a driver for fuel substitution, increasing the risk of concessional spirit being diverted to fuel. |
Whether a denaturant is itself a fuel, such as petrol, or an additive typically used in producing fuel ethanol, such as an emulsifier | Due to the risk of denatured spirit being diverted for use as fuel ethanol |
What formulas are used to denature spirit?
The formulas determined by the Commissioner are contained in Excise (Denatured spirits) Determination 2016 (No. 3) . An Explanatory Statement [379] contains details of the background, purpose and operation of the determination.
The formulas are based on a minimum percentage of an approved denaturing chemical added to spirit at an alcoholic strength of 100%. If the spirit is less than 100% ethanol, the minimum concentration is to be adjusted relative to the alcohol content.
EXAMPLE 13A
According to the formula, alcohol may be denatured by the addition of 1% by volume n-propanol.
Spirit consisting of 80% ethanol may be denatured according to the formula by the addition of 0.8% by volume n-propanol.
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| For more information about what constitutes excise manufacture see Chapter 2 - Licensing: Applications . |
What records do I need to keep?
You should keep the following records and make them available to us when requested:
- all documents:
- recording any receipt or manufacture of spirit
- relating to storage of spirit,
- relating to use of spirit, or
- relating to the denaturing of spirit
- supplier delivery documents (consignment note, delivery docket and so on), and
- working documents, such as operations notes.
Spirit denaturing operations - Raw materials
An audit trail commencing with raw material allows us to check stated production against known material usage.
For each denaturing substance, we recommend recording:
- Date
- Opening stock
- Quantity received
- Supplier name
- Quantity used
- Running balance
Denaturing record
Generally, the denaturing substance is added to the spirit within your bulk storage vessels. As such, you may simply include in your bulk storage register a record of:
- Date
- The quantity of spirit to be denatured (Litres, strength, Lals)
- Description of the denaturing substance
- The quantity of denaturing substance added
- The resultant quantity of denatured spirit (Litres, strength, Lals)
- Description of the denatured spirit, e.g. type
- Losses and gains
Denaturer 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, IBC and drums. The transactions under this heading include:
- Movements between vessels
- Movements out to packaging
- Movements returned from packaging, e.g. decants, drainings
- Under bond movements in or out
- Manufacture e.g. mixing with denaturants.
For each vessel, we recommend:
- Product identification details, e.g. type
- Date, quantity in (litres) and temperature, strength, litres of alcohol (litres × strength)
- Date, quantity out (litres) and temperature, strength, litres of alcohol (litres × strength)
- 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 if there has been no activity within the last three months.
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.
Denaturer 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. ethanol with 5% methanol
- Packaging unit size, e.g. 500ml 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 × 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 × Packaging unit size × Label strength
Example 11X
A packaging run of ethanol with 5% methanol on 1 October 2012 recorded:
500ml bottles, 95.0% label strength
Actual alcoholic strength 95.0%
Total quantity available for packaging 2,000 Lals
Total number of units packaged 4,080 bottles
Average fill per package 501.0ml
Product captured and returned to bulk storage 13.7 litres at 95%a.v. = 13.0 Lals
Samples taken from the packaging line (Lals) 6 bottles = 2.8 Lals
Lals packaged = 4080 × 500ml × 95%a.v. = 1,938 Lals
Net Lals available for packaging = 2,000 less 13 less 2.8 = 1,984.2 Lals
Lals packaged × 100 = % efficiency
Net Lals available for packaging 1
1938.0 Lals × 100 = 97.7% efficiency
1984.2 Lals 1
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| If packaging efficiency falls below historical performance you should investigate. |
Denaturer 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. 500ml 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.
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| For more offsetting stock shortages against stock surpluses refer to 6.3.8 |
You do not need to create additional records, as the necessary details should be part of your normal commercial documentation.
13.4.5 RECYCLING / REDISTILLATION OF CONCESSIONAL SPIRIT
You must not remove all or part of a denaturing substance from spirit classified to subitem 3.8 of the Schedule to the Excise Tariff Act without our permission. [380]
We may give permission, for example, where denatured spirit is used and re-used as a solvent in an industrial or manufacturing process.
13.4.6 TOLERANCES ON QUANTITIES DELIVERED / RECEIVED
It may be inconvenient to apply for minor adjustments to the approved quantities shown on permits. To simplify your administration and reduce your compliance costs, we allow a tolerance on maximum quantities delivered.
All clients may receive a maximum of 105% of the quantity of spirit approved on their current permit without requiring an adjustment. For example a permit for 200 litres will allow the delivery of up to 210 litres without further approval.
The concessional spirit manufacturer or supplier must enter the full amount delivered on the delivery documents and maintain a cumulative total of the quantities delivered to the client. The manufacturer or supplier must ensure that the extended limit is not exceeded.
13.5 PROCEDURES
13.5.1 HOW DO I APPLY FOR A PERMIT?
To obtain a permit to receive concessional spirits, you must complete an Application/renewal for a permit to receive concessional spirits (NAT 3248).
We will consider your application and advise you of our decision within 28 days of receiving all necessary information. We may decline to issue you with a permit, for example if you are not using the spirit for an approved purpose as part of a business or you have a history of poor compliance with other laws we administer. We may also place a condition on your permit if we consider it necessary to do so.
To contact us phone 1300 137 290.
Our staff will:
- discuss your particular circumstances with you
- give you advice about the appropriate permit
- explain how to apply
- explain your ongoing obligations as a permit holder, and
- provide you with a permit application form.
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| There is no charge for a permit to receive concessional spirit. |
How do I lodge an application?
You need to complete the relevant form to apply for a permit to receive concessional spirit.
You can lodge your completed application form and supporting documents via:
the Business Portal
fax at 1300 130 916 ,
email at alcohol@ato.gov.au , or
mail toAustralian Taxation OfficePO Box 3514ALBURY NSW 2640
|
| You must not possess or have custody or control of concessional spirit before your permit has been granted. [381] |
|
| We will process your application within 28 days of the date we receive all required information. |
13.5.2 HOW DO I APPLY TO AMEND OR RENEW A PERMIT?
You will need to apply to amend your permit if you:
- want to increase the amount of spirit that you are allowed to receive
- want to add to, or change details of, your nominated supplier(s)
- change your end use, or
- move premises.
You will be notified when your permit is about to expire and invited to renew it. Renewal of a permit is not automatic and you must apply to renew your permit before it expires.
You should apply to amend or renew current permits in writing by email or by telephoning us on 1300 137 290 .
13.5.3 HOW DO I APPLY FOR A DENATURING FORMULA TO BE APPROVED?
Applications for approval of formulas (for the purposes of subitem 3.8 in the Schedule to the Excise Tariff Act) must be made in writing to us and contain the following information:
- details of the formula
- specifications for the denaturant(s) used, and
- technical specifications for the effects of the denaturant in terms of smell, taste and toxicity in a quantity of alcohol at a strength of 5% by volume.
We will advise you of the outcome of your application in writing.
|
| Approved formulas specify the minimum quantity of denaturant that must be used and are set out in Excise (Denatured spirits) Determination 2016 (No. 3) which can be accessed on our website at www.ato.gov.au/excise |
13.5.4 WHAT DO I DO IF I NEED MORE INFORMATION?
If you need more information on concessional spirit contact us via:
the Business Portal
phone on 1300 137 290
fax at 1300 130 916 ,
email at alcohol@ato.gov.au , or
mail toAustralian Taxation OfficePO Box 3514ALBURY NSW 2640
We will ordinarily respond to electronic requests within 15 business days. We will ordinarily 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.
13.6 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO CONCESSIONAL SPIRIT?
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. [382]
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. [383]
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. [384]
If you abstract a denaturing substance from spirit that has been delivered into the Australian domestic market, without permission, the penalty is a maximum of 50 penalty units. [385]
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. [386]
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. [387]
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. [388]
Deliver
If you deliver excisable alcohol products 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 alcohol products. [389]
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. [390]
False or misleading statements
If you make a false or misleading statement, or an omission from a statement in respect of duty payable on particular goods, to us, a penalty not exceeding the sum of 50 penalty units and twice the amount of duty payable on those goods. [391]
Evade
If you evade the payment of any duty that is payable, the maximum penalty is five times the amount of duty evaded or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units. [392]
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. [393]
If you do not provide sufficient lighting, 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. [394]
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. [395]
13.7 TERMS USED
Deliver into the Australian domestic market
[396]'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. [397]
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 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.
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 [398] 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 licence conditions.
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 the Commissioner's 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.
13.8 LEGISLATION (quick reference guide)
In this chapter we have referred to the following legislation:
Section 16 - Right to require security
Section 20 - New sureties
Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods
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 49 - Facilities to officers
Section 50 - Record keeping
Section 51 - Collector may give directions
Section 52 - Weights and scales
Section 58 - Entry for home consumption 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 77FD - Spirit for fortifying Australian wine or Australian grape must
Section 77FE - Spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose - class determinations
Section 77FF - Spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose - specific approvals
Section 77FH - When an amount is payable on spirit covered by section 77FD, 77FE or 77FF
Section 77FJ - Person must not abstract denaturing substances in spirit classified to subitem 3.8
Section 92 - Seals etc. not to be broken
Section 117 - Unlawful possession of excisable goods
Section 117A - Unlawfully moving excisable goods
Section 120 - Offences
The Schedule
4AA - Penalty units
APPENDIX A
Non-exhaustive list of activities that have previously been approved for concessional spirit permits:
- cake manufacture
- cosmetics
- essences
- extraction of flavour
- foodstuff manufacture
- fortification of Australian wine or Australian grape must
- mouth washes
- perfumes
- preservation of specimens
- printing inks
- refrigeration
- sterilisation of factory equipment
- tinctures
- titration or lab work
- vaccines
| 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 | |
| You are here | 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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