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  • Diversion of illicit alcohol

    Sometimes businesses illegally divert illicit alcohol into the Australian domestic market for home consumption after:

    • a remission, refund or drawback has been claimed
    • spirits have been obtained for an approved concessional purpose.

    Remission, refund or drawback claims

    Sometimes businesses make incorrect claims for a remission (waiver), refund or drawback of excise duty. In these situations, once the remission, refund or drawback of excise duty is granted, the excisable alcohol is then diverted into the Australian market for consumption.

    In some situations, claims are fraudulently made. In other situations, the claims are made correctly however the products may be diverted into the Australian market by an entity other than the claimant (for example by the operator of a destruction facility).

    Other than a remission for eligible entities under the Remission scheme, you can generally only claim a remission of the excise duty you would have had to pay for your goods if both of the following apply:

    • your goods can't be delivered into the Australian domestic market
    • you haven't paid the excise duty for them.

    You can only claim a refund of excise duty you've paid on goods delivered for domestic consumption under certain situations. You can't claim a refund for duty-paid products that go missing, or are destroyed, in transit.

    You can only claim a drawback of excise duty if you export excisable alcohol products that have had excise duty paid on them.

    For more information see Excise refunds and drawbacks for excisable alcohol.

    Example: Suspicious packaging with tampered lot codes

    An excise-licensed manufacturer has a specific quantity of alcohol that is unfit for human consumption.

    They apply to us for:

    • permission to destroy the alcohol on which duty has not been paid
    • remission of the excise duty.

    We grant permission for the alcohol to be moved to a destruction facility and destroyed.

    The manufacturer sends the alcohol to the destruction facility, however, it is not destroyed. Instead, the destruction facility re-packages it or removes lot/batch codes and supplies it to a wholesale distributor, who then sells it, duty unpaid, to a retailer at a significantly reduced price.

    The retailer sells the product to consumers at a much cheaper price than similar alcohol products, while still making a profit.

    In this example, an offence (see Note) under the Excise Act has been committed by each entity in the supply chain, the:

    • destruction facility
    • wholesale distributor
    • retailer.

    Note: There are various offences and consequences that could apply in this situation. Penalties may include having to pay up to five times the amount of duty that would have been payable or criminal prosecution.

    In addition, selling products that the manufacturer declared were unfit for human consumption poses a risk to public health.

    End of example

    Concessional spirits used for non-concessional purposes

    Sometimes concessional spirits are used for non-concessional purposes and excise duty isn't being paid. One example is where concessional spirits are used to produce an excisable alcoholic beverage. This is an offence and could pose a risk to public health if the concessional spirit used is unfit for human consumption (denatured spirit).

    Concessional spirits are generally very high-strength spirits (around 96% alcohol by volume). A common example is methylated spirits.

    You can only use concessional spirits for approved concessional purposes and you generally need to hold a concessional spirit permit.

    Spirits are only free of excise duty if they are:

    • used for approved concessional purposes – that is, used for either
      • fortifying Australian grape wine or grape must
      • an industrial, manufacturing, scientific, medical, veterinary or educational purpose
    • denatured in accordance with a formula approved by us, that is they
      • are made unfit for human consumption
      • aren't for use in an internal combustion engine.

    How to correct a mistake or amend a return

    If you need to fix a mistake or amend an excise return to change information you have previously lodged, for example because you haven't reported and paid all the excise duty you needed to, you should do this as quickly as possible.

    To reduce penalties that may apply you can make a voluntary disclosure.

    You may also want to seek independent professional advice.

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    Last modified: 02 Dec 2021QC 63184