Excise guidelines for the fuel industry

The Excise Act 1901 (Excise Act) provides us with the discretion whether to grant or refuse a licence. We base the decision on the information you supply.

However subsection 39A(2) provides that if we consider certain criteria exist they can be the basis for refusal.

In summary those criteria are:

whether you or an associate are not 'fit and proper'
whether you do not have, or have available to you, the skills and experience required to carry out the activity that would be authorised by the licence
the physical security of the premises is not adequate
the plant and equipment to be used at the premises is not suitable
you will not have a market for the goods
you would not be able to keep proper books of account for audit purposes
the grant of a storage licence would delay liability for duty, or
it is necessary to refuse to grant the licence to protect the revenue.

These criteria are explained in more detail below.

How any of these criteria affects a particular licence application depends on the facts in each particular case. There are, however, some criteria that are critical, for instance:

you are not 'fit and proper'
existence of a market, and
protection of the revenue.

3.3 POLICY AND PRACTICE

3.3.1 LICENSING CRITERIA

(1) 'Fit And Proper' Person Or Company ^[62]

The nature of the entity applying for the licence will affect who is assessed as being fit and proper:

if an individual, the individual is assessed
if a partnership, each partner is assessed, and
if a company, the company is assessed.

Persons other than the applicant can also be assessed as to whether they are fit and proper. These persons are:

another person who would participate in the management or control of the premises that is the subject of the licence application
if the applicant is a company, then any director, officer, or shareholder of the company that would participate in the management or control of the company, and
certain associates of the applicant (associates can be people or companies).

What does fit and proper mean?

The term 'fit and proper' is not defined in the Excise Act or Excise Regulation 2015 (Excise Regulation). Fit and proper is dependant on the purpose of the legislation and the proposed activities of the person concerned. In general, qualities of diligence, honesty and the likelihood of observance of the law are pivotal characteristics to be taken into account in considering fitness and propriety. In an Excise context we are assessing the suitability of the person applying for a licence to have access and control over excisable fuel products.

The Excise Act provides a definitive list of factors that we will take into account in determining whether a person or company is fit and proper. These factors generally relate to:

any prosecution history
solvency
the honesty of information provided by the applicant
compliance with tax obligations, and
licensing history if applicable.

In assessing these factors we will consider whether your circumstances demonstrate that you will be diligent, honest, and likely to observe Excise laws.

A single factor will not necessarily be determinative on its own of whether a person or company is 'fit and proper'. It will depend on the facts and circumstances of each case.

The weight afforded to each factor in reaching a decision about whether a person or company is 'fit and proper' is a matter for us to decide. We are deciding whether the person or company is fit and proper, and will do so after considering all relevant information.

Some factors apply to both individuals and companies; others are specific to individuals or to companies.

Individual or company:

whether, within a year of lodging the application, the person or company has been charged with :
whether, within 10 years of lodging the application, the person or company has been convicted of :
the extent of the person's or company's compliance, within 4 years of lodging the application, with any law administered by us (e.g. income tax, GST)
whether the person has held an excise licence which has been cancelled, or
the person's or company's financial resources.

an offence under the excise legislation, or
an offence under Commonwealth, State or Territory law punishable by imprisonment for one year or longer (for an individual), or by a fine of 50 penalty units or more

an offence under excise legislation, or
an offence under Commonwealth, State or Territory law punishable by imprisonment for one year or longer (for an individual), or by a fine of 50 penalty units or more

Individual only

whether the person has participated in the management or control of a company that has had an excise licence cancelled
whether the person is an undischarged bankrupt
any misleading statement made in the application by the person, or
where any false statement was made in the application - whether the person knew it was false.

False and misleading statements are discussed below in ' Where a person makes false or misleading statements in their application '.

Company only

whether a receiver has been appointed over the property, or part of the property, of the company
whether the company is under administration under the Corporations Act 2001 (Corporations Act)
whether there is a current deed of company arrangement in place under Part 5.3A of the Corporations Act, or
whether the company is being wound up.

Where a person makes false or misleading statements in their application ^[63]

It is important that you provide information that is accurate and complete. If your application (i.e. your completed application form, any supporting documentation and any oral statements made), contains false or misleading statements we will take this into account.

Misleading statements.

With regard to this element, the term 'mislead' is not defined in the Excise Act. The Australian Oxford Dictionary , 2004, 2 ^nd edn, Oxford University Press, Melbourne defines 'mislead' as follows:

cause (a person) to go wrong, in conduct, belief, etc.
lead astray or in the wrong direction.

A misleading statement does not have to successfully mislead us, but it can be taken into account if it was reasonably foreseeable that we could have been misled when assessing the application.

Misleading may be by omission as well as what has been said.

Example 3A

You advise us that you have installed a state of the art security system at your premises. While true, you failed to advise us that a design fault has resulted in repeated false alarms to the point where you have switched off the security system and have no intention of re-engaging it. The design fault cannot be remedied. The only security actually in operation at the premises is a rusty padlock.

The information you provided, whilst not false, could lead us to believe that your premises are secure. This is misleading.

False statements

We can only take false statements into account if you knew they were false. ^[64]

In essence, a statement is false if it is not true. A false statement may be made expressly, or via omission. An example of the former is where you state you have no criminal convictions when in fact you have been convicted. An example of the latter would be to leave the question on your application form in relation to criminal convictions blank when in fact you have been convicted. In both instances, a false statement has been made.

Who are the associates that can be assessed under the fit and proper person test? ^[65]

To avoid situations where people with a high risk of non-compliance are able to exercise control over licence holders, certain associates can be assessed under the fit and proper person test.

The word associate effectively takes its meaning from the Income Tax Assessment Act 1936 and is summarised below:

An associate of a natural person (other than in the capacity of trustee) includes:

a relative ^[66] of the individual, for example, their spouse, parent, sibling, uncle or aunt
a partner of the individual or a partnership in which the individual is a partner
if a partner of the individual is a natural person otherwise than in the capacity of trustee, the spouse or child of the partner
a trustee of a trust under which the individual or their associate benefits, or
a company under the control of the individual or their associate. ^[67]

Although an associate includes a spouse, a legally married spouse of a person who lives separately and apart on a permanent basis is not an associate. ^[68]

An associate of a company includes:

a partner of the company or a partnership in which the company is a partner
if a partner of the company is an individual, the spouse or child of the partner
a trustee of a trust under which the company or their associate benefits
another entity (a company, partnership, trustee or an individual), or its associate(s) who controls the company, or
another company which is under the control of the company or the company's associate. ^[69]

The control of a company looks to whether another entity (including individuals):

has sufficient influence over the company, or
holds a majority voting interest in the company.

An associate of a trustee includes an entity or an associate of the entity that benefits or is capable of benefiting either directly or indirectly under the trust. ^[70]

For a partnership an associate includes each partner of the partnership or associate of the partner. ^[71]

(2) Skills And Experience ^[72]

The next criterion for licensing relates to skills and experience.

Skills and experience are not defined in the Excise Act or Excise Regulations. There is no Excise case law regarding skills and experience.

In forming an opinion as to whether you have the required skills and experience we will consider your ability to:

carry out the activity requiring a licence
conduct a business, and
comply with excise obligations.

It is important to note that you, as the applicant, do not necessarily need to possess the skills and experience yourself provided that you can demonstrate that you will use another person's skills and experience, for example by hiring them or using a consultant. Should that be the case, we will assess the other person's skills or experience.

Example 3B

Mr X, as a Director of Z Transport and Logistics Pty Ltd, applies for a storage licence.

Neither Mr × nor any of his staff have the skills and experience to comply with the company's excise obligations. This poses a risk that excisable fuel products may be sold without adequate record keeping, and may adversely affect revenue and compliance.

Therefore, when assessing this element of subsection 39A(2) in isolation, Z Transport and Logistics Pty Ltd would fail the requirements of skills and experience. However, a decision on granting a licence is made based on an assessment of all elements of subsection 39A(2).

Z Transport and Logistics Pty Ltd may choose to address the deficiency in skills and experience by such measures as appointing a Manager who has the relevant skills and experience.

(3) Physical Security Of The Premises ^[73]

Physical security relates to measures that prevent unauthorised access to excisable fuel products and thus protects against theft or loss of goods and excise revenue.

In forming an opinion about the physical security at the premises, we will consider:

the nature of the site
the kinds and quantities of goods to be kept, and
the procedures and methods adopted to ensure the security of goods .

Consideration of the nature of the site can include:

construction (for example floor, walls, ceiling, windows and doors) and whether material is difficult to penetrate or remove
barriers (for example fences or wire) to a standard that would prevent unauthorised access
locks and bars
alarms, security lighting, security guard patrols or closed-circuit TV cameras
physical security of all warehouse facilities within the site, and
fire alarms, smoke detectors, sprinklers etc.

Consideration of the kind and quantity of goods to be kept at the site can include:

the ease with which goods can be handled, for example, bottles of spirits are easier to move than fuel in a large refinery tank
the rate of excise duty applicable to the goods (goods that attract a greater rate of excise duty represent a greater revenue risk), and
the greater the quantity of excisable goods to be dealt with, the higher the level of physical security that would be required.

Consideration of the security procedures and methods can include:

gate security system that would identify all people entering and leaving the site, and confirm their right to do so
gate security system that would identify the type and quantity of all goods entering and leaving the site
surveillance system
procedures to handle and retain information from surveillance system (if there is one)
access control, for example by limited distribution of keys and access swipe cards or codes
security responses when breaches are detected, for example back to base system, and
an independent security audit function to oversee all of the above.

(4) Suitability Of Plant And Equipment ^[74]

Plant and equipment are considered suitable if they are capable of performing the intended tasks and will allow you to properly account for excisable fuel products and calculate the correct amount of excise duty.

Plant and equipment that are used in relation to goods at licensed premises include:

temperature measuring equipment
storage tanks
weighing equipment e.g. scales and weighbridges, and
volume measuring equipment.

(5) Market For The Goods ^[75]

In this criterion, we are primarily concerned with the presence of an available market within Australia. That market must be legal. Licensing is concerned with minimising the risk of excisable fuel products entering an illicit market in Australia and the resultant loss of revenue.

You must provide sufficient information to identify your proposed market.

You may be able to demonstrate that you have a market by, for example, supplying:

evidence of contracts (including 'in principle' contracts) you have negotiated, or
a business plan which outlines the market you have identified.

A legitimate market may exist overseas for locally manufactured excisable fuel products. Applications relating to overseas markets may be subject to additional scrutiny and you may be required to provide additional information or documentation as evidence of the legitimacy of your overseas market.

Therefore, market should be taken to mean that there exists a proven or demonstrated demand for a commodity, or an opportunity for (legally) buying or selling (trading in) a specified commodity. In such cases a market can be either in Australia or overseas.

If you intend to manufacture excisable goods and use them within the operation of your business, or entirely for personal (non-commercial) ^[76] use, you do not need to meet the market test.

Examples of this situation are:

a farmer who produces biodiesel to use in his farm equipment
a person who produces biodiesel for their personal non-commercial use.

(6) Ability To Keep Proper Books Of Account ^[77]

This criterion is whether you can keep 'proper books of accounts and records' that enable us to audit those records. It is your ability to keep the required records that must be determined.

You may be asked to demonstrate:

the recording systems you intend to use, whether they are manual or electronic
where an electronic record keeping system is used, systems documentation showing details such as screens, reports available and security controls, and
the internal documentation supporting the recording systems, ensuring that the recording systems will record sufficient detail.

(7) Delay Liability For Duty (Storage Licence Only) ^[78]

This criterion only relates to an application for a storage licence where the granting of the licence would delay liability for duty.

The liability for excise is imposed on goods at the time of manufacture. ^[79] However, it is not actually paid until a later point.

The wording in paragraph 39A(2)(k) "...delay the liability for duty" suggests that one is able to delay the point in time in which the liability arises. However, this is not possible as the imposition of excise, and therefore the time at which the liability arises, is not dependent on any further dealings or processes on those goods. It is only the payment of the liability, the duty, which can be delayed depending on how the goods are dealt with.

We consider that the only possible interpretation of section 39A(2)(k) is that it operates to delay the time the liability must be paid. A storage licence allows for the storage of excisable goods on which duty has not been paid. It effectively allows a manufacturer to defer the payment or transfer the liability to a storage licence holder. The question then arises as to how far down the distribution chain payment of an excise liability may be deferred.

It is our view that we may refuse to grant a storage licence where the grant of the licence would delay payment of duty beyond the point of storage occurring in the normal wholesale distribution of the goods. Using a different perspective, we may refuse to grant a storage licence when refusal is necessary to ensure that excise duty is paid before goods reach the retail level in the distribution chain.

In forming an opinion as to whether the granting of an excise storage licence would delay liability for duty, we will consider:

the purpose for which the goods are to be stored, and
whether the premises in question are for storage occurring in the normal wholesale distribution of the goods, or for storage beyond the normal wholesale distribution of the goods (for example, storage for a retail premises).

(8) Protect the Revenue ^[80]

The term 'necessary to protect the revenue' is not defined in the Excise Act.

The meaning of 'protect the revenue' was considered by Deputy President Forgie in Martino and Australian Taxation Office. ^[81] She said:

' 50. ... The expression "protect the revenue" is not defined in the Act and I am not aware of any authorities that have considered it. The word "revenue" has been considered in Stephens v Abrahams (1902) 27 VLR 753 by Hodges J. ...Hodges J took:

"... the 'revenue' to be moneys which belong to the Crown, or moneys to which the Crown has a right, or moneys which are due to the Crown,

The ordinary meanings of the word "protect" include "keep safe, take care of" ... and they would seem to be the senses in which the word is used in the expression "protect the revenue". Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally.

What is meant by the word "necessary"? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447:

"As to the word 'necessary' it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way.'

While this case was in relation to tobacco, the finding is equally applicable to fuel. 'Protect the revenue' therefore means ensuring that the Commonwealth receives the full amount of excise duty that is ultimately payable and we do not spend more Commonwealth funds than necessary to carry out our responsibilities.

3.3.2 WHAT ARE LICENCE CONDITIONS?

Licence conditions form part of your licence. They are restrictions, limitations or modifying circumstances. They may define permissible activities and require you to take certain actions if defined circumstances arise. If you fail to comply with a condition, we may suspend or cancel your licence. ^[82]

For information about when we can suspend or cancel your licence refer to Chapter 4 - Licensing: Suspension & Cancellation .

All excise licences are subject to certain conditions imposed by:

the Excise Act, and
us ('special conditions').

We are able to add, vary or modify special conditions even after the licence has been granted. ^[83] We will notify you in writing if we do so and provide you with an amended licence that includes the amended conditions.

Conditions imposed under the Excise Act

You must advise us in writing within 30 days if: ^[84]

you or any person participating in the management or control of a licensed company or premises is charged with or convicted of:
you become bankrupt
a person not listed in the licence application starts to participate in the management or control of the licensed premises or company, as the case may be
there is a change in the membership of a partnership that holds a licence
a company that holds a licence comes under receivership, administration or begins to be wound up
there is a change that substantially affects the physical security of the licensed premises or plant and equipment used in relation to excisable goods at the premises
you hold a manufacturer licence and you cease to manufacture excisable goods at the licensed premises, or
you hold a storage licence and you cease to keep and store goods at the licensed premises.

an offence against a provision of the Excise Act, or
an offence against a law of the Commonwealth, a State or a Territory that is punishable by imprisonment for a period of one year or longer or by a fine of 50 penalty units or more

Special conditions

We can also impose special conditions on your licence if we find it necessary to protect the revenue or ensure compliance with the Excise Act. ^[85] Examples of conditions that have been imposed under this provision are:

the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee
restrict the storage of excisable goods (by a storage licence holder) to ship's stores and aircraft's stores, and/or
restrict the quantity of excisable goods that a licensed manufacturer may manufacture.

The examples of special conditions given above are only for illustrative purposes. The decision to impose special conditions is considered on a case by case basis.

You can apply to have these special conditions varied, revoked or added. We will consider and advise you of our decision.

If you are not satisfied with our decision, you can ask for a review by lodging an objection within 60 days of the day we notify you. ^[86]

For more information about your review rights refer to Chapter 8 - Reviews and objections .

3.3.3 WHAT ARE SECURITIES?

We can use special conditions as a mechanism to increase the level of protection of the revenue or to ensure compliance with the Excise Act. However, prior to granting the licence we may also require you to provide a security to achieve the same result. Even if we don't require a security prior to the granting of the licence, we may ask for a security at a later time. We can also ask you to increase the value of any security you may already have given. ^[87]

A security can be a bond, guarantee, cash deposit or similar financial product for an amount of money which may be forfeited if there is a failure to comply with the Excise Act. It is not necessary for a liability to arise as a result of the failure to comply, for the security to be forfeited. There is no statutory limit to the amount of a security but the amount is generally set by reference to the level of revenue at risk.

We cannot apply these securities against other tax debts.

We review securities every three years, at which time they may be extended, revised or cancelled.

The decision to require a security is not reviewable under the objection process. However, there may be other avenues for review, for example you may seek an informal review of our decision.

For information about your review rights refer to Chapter 8 - Reviews and objections.

3.3.4 ASSESSING YOUR APPLICATION TO RENEW YOUR LICENCE

Licences are only valid for a specified period. Renewal of a licence is not automatic and you must apply to renew your licence before it expires. In assessing an application to renew a licence we consider the same criteria that exist for cancelling a licence. That is, if reasons exist for us to cancel your licence (assuming that it had not expired) then we may decide not to renew your licence.

	For more information about the criteria for cancelling a licence refer to Chapter 4 - Licensing: Suspension & cancellation .
	If you have applied before the date of expiration on your licence but we have not made a decision by this date, the licence remains in force until such time as we do make a decision.

If we refuse your licence renewal, you may object to the decision.

For information about your review rights refer to Chapter 8 - Reviews and objections.

As an alternative to non-renewal of a licence, we may:

alter existing conditions on your licence
impose new conditions, or
require you to provide a financial security.

If you have not applied to renew your licence when the licence expires on 30 September, you can no longer carry out excise related activities.

3.4 PROCEDURES

3.4.1 WHAT HAPPENS IF MY LICENCE IS NOT GRANTED?

If we do not grant a licence, we will notify you of the decision and provide you with an explanation for our decision.

If you are not satisfied with our decision, you can ask for a review by lodging an objection within 60 days of the day we notify you. ^[88]

For information about your review rights refer to Chapter 8 - Reviews and objections.

3.4.2 WHAT WILL HAPPEN IF MY LICENCE IS GRANTED?

If we grant you a licence, we will post it to you. All special conditions will form part of the licence. We will also provide you with an establishment number for the premises specified on your licence. This will be needed in some of your dealings with us.

You may receive a visit or phone call from us to see whether you understand your obligations or need further assistance to comply.

3.4.3 HOW DO I RENEW MY LICENCE?

We will send you an invitation to renew your licence at least six weeks before the licence expires. We will also send an application form containing your details. You must verify the details on the application, provide any required information, sign and return it to us before your licence expires.

Your existing licence will remain valid until we make a decision about your application for renewal. ^[89]

Licences are renewed for a period of three years.

Example 3C

Your licence is due to expire on 30 September 2014 (the expiry day). On 1 September 2014 you apply to renew the licence. We have not decided the application by the end of 30 September 2014.

The licence continues in force automatically past 30 September 2014 until we decide the application.

On 15 October 2014 we decide to renew the licence. The renewed licence expires on 30 September 2017.

If you wish to renew your licence but you have not received an invitation to renew within four weeks of the date of expiry you need to contact us.

3.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on licensing matters contact us as follows:

phone 1300 137 292
fax 1300 130 916
email us at ATO-EXC-Petroleum@ato.gov.au , or
write to us at

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.

3.5 WHAT PENALTIES CAN APPLY FOR OFFENCES IN RELATION TO MAKING AN APPLICATION?

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

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 may apply ^[90]

3.6 TERMS USED

Excisable fuel 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 fuel products, we have used the term excisable fuel products.

Excisable fuel products include:

petrol
diesel
renewable diesel
crude petroleum oil
condensate
heating oil
kerosene
fuel ethanol
biodiesel
compressed natural gas (CNG)
liquefied natural gas (LNG), and
liquefied petroleum gas (LPG).

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $210.

3.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation:

Part 5.3A - Administration of a company's affairs with a view to executing a deed of company arrangement

3.7.6 Crimes Act 1914

Section 4AA - Penalty units

Excise guidelines for the fuel industry

	Date:	Version:
	1 July 2006	Original document
	1 April 2015	Updated document
	12 July 2017	Updated document
	11 December 2017	Updated document
	4 June 2021	Updated document
You are here	1 July 2024	Current document

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Excise guidelines for the fuel industry

03 LICENSING: Assessing applications

3.1 PURPOSE

3.2 INTRODUCTION

3.3 POLICY AND PRACTICE

3.3.1 LICENSING CRITERIA

(1) 'Fit And Proper' Person Or Company [62]

What does fit and proper mean?

Where a person makes false or misleading statements in their application [63]

Who are the associates that can be assessed under the fit and proper person test? [65]

(2) Skills And Experience [72]

(3) Physical Security Of The Premises [73]

(4) Suitability Of Plant And Equipment [74]

(5) Market For The Goods [75]

(6) Ability To Keep Proper Books Of Account [77]

(7) Delay Liability For Duty (Storage Licence Only) [78]

(8) Protect the Revenue [80]

3.3.2 WHAT ARE LICENCE CONDITIONS?

Conditions imposed under the Excise Act

Special conditions

3.3.3 WHAT ARE SECURITIES?

3.3.4 ASSESSING YOUR APPLICATION TO RENEW YOUR LICENCE

3.4 PROCEDURES

3.4.1 WHAT HAPPENS IF MY LICENCE IS NOT GRANTED?

3.4.2 WHAT WILL HAPPEN IF MY LICENCE IS GRANTED?

3.4.3 HOW DO I RENEW MY LICENCE?

3.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

3.5 WHAT PENALTIES CAN APPLY FOR OFFENCES IN RELATION TO MAKING AN APPLICATION?

3.6 TERMS USED

3.7 LEGISLATION (quick reference guide)

3.7.1 Excise Act 1901

3.7.2 Excise Tariff Act 1921

3.7.3 Income Tax Assessment Act 1997

3.7.4 Income Tax Assessment Act 1936

3.7.5 Corporations Act 2001

3.7.6 Crimes Act 1914

(1) 'Fit And Proper' Person Or Company ^[62]

Where a person makes false or misleading statements in their application ^[63]

Who are the associates that can be assessed under the fit and proper person test? ^[65]

(2) Skills And Experience ^[72]

(3) Physical Security Of The Premises ^[73]

(4) Suitability Of Plant And Equipment ^[74]

(5) Market For The Goods ^[75]

(6) Ability To Keep Proper Books Of Account ^[77]

(7) Delay Liability For Duty (Storage Licence Only) ^[78]

(8) Protect the Revenue ^[80]