Welcome and introductions
Tony Poulakis welcomed members, noting that this meeting was being held by teleconference due to the impact of COVID-19.
No conflicts of interest raised by members.
Minutes of the previous meeting of 10 July 2019 had been published on the ATO website and the three action items had been finalised. There would be a further update on action item 10072019-2-1 as part of ATO Updates – Justified Trust.
Reflections of 2019–20 and compliance focus areas for 2020–21
Andrew McIver provided summaries of the alcohol and Wine Equalisation Tax (WET) environments and the planned compliance focus for 2020–21.
Alcohol excise - results from 2019–20 and focus for 2020–21
The ATO’s alcohol excise tax gap for 2017–18 had been published on 19 October estimating the difference between actual collections and theoretical collections (based on methodology) as $596m.The vast majority of the amount related to activities undertaken by a small number of entities in a variety of schemes in the excise and customs systems. Apart from these, alcohol excise compliance appeared to be very good. There were no systemic issues identified, apart from some smaller, new entities not understanding excise calculations.
The ATO had focused on six key areas – outstanding lodgments and debt, with follow up calls which recovered the majority of the debt; continued ‘New to Excise’ tailored contact, with 226 calls made over the year; continued Excise Client Manager (ECM) program, aimed at education and assistance to large entities; understanding control frameworks for larger excise payers; a particular focus on illicit alcohol; and monitoring of clearances, lodgments and debt levels, including contact with lead industry bodies to understand industry impacts of COVID-19. The ATO noted that in general, clearances had increased, however the structure making up the market clearances was different. This was caused by the closure of businesses such as pubs, clubs and restaurants.
The main focus for 2020–21 would be on illicit operations. Some high-risk cases were underway, and others were expected to commence soon. The ATO would also continue to follow up lodgments and debt with calls to entities as part of a staged approach to initially remind of obligations, with a later reminder of consequences of failure to lodge/pay debt and finally followed up with stronger action in the new year.
Concessional spirits will be monitored, particularly those permits allocated to assist in the production of hand sanitiser, with calls to entities to ascertain whether permits and licences were still required. The ATO would also be reminding businesses that the concession for repackaging beer and takeaway alcohol is due to finish on 31 January 2021.
The ‘New to Excise’ and ECM program would continue in 2020–21 and regional visits were expected to take place in the last quarter of the 2020–21, depending on COVID-19 requirements. The level of confidence review of controls frameworks of larger clients would also continue.
Industry members acknowledged the industry assistance provided by the ATO during 2020, including deferral of excise duty payments and the JobKeeper stimulus package, 'which were responsible for the survival of many businesses'.
WET - results from 2019–20 and focus for 2020–21
The ATO’s WET tax gap for 2017–18 had been published on 19 October estimating the gap as $37m. This had been based on data and activities prior to legislative amendments introduced in 2018–19. Data had shown movement around values going up and credits decreasing which was an expected result of those amendments.
The ATO was aware of some smaller entities that were exporting but still claiming credits for WET. Contact would be made with these entities to remind them to adjust their claims.
For 2020–21, the ATO would continue to monitor lodgments and payments, as well as work to gain an understanding of the impact of COVID-19, particularly to cellar door businesses and entertainment facilities.
ATO focus topic
Approach to illicit alcohol – Tony Poulakis, Matthew Duckworth, Naomi Schell.
The illicit alcohol risk was an increased focus for the ATO and Australian Border Force (ABF) to ensure a level playing field for industry. It related to serious and deliberate non-compliance resulting in dutiable alcohol entering the market without the proper amount of duty being paid. Non-compliant and illicit movement of alcohol on export was also of increasing concern. The alcohol tax gap had been published for the first time and the ATO and ABF were seeking to reduce the gap from a revenue perspective but also to ensure those who comply were not being disadvantaged.
Known illicit alcohol activities included unlicensed manufacture, licensed manufacture with unreported excise duty, product diversion, smuggling and fraud. The tax gap also provided evidence for ABF to streamline and target areas of illicit trade at the border. The ATO and ABF have an aligned approach to identify and take action where serious non-compliance is detected. Methodologies for evasion of duty ranged from simple to extremely complex, involving several entities.
The ATO’s Illicit Alcohol Improvement Project focused on improving identification, correction and prevention strategies. The ATO had made a significant investment in intelligence resources to identify groups and entities involved in non-compliant activities and were linking across the Commonwealth through the Black Economy Standing Taskforce as well as working with state police, state-based liquor licensing and health authorities. During the previous 18 months, the ATO had undertaken a number of corrective activities, including suspension and cancellation of licences and permissions, finalised a number of audits with significant revenue outcomes and destroyed significant amounts of bulk and packaged duty-unpaid stock as part of audit activity. As part of prevention work, the ATO had published updated web content about the alcohol tax gap and 'what attracts our attention'. Licence and permission conditions would be more specifically tailored and monitored, and there would be more stringent requirements around refunds, remissions and drawbacks. A retailer strategy is being rolled out to ensure that retailers were aware of penalties where they deliberately or even negligently engage in the sale of illicit alcohol, types of arrangements and products to look out for and how to contact the ATO with information or concerns. The strategy included a Taxpayer Alert which was distributed as a draft for comment and expected to be finalised in early 2021.
The ABF was looking to complement the work of the ATO by strengthening the integrity of the alcohol supply chain as it related to border movement, particularly in the area of drawbacks and refunds to ensure appropriate evidence was provided to support claims.
Matthew Duckworth stressed the importance of industry referrals to the ABF’s BorderWatchExternal Link Program. The ATO had a similar process in the Tax Integrity Centre.
Members discussed options to assist purchasers to avoid illicit alcohol, including seeking declarations of duty payment, excise licence details, as well as compiling a list of common types of product (e.g.700ml bottles of spirits) and the relevant excise duty payable.
Industry updates-roundtable
Tony Battaglene, Australian Grape and Wine Incorporated (AGWI) had been liaising with the ATO about a potential counterfeit product in a retail store. The AGWI had noted that as borders were reopening, cellar door sales had increased significantly.
Members noted that alcohol excise had not increased as part of recent indexation, noting that as it related to Consumer Price Index (CPI), there was no indication of whether it would increase in February 2021.
Kylie Lethbridge, Independent Brewers Association noted the benefits for industry with borders reopening, as well as industry appreciation for ATO concessions including deferral of excise payments.
Ashlee Louise George, Vok Beverages, acknowledged the ATO’s assistance to clients as they pivoted their business to produce hand sanitiser.
George Nikolaou, Coles, noted a shift in consumers to higher quality wines and more interest in the variety and different brews.
Neil Owen, Woolworths, provided a snapshot of the impact of COVID-19 over the previous 7–8 months with sales nearly doubling. Hotel business had struggled and businesses in Victoria had been significantly impacted. He noted a trend to low carb ciders as well as innovation to keep cider treated under WET rather than alcohol excise.
Jane Anderson, Cider Australia, referred to cider definitional issues, with new products not properly defined. Cider Australia had been working with the ATO on fortified products to determine whether they fit under WET or alcohol excise. She noted development in apple and pear spirit products.
Margaret Whelan, ATO, advised members that the ATO were happy to consult on product classification issues, particularly in the development of new products, to provide greater certainty of how the product would be taxed. Contact could either be made through ECMs or to Excise.Centre@ato.gov.auThis link opens in a new window.
ATO updates
‘Know our Clients’ framework – Michael Hughes
The ATO continued to identify ways to use data better and to provide the most appropriate client experience based on a whole-of-tax approach.
Due to the specialised nature of excise, existing systems were in the process of being upgraded, however information was still being extracted across several systems. The Excise Centre was progressing work to put together an excise picture of clients which could be shared across the ATO for a whole-of-client approach.
This would assist in making client interactions quicker, easier and more coordinated across other areas of the ATO, as well as allowing for more tailored engagement activities.
For compliant clients, it could lead to faster approval of applications for licences, refunds and remissions. For those clients with a poor compliance history in other taxes, it could lead to a more tailored response which may result in the application being declined or the imposition of additional conditions or controls to limit the risk of non-compliance and to maintain a level playing field.
Larger excise alcohol clients provided more of a challenge in obtaining a whole-of-ATO view as their organisations could be quite complex. This work would provide a better sense of excise compliance for other areas of the ATO. As excise risk views were being collated, they would be shared with organisations and the ATO would work with the organisation if any areas were identified for improvement.
Justified Trust update – Andrew McIver
The ATO had been undertaking Justified Trust work over several years which involved a detailed review of largest tax-paying organisations regarding internal controls and governance. As the alcohol tax gap related to a small number of non-compliant entities, it was not considered necessary for this level of review of excise alcohol clients. A less intensive program of 'level of confidence' work had been undertaken on some large excise clients and this would continue.
In June or early 2021–22, the ATO would publish a guide of what was expected in relation to excise and what organisations could do from a risk management perspective. Guides have been published relating to income tax and GST. The publication of the guide was however contingent on resource availability and priority work that may be otherwise required.
The results from control frameworks activity to date had been positive and supported the decision not to carry out Justified Trust activities. Good practice noted in reviews included procedure documents for staff working with excise and excise equivalent goods (EEGs) including internal manuals and regular training around excise and EEGs particularly for those at the ‘front line’, buyers and warehouse managers. A number of entities had an open, engaged relationship with the ATO consulting early in relation to new products, changes to business structures or systems that may impact on excise or EEGs administration.
Update on concessional approach to manufacture of alcohol – Margaret Whelan
Since 23 March 2020, the ATO had applied concessional treatment to certain alcohol repackaging circumstances that would normally require an excise manufacturer licence and payment of further excise duty. This mainly related to the sale of growlers and packaged cocktails.
This had been extended through to 31 January 2021. The concession would be reviewed in early January and if businesses were operating in a more 'COVID normal' environment, it was expected that the concession would not be extended. Venues wanting to continue selling takeaway alcohol such as growlers and packaged cocktails would need to contact the ATO to arrange necessary excise authorisations and licences.
Contemporary Excise Experience update – Michael O’Rourke
The Contemporary Excise Experience (CEE) refers to the new system flagged for development to replace the current Excise Collections System (ECS) and the Generic Payment System (GPS). These systems are considered costly and time consuming for the ATO and clients. Integration with other ATO systems will provide staff and clients with a holistic view consistent with other ATO products. The new CEE system is intended to provide a more tailored and validated system.
Funding was approved in the 2018 Budget. CEE work had commenced in May and is expected to take two years. System design is currently taking place for GPS and is likely to be available in September 2021.The ECS replacement is expected to be designed and built by the end of 2022.
Group members may be asked to assist in beta testing for the ATO’s new Online Service for Business (OSB). This is a whole-of-ATO project to replace the current Business Portal. Private beta testing is being carried out to the end of January 2021, with public beta testing from January to June 2021. From March 2021, the OSB will be the ATO’s preferred mail channel for those currently using the Business Portal, which is expected to be decommissioned in July–August 2021. Visibility of all accounts, including excise, would not be possible until the CEE has been fully implemented which is expected by September 2022.
Members were advised that the features of OSB included access to communication history with ATO, communication preferences, income tax history and copies of previous returns, in-channel payments, payment plans, device optimisation. On the new ATO OSB homepage, clients would be able to switch between ABNs with a single logon and advice on completion of audits would be communicated through OSB.
ATO communications update – Claudia Bianco
The ATO had updated web content and sent emails to group members and other industry associations in relation to COVID-19 support arrangements on hand sanitiser and takeaway alcohol concessions. Communications would be issued in the new year regarding arrangements for takeaway alcohol.
Members noted that the next indexation rate would take effect from 1 February 2021, with new CPI rates due to issue on 27 January 2021.
The ATO had recently published a complete rewrite of web content relating to excise on alcohol and EEGs (imports). Claudia Bianco acknowledged the assistance of several group members. Feedback on the content is always welcomed and could be provided to Excise.Centre@ato.gov.auThis link opens in a new window.
Claudia Bianco advised members of a range of communications to issue to alcohol manufacturers, industry and alcohol retailers to increase awareness of illicit alcohol arrangements that attracted the ATO’s attention. Web content would be updated, information would be provided to members, proactive PR activities would engage key industry and business associations and social media activities would be carried out using ATO channels.
The ATO encouraged members to share messaging and communications and to advise if there were any recommendations for communication products to assist clients.
Treasury update
2020 Budget measures – Joshua Toohey
Joshua Toohey advised members that Treasury were keen to receive feedback from industry in relation to 2020 BudgetExternal Link measures or measures introduced to assist industry during COVID-19. He provided a summary of the 2020 Budget, delivered on 6 October, and noted that the focus of the Budget had been in response to the COVID-19 pandemic to support business but still ensure the integrity of the tax system. Key measures included the JobKeeper payment and the introduction of the Cash flow boost as well as the instant asset write-off and the change to the small business threshold.
Action item
Action item |
11112020-6-1 |
Due date |
15 December 2020 |
Responsibility |
Joshua Toohey |
Description |
Joshua Toohey to provide the context of excise revenues forecast in the 2020 Budget papers to members. |
Action item
Action item |
11112020-6-2 |
Due date |
15 December 2020 |
Responsibility |
Members |
Description |
Members to provide any further intelligence or feedback from industry around measures to reduce red tape including indexation and other excise administrative costs to Excise.Centre@ato.gov.au |
Other business
Maturation Requirements – Victoria Angove raised an issue regarding ABF’s review of alcohol maturation requirements. A public consultation paper is currently out for comment, with responses due by 18 November. Matthew Duckworth explained that the ABF was seeking to provide more clarity and certainty around the terms ‘brandy, whiskey or rum’.
Meeting close
Tony Poulakis thanked members for their assistance and contributions throughout the year.
Attendees
Organisation |
Attendees |
|---|---|
ATO |
Tony Poulakis (Chair), Excise Centre, Private Wealth |
ATO |
Rowena Troth (Secretariat), Excise Centre, Private Wealth |
ATO |
Andrew McIver, Excise Centre, Private Wealth |
ATO |
Caraline Hill, Excise Centre, Private Wealth |
ATO |
Claudia Bianco, ATO Corporate |
ATO |
Margaret Whelan, Excise Centre, Private Wealth |
ATO |
Michael Hughes, Excise Centre, Private Wealth |
ATO |
Michael O'Rouke. Excise Centre, Private Wealth |
ATO |
Michelle Nourse, Excise Centre, Private Wealth |
ATO |
Naomi Schell, Excise Centre, Private Wealth |
ATO |
Sally Fonovic, Excise Centre, Private Wealth |
Angove's Proprietary Ltd |
Victoria Angrove |
Asahi Group Holdings |
Alex Choo |
Asahi Group Holdings |
Paul Jackson |
Australian Border Force |
Matthew Duckworth |
Australian Grape and Wine Incorporated |
Tony Battaglene |
Brewers Association of Australia |
Sarah Lovett |
Brown-Forman Australia Pty Ltd |
Jorge Jimenez |
Cider Australia |
Jane Anderson |
Coca-Cola Amatil |
Chris Callen |
Coca-Cola Amatil |
Peter Parimeros |
Coles Financial Services |
George Nikolaou |
Coopers Brewery |
Brad Grunert |
Diageo Australia Ltd |
YoungMi Avern |
Independent Brewers Association |
Kylie Lethbridge |
Independent Brewers Association |
Peter Philip |
Lion |
Sonja Icanovski |
Metcash |
Darren Thomas |
Pernod Ricard |
Rachel Whiteley |
Samuel Smith and Son |
Bob Smart |
Spirits and Cocktails Australia |
Greg Holland |
Spirits and Cocktails Australia |
Nicole Lestal |
Stone and Wood Brewing Company |
Chris Pensabene |
Taylor Ferguson Pty Ltd |
Chris Parton |
Treasury |
Andrew Boland |
Treasury |
Joshua Toohey |
Treasury Wine Estates |
Jenny Fisher |
Vok Beverages |
Ashlee Louise George |
Wilmar BioEthanol |
Scott Johnstoner |
Wine Australia |
Steve Guy |
Woolworths |
Neil Owen |
Apologies
Organisation |
Members |
|---|---|
Accolade Wines |
Annalisa LoBasso |
Australian Distillers' Association |
Stuart Gregor |
Cider Australia |
Warwick Billings |
Gage Roads Brewing Co |
Phil McClintock |
Manildra Group |
Debbie Forster |
Metcash |
Paul Onley |
Tarac Technologies |
Robert Pelton |
Taylor Ferguson Pty Ltd |
Frank Ciampa |
The Drinks Association |
Georgia Lennon |
Wilmar BioEthanol |
Trevor Barr |