Excise guidelines for the tobacco industry

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Chapter 7 - Remissions, refunds, drawbacks & exemptions

Purpose

This chapter deals with:

• when you can apply for a remission, refund or drawback of excise duty
• what happens if you are overpaid a refund or drawback of excise duty
• when tobacco goods are free from excise duty
• how to apply for a refund or drawback of excise duty, and
• penalties that can apply to offences in relation to remissions, refunds, drawbacks and exemptions.

7.1 Introduction

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture.

A refund is the repayment of duty that has already been paid.

A drawback is a repayment of duty already paid. It is similar to a refund, but applies where duty-paid goods are exported.

In some circumstances the duty you pay on goods may be subject to a complete or partial refund or drawback. ^[194]

7.2 Policy and practice

7.2.1 When can I apply for a remission of excise duty?

As excisable tobacco goods are deemed entered and delivered into home consumption at the point of manufacture, they are no longer subject to excise control and there are no circumstances under clause 1 of Schedule 1 to the Excise Regulation in which an application for remission can be made. Generally the circumstances will relate to an application for a refund of the duty paid.

When are excisable tobacco goods subject to remission without an application?

Excisable tobacco goods are subject to remission without application prior to the duty being paid at the end of the seven-day excise tobacco period (this effectively means they are exempt from duty) when they are for official use but not for trade by ^[195] :

• parties that use tobacco for an approved medical, scientific, horticultural or agricultural purpose (the relevant approvals should be sought from us) ^[196]

Example 7A Tobacco plants are grown and used by an approved educational facility for scientific purposes. The facility has a producer and manufacturer licence to grow and manufacture the tobacco goods. The facility has an automatic remission of duty on all tobacco goods that it uses. As part of the conditions of the licence, the facility must also destroy, with approval all tobacco not used in their experiments and retains records of the destruction (for example, date, volume and type of goods destroyed).

• the Governor-General or any member of the Governor-General's family ^[197]
• State Governors or any member of a State Governor's family
• the Australian American Foundation (Australian-American Fulbright Commission)
• the Government of another country, under an agreement between that Government and the Australian Government
• persons covered by a Status of Forces Agreement ^[198] , and

Example 7B A manufacturer receives an order from the Australian Defence Force for supply of cigarettes to US defence personnel undertaking joint military training exercises in the Northern Territory. A remission of the excise payable can be applied to tobacco goods and will be reflected in the sale price.

• the personnel of sea-going vessels of the Royal Australian Navy (RAN) or Australian Military Forces (AMF) (see below for more detail). ^[199]

If you are not certain whether someone falls into one of these categories, you should contact us by phone on 1300 137 290 .

Some restrictions apply to tobacco goods for the RAN and AMF. Tobacco, cigars and cigarettes may be supplied free of duty when:

• the goods are for consumption by the personnel of sea-going vessels of the RAN or the AMF when
  • such vessels are in full commission, and
  • the goods are consumed on such vessels. ^[200]

To supply tobacco goods under these circumstances, you must first ensure the receiver meets the relevant criteria. For example, you should only accept orders, stating that the goods are for official use, on the official stationery, or official order, of eligible people or organisations. You must keep a copy of this documentation.

You do not have to apply for a remission and you do not have to include these goods on your excise return, but you must keep sufficient records of each transaction

7.2.2 When can I apply for a refund of excise duty?

You can apply for a refund of excise duty paid on excisable tobacco goods if the following circumstances apply:

1. Duty has been paid through manifest error of fact or patent misconception of the law. ^[201]
   
   This circumstance applies to an error that is evident, obvious or apparent and also in situations where duty has been paid in error for goods entering home consumption that are not excisable. In both cases a refund of the duty paid would be payable.

Example 7C A tobacco manufacturer calculates the excise on pouch tobacco on the basis that the packages contain 50 grams whereas they only contain 30 grams. Excess duty is paid through an obvious error of fact. The manufacturer applies for a refund of the duty overpaid through manifest error of fact.

2. Duty-paid goods have been taken up as ship's or aircraft's stores. ^[202]
   
   Ship's stores on overseas ships and aircraft's stores on international flights are not subject to excise duty. ^[203] Where duty has been paid and the excisable tobacco goods are subsequently re-directed for use on ships or aircraft travelling overseas, this refund circumstance may apply.
3. Duty paid tobacco goods are returned to an excise licensed premises, or a person authorised by the manufacturer of the goods to receive goods on behalf of the manufacturer, and the returned tobacco is destroyed or mixed with other tobacco goods of a similar kind, that is, loose tobacco with loose tobacco, cigarettes or cigars with tobacco that is to be used in the manufacture of cigarettes or cigars. ^[204]

	Tobacco goods that are to be destroyed are to be returned to the manufacturer or can be returned to a person authorized by the manufacturer to receive the tobacco goods on their behalf. This is generally a place where the goods will be destroyed (furnace or council tip).
	A refund will not be allowed for returned goods under this circumstance unless a notice of intention to destroy or mix the goods has been given to the Commissioner at least seven days before that event. [205]

Example 7D Cigarettes have gone stale at retailers' premises. The manufacturer's sales representative arranges for the return of the cigarettes to the manufacturer's distribution premises with a refund or credit to the retailer. The manufacturer notifies us at least seven days before they destroy the cigarettes that they intend to destroy them. The manufacturer applies for a refund of duty on the returned cigarettes. Note: Refund circumstance 1 does not apply in this instance because the goods have gone stale after they passed out of excise control.

• Refunds for tobacco goods returned to the manufacturer for remixing or destruction are exclusively claimed by the manufacturer who paid the excise duty on manufacturing the tobacco goods.
• The historical experience has been that manufacturers replace returned tobacco goods or provide equivalent compensation by credit note on a 'like for like' basis. That is, they also compensate the party returning their goods in respect of duty paid by that other party. This is done in the context of agreement and understanding between them in those circumstances that only the manufacturer can and will claim the relevant duty refund.
• When calculating the amount of refund for tobacco goods returned to the manufacturer, we recognise that due to the nature of these returns (that is, usually stale product that may have been duty paid at different times it is sometimes unrealistic to expect you to identify the actual rate of duty paid on each product when the goods were originally manufactured and delivered into home consumption.
• Therefore, when making claims in relation to returned tobacco goods pursuant to item 7 of the table in subclause 1(1) of Schedule 1 to the Excise Regulation a tobacco manufacturer may use the rate in force six months prior to the refund claim or where they have evidence of the excise duty paid on the returned goods then the claim can be calculated using that information.

4. Duty has been paid on excisable tobacco goods and they are sold to a diplomatic or consular mission. ^[206]

For refund circumstance 1 and 2 in section 7.2.2 above, your application must be submitted within 12 months of the date on which the excise duty was paid. ^[207] There are no time limitations for lodgment of a refund application under the other circumstances listed above.

7.2.3 When can I apply for a drawback of excise duty?

You can apply for a drawback if you export tobacco goods that have had excise duty paid on them. ^[208]

We will only pay a drawback if ^[209] :

• prior to the exportation, you advise us that you intend to claim a drawback (We can exempt you from this requirement, in writing, either on all claims for drawback or any particular claim ^[210] )
• before exportation of the excisable tobacco goods on which duty has been paid, the goods are available for inspection by us
• you have not claimed a refund of excise duty in relation to the exported excisable tobacco goods
• the excisable tobacco goods have not and are not intended to be returned to Australia after they have been exported
• you keep records showing
  • that duty was paid on the tobacco goods (for example invoice), and
  • the tobacco goods were exported (for example, an export declaration number or bill of lading and evidence such as payment by the buyer)
• you lodge a drawback claim in the approved form no later than 12 months after the tobacco goods were exported, and
• the amount of the claim is at least $50.

The amount of the drawback will not exceed the amount of excise duty that was paid. ^[211]

Example 7E A cigarette distributor purchases a quantity of excise duty-paid cigarettes. The distributor notifies us that they intend to export the cigarettes and makes them available for inspection by us. They then export them to Fiji. The cigarette distributor applies for a drawback of the excise duty component of the cigarettes. To support the application, the company provides us with copies of invoices of purchase and the Bills of Lading, which will include details of the export declaration notice (EDN) number.

7.2.4 What happens if I am overpaid a refund or drawback?

If we overpay you by way of a refund or drawback then you must pay the overpaid amount back. We can require that you pay back the amount and if you do not repay the amount within the time we specify we can recover the amount through the courts as a debt due to the Commonwealth. ^[212]

7.2.5 When are excisable tobacco goods free from excise duty?

Excisable tobacco goods are not liable for duty if they are:

• exported
• sold for use as ship's or aircraft's stores ^[213]
• with our approval, delivered as small samples ^[214] , or
• subject to remission without application. ^[215]

What are ship's and aircraft's stores?

Ship's and aircraft's stores are goods for the use of passengers or crew on international journeys (for example, cigarettes for sale to passengers on board a cruise liner).

There are limits on the quantities of excisable tobacco goods that are not liable to excise duty as ship's stores ^[216] :

• cigarettes must be sold to passengers or crew in individual packets or tins of not more than 50 sticks
• loose tobacco (for example, pipe or cigarette tobacco) must be sold in quantities of not more than 120 grams, or
• Cigars must be sold in individual packets, tins, or boxes of not more than 25 cigars.

Ship's and aircraft's stores are goods for the use of the passengers or crew of an international aircraft or overseas ship. In the normal course of events such goods can be supplied to a ship or aircraft without an entry and without duty being paid; the authority for doing this being an approval granted under section 129 of the Customs Act.

Can I deliver samples without payment of duty?

Yes, you may be able to deliver small samples without payment of duty and without entry. You must apply to us for approval and your application must:

• be in writing
• specify who the sample is for
• specify the quantity for approval, and
• specify the purpose of the sample.

You do not include approved samples in your excise return ; however, you must keep records of any samples you deliver.

If you need more information on samples call us on:

• phone 1300 137 290

Or to apply for approval, send your application to us by:

• the Online Services for Business
• email at tobacco@ato.gov.au ,
• or posting to

• Australian Taxation Office
• PO Box 3514
• ALBURY NSW 2640

7.3 Procedures

7.3.1 How do I apply for a refund?

An application for a refund must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested. ^[217]

For refund circumstance 1 and 2 in section 7.2.2 above, your application must be submitted within 12 months of payment depending on your circumstances. ^[218]

To ensure the excisable tobacco goods that are to be destroyed do not find their way into the Australian domestic market, we may wish to inspect or supervise the disposal of the goods. If excisable tobacco goods or tobacco leaf must be destroyed off site, you must submit an application and it must be approved by us prior to moving them to the place of destruction. For tobacco leaf the approval will also include a movement permission. ^[219]

	You should contact us before moving or destroying any tobacco products subject to remission or refund. We will provide you with direction and advise you if the goods are to be inspected or the destruction supervised.
	For more information about movement permissions refer to Chapter 4 - Movement permissions .

You can elect to have a refund credited to your excise account or paid directly into your bank account.

To apply for a refund, send us a completed Excise refund (NAT 4287). You can use the Excise refund instructions (NAT 15771) to help you complete this form. Applications can also be made on company letterhead as long as all the relevant information is provided.

If you are not satisfied with our decision to refuse your refund or remission, you can request a review of our decision by lodging an objection within 60 days.

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

7.3.2 How do I apply for a drawback?

An application for a drawback must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested. ^[220]

Your drawback application must be submitted no later than 12 months after the goods are exported. ^[221]

To apply for a drawback of duty, send us a completed Excise drawback (NAT 4287) or an application on your business letterhead. You can use the Excise drawback instructions (NAT 15688) to help you complete NAT 4287.

If we refuse to pay your drawback and you are not satisfied with our decision you can request a review of our decision by lodging an objection within 60 days.

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

7.3.3 What do I do if I need more information?

If you need more information on remissions, refunds, drawbacks and exemptions contact us as follows:

• the Online Services for Business
• phone 1300 137 290
• email at tobacco@ato.gov.au , or
• write to us at

• Australian Taxation Office
• PO Box 3514
• ALBURY NSW 2640

We will ordinarily respond to electronic requests within 15 business days and finalise private rulings within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

7.4 What penalties can apply to offences in relation to remissions, refunds, drawbacks and exemptions?

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

7.4.1 Evade

If you evade payment of any duty which is payable the maximum penalty is five times the amount of duty on the excisable tobacco goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units. ^[222]

7.4.2 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, the maximum penalty is a penalty not exceeding the sum of 50 penalty units and twice the amount of duty payable on those goods. ^[223]

Latest update

December 2021

Section

Changes and updates

Throughout

This chapter was updated to take into account law changes that impacted the tobacco industry, which repealed provisions allowing for the movement and storage of excisable tobacco goods on which duty has not yet been paid. The update also reflects the current duty rate and replace references from the old Business Portal to the new Online Services for Business. Updated to new format and style including footnotes.

Details of previous updates are available through the versions linked to in the table below.

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