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  • Licensed manufacture or storage of unreported product

    We know that most businesses do the right thing. However, some businesses that manufacture or produce excisable alcohol, or store underbond excisable alcohol don't report all the excisable alcohol products they are required to.

    Excisable alcohol is 'underbond' until the excise duty has been paid or otherwise acquitted.

    For example, the alcohol is no longer underbond because;

    • the product delivered into the Australian domestic market for home consumption has been reported to us, or
    • a remission has been applied for the applicable excise duty.

    Selling illicit alcohol is illegal and is also unfair to other businesses who are doing the right thing.

    If we approve you to hold an excise manufacturer licence, there are obligations that you must meet, including:

    • keeping proper records of all excisable alcohol you manufacture, produce or store under your licence
    • reporting on your excise return the full and correct amount of all excisable alcohol you enter into the Australian domestic market
    • paying the full and correct amount of excise duty for all excisable alcohol you manufacture at the correct time, where the automatic remission available under the Remission scheme doesn't apply (for example because you are not an eligible manufacturer or you have reached the threshold).

    If we approve you to hold an excise storage licence, you need to:

    • keep proper records of all excisable alcohol you store under your licence
    • report on your excise return and pay the full and correct amount of excise duty on all excisable alcohol you store and then enter into home consumption at the correct time

    Example: Bonus stock supplied by licensed manufacturer that is not entitled to an automatic remission under the Remission scheme

    A business, that holds an excise manufacturer licence, sells bottles of spirit it has manufactured to a retail bottle shop and includes a significant amount of ‘bonus stock’.

    The manufacturer gives the retailer an invoice for the sale. While the price of the product on the invoice appears to include excise duty, the quantity of product on the invoice is significantly less than what was supplied because the invoice does not include the bonus stock.

    By providing the bonus stock to the retailer, the manufacturer is able to sell the product to the retailer at a cost for the total supply that is less than the amount of the excise duty component of the supply.

    The retailer is then able to sell the product to consumers at a discount, while still making a profit.

    In this example, an offence (see Note) under the Excise Act has been committed by both the:

    • licensed manufacturer
    • retailer.

    Penalties may include having to pay up to five times the amount of duty that would have been payable or criminal prosecution.

    Note: There are various offences and consequences that could apply in this situation.

    End of example

     

    Example: Export diversion by storage licence holder

    A wholesaler, that holds an excise storage licence, stores well-known brands of beer and spirits, underbond at a licensed warehouse.

    The wholesaler pays excise duty at the correct rate on some of the beer they store, at the time it is entered for home consumption. They then load the remaining underbond beer into export containers, at their licensed warehouse. However, they incorrectly declare the beer they are exporting to be spirits in the Australian Border Force (ABF) Integrated Cargo System (ICS).

    The wholesaler then diverts the underbond spirits that they declared to ABF as exported, into the Australian domestic market for sale. They either sell the spirits directly to a retailer, or to a retailer via wholesale distributor, without the payment of excise duty.

    The wholesaler sells the spirits to the retailer at a price that is significantly below the price the brand would usually sell for because no excise duty has been paid on the spirits. The retailer sells the illicit spirits to consumers at a discount, while still making a profit.

    In this example, an offence (see Note) under the Excise Act has been committed by both the:

    • excise storage licence holder (the wholesaler)
    • retailer.

    Penalties may include having to pay up to five times the amount of duty that would have been payable or criminal prosecution.

    Note: There are various offences and consequences that could apply in this situation.

    End of example

    Selling illicit alcohol

    Some alcohol products are being sold, offered for sale, or entered into the Australian domestic market for consumption without the required excise or customs duty being paid. This is what we mean by 'illicit'. We treat it very seriously as it's illegal, and unfair to businesses who do the right thing.

    Excise duty is a tax that applies to beer, spirits and other excisable alcoholic beverages manufactured in Australia before they are sold to consumers.

    Customs duty must be paid on equivalent imported alcohol products.

    Low price alcohol

    While a key indicator of illicit alcohol is unrealistically low prices, lower alcohol prices can still exist in the market.

    We expect to see some lower priced products in the market following the introduction of the Excise remission scheme for manufacturers of alcoholic beverages (Remission scheme).

    The Remission scheme provides eligible alcohol manufacturers with a remission of excise duty on alcoholic beverages they manufacture. The remission is up to a maximum of $350,000 per financial year.

    How much of that remission is passed onto consumers as lower prices depends on the manufacturer.

    Excise duty will still need to be paid when:

    • the manufacturer has reached the threshold for the financial year
    • the product is not covered under the Remission scheme
    • the manufacturer does not meet the eligibility criteria

    We are focused on each part of the supply chain including:

    • manufacturers
    • wholesale distributors
    • importers
    • retailers.

    Responsibility of manufacturer or producer

    The manufacturer of excisable alcohol is generally legally responsible for paying the excise duty on excisable alcohol it manufactures before it's entered into the Australian domestic market for consumption, unless:

    • they are entitled to, and have applied, an automatic remission under the Remission scheme
    • they pay excise duty after the excisable alcohol is delivered into the Australian domestic market under an approved periodic settlement permission
    • it is sold underbond pursuant to a movement permission from us.

    If you manufacture excisable alcohol without a manufacturer licence, you will still have an excise liability for the alcohol you manufacture.

    Responsibility of distributor or retailer

    Alcohol distributors and retailers need to understand that if they purchase illicit alcohol products and then sell them (or offer them for sale), they are also committing an offence under the Excise Act. Penalties and other consequences may apply. This is regardless of whether the distributor or retailer knew that duty had not been paid on the alcohol.

    If we find that the distributor or retailer knowingly or recklessly purchased the illicit alcohol for resale, more serious penalties and consequences may apply, including criminal convictions and imprisonment.

    Similar penalties apply to the sale of imported alcohol on which excise equivalent customs duty should have been paid.

    Taxpayer Alert TA 2021/1 – Retail sale of illicit alcohol – describes our concerns about arrangements where alcohol retailers are knowingly or recklessly purchasing illicit alcohol for the purposes of resale.

    What to look out for

    We recommend that distributors and retailers be alert to situations that may indicate a supplier is involved in the supply of illicit alcohol:

    • Check the product price and labelling  
      • Make sure the price is realistic.
      • Be careful when offered 'bonus stock' that substantially reduces the price of the total supply.
      • Check if the price looks odd when compared to similar product from other suppliers.
      • Watch out for incorrect or odd product labelling, including country of origin, supplier/manufacturer details, lot identification, barcode, tampered lot codes.
       
    • Check the invoice details   
      • Ensure the amount of product matches what was delivered.
      • Be alert to missing, vague or incorrect product descriptions.
       
    • Check the supplier's details
      • Confirm if they hold an ATO-issued manufacturer or storage licence.
      • Be careful of requests to hold or store product without purchasing it.
      • Verify the bona fides of new suppliers.
      • Check if they are registered on the Australian Business RegisterExternal Link.
       
    • Check your internal controls
      • Monitor your stock.
      • Understand how much excise duty is payable on different alcohol products by checking the excise duty rates for alcohol on our website.
      • Verify the bona fides of new suppliers.
       

    If you purchase directly from an alcohol manufacturer, you can contact us for certain information about the excise licences and permissions of those suppliers.

    What to do if you have been sold illicit alcohol products

    If you are concerned you may have purchased illicit alcohol, or otherwise have illicit alcohol in your possession, we can help you rectify the problem and encourage you to:

    You may also want to seek independent professional advice.

    A visual factsheet – Could you be selling illicit alcohol without realising it?External Link can be downloaded for your future reference from our Publication Ordering System as a PDF.

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    Last modified: 02 Dec 2021QC 63184