Welcome and introductions
Tony Poulakis welcomed members to the meeting.
No conflicts of interest raised by members.
Minutes of the previous meeting of 11 November 2020 had been published on ato.gov.au and the 2 action items have been finalised.
Reflections of 2020–21 and compliance focus areas for 2021–22
Michael Hughes provided summaries of the alcohol and Wine Equalisation Tax (WET) environments and the planned compliance focus areas for 2021–22.
Alcohol excise - results from 2020–21 and focus areas for 2021–22
The impacts of COVID-19 continue, with lockdowns and associated impacts on business. Revenue impacts in 2020–21 had been minimal regarding overall alcohol excise, however products such as kegged beer had been impacted. It was also noted that inquiries into requirements around stills had increased slightly, as had applications for licences.
The ATO focused on supporting businesses in relation to debt and lodgment challenges. Approximately 400 calls were made to excise clients to work through lodgment issues. Debt levels had normalised and remained stable and the ATO continues to work with clients to manage lodgments and debt.
The tax gap for alcohol was 9.6%, or $596 million for 2017–18 and was largely attributable to deliberate illicit behaviour, which is being addressed under the illicit alcohol program of work. The tax gap for 2018–19 is expected to be published in October 2021.
The alcohol excise treatment plan for 2021–22 would continue to support business’ ability to access and engage with the ATO. The ‘New to Excise’ program assists new clients to the excise system through a number of contacts over the first 12 months of operation. The Level of Confidence work on large excise payers would continue, to ensure business systems and controls of those clients were working appropriately, with the ATO providing assistance with any complexities.
A risk assessment would be carried out on concessional spirit licence and permit holders. It was noted that of 253 clients who had pivoted to produce hand sanitiser, approximately 80 clients indicated that they planned to continue making hand sanitiser in the future. These clients have been advised of the need to hold a concessional permit.
The ATO would continue to monitor and gain a better understanding of hard seltzer products, with reviews of products in the market, including whether products marketed as beer met definitional requirements. Discussions also continued to be held with Australian Border Force (ABF) to ensure a level of consistency around approaches to the products.
WET - results from 2020–21 and focus areas for 2021–22
The WET tax gap for 2017–18 was 3.1%, or $27 million. The tax gap for 2018–19 was expected to be published in October. Trends in WET collections and rebate / credits were consistent with industry reports.
At the 2020 Alcohol Stakeholder Group (ASG) meeting, there had been discussion about the imposition of tariffs by China on imported Australian wine and whether that might impact WET collections. Recent media reports referred to alternative markets for wine exports given the reduction in demand from China.
The NZ rebate claims were also slightly reduced from the previous year. A recent issue had arisen in New Zealand with alternatives required for WET rebate payment as NZ banks were moving to no longer accept overseas, including ATO cheques.
WET compliance activity had been largely on a 'watch and monitor' basis following the introduction of amendments to the WET Act in 2018. For 2021–22, compliance activities would include addressing residual issues with a small number of clients claiming WET credits on exports as well as entities claiming over threshold. The ATO would also be reviewing activity resulting in changes in structures / behaviours of entities following the amendments.
Tony Poulakis reiterated that the general health of the alcohol excise and WET systems was good and that most clients were complying, and revenue was tracking broadly in line with expectations. There were a small number of entities of concern which were being covered as part of the illicit alcohol program of work.
ATO focus topics
Deregulation taskforce deep dive
Paul Hubbard advised members of the purpose of the Government’s deregulation agenda: focusing on reducing barriers and making it easier for businesses to grow and create jobs. A review of Australia’s excise and excise-equivalent customs duty systems for fuel, beer and spirits had been announced in December 2020.
The deregulation taskforce had been working closely with the ATO and ABF and had engaged a broad range of business and industry participants to gain a ‘factory floor’ perspective of how businesses engage with the excise system. Based on those discussions, the team had identified opportunities for reform of the system using both administrative and legislative reforms. These had been released on 3 August as a public consultation paper on the taskforce’s website, with written submissions due by 31 August 2021. Paul Hubbard encouraged members to contact the taskforce if they wished to discuss the paper or potential submissions. He encouraged members to provide written submissions for government consideration.
The taskforce had commissioned an analysis by accenture of excise and excise-equivalent customs duty systems internationally. This report was available, on request, to members as a potential resource when putting submissions together. KPMG have been commissioned to engage with business to understand the cost of complying with the current system.
Tony Poulakis advised that the ATO had been working closely with the taskforce to identify issues from a regulatory point of view and would not be making a formal submission.
Members were positive about the approach and the paper and acknowledged the consultation by the taskforce team.
Excise remission scheme for manufacturers of alcohol beverages
In the 2021 Budget, the government announced the Automatic Manufacturer Remission scheme for excise manufacturers. This replaced the previous refund scheme from 1 July 2021 and provides a 100% automatic remission of excise duty up to a maximum cap of $350,000 per annum for eligible alcohol manufacturers.
Joe Limongelli explained that changes included the use of a new excise return and would be applied on a pro rata basis for manufacturers entering the market part way through the year. He advised that the eligibility criteria were the same as with the previous refund scheme, with record keeping necessary to determine whether claimants had reached the cap.
Transitional arrangements had been put in place for goods entered prior to 1 July. Following executive council endorsement on 10 June, the Excise Centre advised this group and alcohol manufacturers of the changes, including transitional arrangements. ATO web content had been updated and those clients who were in payment arrangements due to COVID-19 impacts were contacted to ensure they were aware of the need to lodge and pay prior to 30 June 2021 to ensure they were eligible for a refund under the former scheme. A significant number of claims for refunds had been received by the ATO.
The Excise Centre is planning an education webinar for clients. Members welcomed the educational support about these changes. Claudia Bianco thanked the ASG for sharing ATO content with their members and asked ASG members to contact the ATO if they would like any additional support in the form of additional videos or communications such as articles for industry publications.
Inquiries from clients centred on eligibility criteria and the need to have an excise manufacturer’s licence. A draft ruling was being prepared to provide further advice about the need to be ‘legally and economically independent’ and was expected to issue soon.
In light of the amendments, the ATO would be looking at opportunities to provide further administrative deregulation associated with reporting and lodgment of excise returns. Tony Poulakis explained that the ATO approach to regulation was risk-based and outcomes-focused and would be working to provide deregulation opportunities, particularly for those entities that posed little risk to the system.
Illicit alcohol update
Naomi Schell provided an update to members of work in the illicit alcohol program. Naomi acknowledged the positive engagement of industry in various meetings and sharing of information.
Addressing illicit alcohol activity is a focus area and a priority risk for both the ATO and ABF. The alcohol excise tax gap is around 9%, which is one of the largest tax gaps in percentage terms. Most of that gap continues to be attributable to large-value illicit alcohol activity.
Since the previous ASG meeting, the ATO continued to work with other government agencies as part of the Black Economy Standing Taskforce, as well as some state regulatory bodies. Significant intelligence had been gathered and analysed. A range of communications and key messages had been issued, primarily aimed at education and prevention. A taxpayer alert had been issued in April to form the foundation of the prevention strategy, with a specific focus on the retail industry. The retail avenue was the main pathway into the consumer market for illicit alcohol. ATO web guidance had been updated and an educational fact sheet had been issued which was designed to be a quick reference guide for alcohol retailers and provided practical tips of indicators around illicit activities.
Tony Poulakis and Naomi Schell had met with several large retailers in July to discuss internal controls around systems and supplier’s due diligence. These conversations were considered very useful and highlighted areas of best practice. These best practice examples would be collated and shared with this group and clients.
In late May, the ATO had conducted several ‘walk-in’ visits to smaller, independent retail outlets across several states for the purpose of education as well as information gathering. These types of visits were planned to continue in 2021–22.
A greater focus is being placed on compliance activities, with several significant operations being carried out. The ATO had carried out several destructions, under supervision, of high-risk product. Several high risk and illegal stills had been disabled or seized. The most serious cases of non-compliance had been referred for criminal treatment. More compliance activity was planned for 2021–22 to reduce the tax gap and promote a level playing field.
Members raised the possibility of including suppliers’ licence details on a similar platform to 'ABN lookup' to provide more assurance that companies were dealing with entities that were appropriately licensed. Tony Poulakis was aware of this issue and had been progressing and advocating for it, however noted that this could also be advocated for and included in industry submissions to the deregulation taskforce.
Tony Poulakis advised members that the illicit alcohol program is focused on identifying the main offenders and taking appropriate action to remove them from the system. In addition to this, the retailer strategy focused on a particular area of the supply chain, however he asked members to consider whether there were other areas of the supply chain the ATO should focus on. Tony also referred to the graduated approach being taken with ‘walk-in’ visits ranging from education in the first instance, to possible infringement notices and demands being issued for repeat offenders.
Paul McLeay noted the impact of the new remission scheme on the price of alcohol, where some manufacturers would now be able to offer product at a much-reduced price, particularly small business not producing much beyond the cap of $350,000. This was understood and it was noted that in addition to cheap pricing, there are other indicators of illicit alcohol to look out for.
Industry updates - Roundtable
Rebecca Tolhurst of Bickfords Group noted the previous support offered by Excise Client Managers (ECMs) and queried the reduction in that program. Tony Poulakis advised that the ECM program had been pared back, however that may be revisited. He asked those who had previously had an ECM to let the ATO know whether it was causing difficulties with compliance or inefficiencies.
Action item |
19082021-6-1 |
Due date |
30 September 2021 |
Responsibility |
ASG members |
Action item details |
Members were asked to provide feedback on the excise client manager program to Rowena Troth. |
Steve Guy of Wine Australia advised members of a new tool introduced on 1 July, the Export Label Image Search System which was a publicly purchasable database of all wine labels that were exported from Australia. This was designed to assist retailers and consumers purchasing wine overseas.
Brad Grunert of Coopers Brewery noted support of an ABN Lookup style reference for excise licensees, as well as support for a return of the ECM program.
Sonja Icanovski of Lion Ltd expressed an interest in the draft ruling to assist with eligibility for the alcohol manufacturer remission scheme. She also noted an interest in further ATO guidance around the classification of products such as seltzers.
Margaret Whelan advised that the draft ruling on legally and economically independen’ would be published on the ATO’s Consultation webpage. Margaret also advised that the ATO were preparing public advice and guidance material about product classification which would also be issued for consultation.
Tony Poulakis noted that this guidance would provide practical examples for greater clarity around specific products but encouraged industry to provide feedback to ensure the ATO guidance was useful for industry.
Action item |
19082021-6-2 |
Due date |
31 October 2021 |
Responsibility |
Margaret Whelan |
Action item details |
ATO to advise ASG members when the draft ruling on legally and economically independent and further guidance on product classification were published for consultation. |
Paul Jackson of Asahi Holdings noted support of the deregulation consultation paper.
Peter Philip of the Independent Brewers Association echoed previous industry comments about the deregulation / streamlining efforts. Peter commented that blockchain technology may add too much technical complexity for most small brewers. He also noted an interest in the product classification guidance as some IBA members are producing brewed seltzers under the beer regime.
Rebecca Carter of Diageo Australia agreed that the consultation paper for deregulation had captured industry’s ‘pain points'. She also supported the idea of a licence look up reference tool.
Karen McCoy of Coca Cola Amatil noted an interest in the draft ruling on legally and economically independent. Karen had shared the consultation paper, which was widely welcomed by others in Coca Cola Amatil, who would be providing a submission. She also noted the work being done by Coca Cola Amatil to ensure appropriate controls were in place around alcohol products, particularly in relation to destructions.
Frank Ciampa of Alepat Taylor acknowledged the great support provided by their previous ECM. Frank also supported the work of the deregulation taskforce, as well as a licence look up tool.
Rebecca Tolhurst, Bickfords Group supported ATO’s provision of education material, noting a significant cost for industry in training staff about excise issues. Rebecca commended the material online as well as information on the ATO website.
Victoria Angove, Angove’s, expressed an interest in a dedicated account manager as well as the value of these meetings for the ATO to engage industry.
Paul McLeay, Australian Distillers Association (ADA), acknowledged the good work of the Excise Centre Technical Advice team as well as providing positive support for the work of the deregulation taskforce. He expressed an interest in the treatment of alcoholic seltzers. Paul advised of a Technical Standards Division being set up within the ADA, which would be working on definitions and standards of gin and whisky, which had recently been raised as part of the UK / Australia Free Trade Agreement.
Greg Holland of Spirits and Cocktails Australia provided positive feedback about the work of the Excise Centre team in working through various issues.
Paul Onley of Metcash raised the issue of greater sharing of information about products and suppliers in the supply chain. The Excise Centre is undertaking work to ascertain whether information could be provided to entities about specific products. The ATO would also continue to investigate the potential for provision of information to assist industry, providing it met privacy requirements.
Paul also queried the application of justified trust approach for excise clients. Tony Poulakis advised that at this stage, the ATO does not undertake full justified trust activities for excise clients, but rather a ‘level of confidence’ analysis on some entities, particularly where they have ECMs. There were no current plans to expand on the level of confidence work, however he noted that the general aspiration of the ATO was to eventually provide a whole of taxes / whole of client service.
Paul encouraged consultation by the ATO when a justified trust approach was to be taken to excise clients so that industry could assist in co-designing approaches. He noted that previous Income Tax and GST approaches had taken several years to bed down.
Paul complimented the work of the deregulation taskforce and queried the ATO position on ad valorem.
Tony Poulakis advised that this was an issue for the ABF. Tom Watson noted that the ad valorem applied to all imported goods and had some links to free trade agreements, however he encouraged members to include this in submissions to the taskforce if that was considered an issue.
Tom also posed a possible option of disconnecting the payment of ad valorem from the payment of duty by paying ad valorem on or close to import and then paying duty when the product entered home consumption.
George Nikolaou of Coles referred to the ad valorem issue and noted that the way ad valorem applied to particular goods purchased from other suppliers was an irritant and would be included in the submission from Coles to the taskforce. George advised that Coles were carrying out education for their buyers around illicit alcohol issues but noted that clarification could be provided on certain suspicions by having a reference tool around registrations / licences. He also supported the value of the ECM program.
Catherine Dishon of Treasury Wine Estates (TWE) noted some great initiatives in the consultation paper and noted that TWE deals in both wine and spirits and can see the differences in administration of the 2 taxes. TWE would be providing a submission.
Con Karatonis of Endeavour Group noted that following the demerger of alcohol products to Endeavour Group, Woolworths would no longer be a member of the ASG. Con welcomed the consultation paper and also supported a register of excise licensees. He also expressed interest in the proposed guidance on seltzers and ciders.
Rachel Whitely of Pernod Ricard noted that innovation had been a focus of 2021. Pernod Ricard was considering their submission to the Taskforce and commended those involved in preparation of the paper. Rachel also noted the difference in not having an ECM and fully supported a return of the program.
Tony Battaglene of Australian Grape and Wine Incorporated noted the impact on exports of the decision by China to cut wine imports from Australia. He advised that this will cause price pressure towards the end of 2021. Approximately 1,000 exporters had been geared solely to China and would be pivoting towards domestic sales. Tony noted that this may cause a potential issue in unfamiliarity with WET requirements for domestic production and sales.
Action item |
19082021-6-3 |
Due date |
16 September 2021 |
Responsibility |
Michael Hughes |
Action item details |
Michael Hughes to arrange for excise centre alcohol treatment lead to contact Tony Battaglene to discuss potential education for WET registrants moving to domestic production. |
Jane Anderson of Cider Australia referred to an issue relating to requests for export permits for cider. Despite not being required, requests continued to be received from customs agents.
Jane also advised members of a new product using red-fleshed apples. This produced a red cider which was entirely based on the fruit rather than additives.
Action item |
19082021-6-4 |
Due date |
1 September 2021 |
Responsibility |
Jane Anderson |
Action item details |
Jane Anderson to provide further detail about the export permit issue to the ATO. ATO and ABF staff would investigate to seek an appropriate solution. |
Tony Poulakis reminded members to contact the Secretariat if they had anything, they wished to raise following the meeting.
Other business
‘Know our clients’ framework
At the 2020 meeting of the ASG, an update had been provided about work being undertaken in the excise centre on better use of data to tailor excise client engagement. Those clients identified as a lower risk would be given light touch assistance, whereas those representing higher risk would have tailored treatment which may include additional licence conditions and firmer approaches, for example supervised destructions.
Michael Hughes advised that a flow on from the alcohol manufacturer remission amendment may be the identification of opportunities to reduce compliance or reporting activities resulting from a number of clients no longer paying excise. The ‘know our clients’ assessments would assist this work.
Excise centre continued to progress this initiative.
Update on concessional approach to takeaway alcohol
Margaret Whelan advised that information relating to concessions provided to support alcohol service venues through COVID-19 restrictions had been provided to the ASG and on the ATO website.
The concession allowing alcohol service venues to provide repackaged beer without the need for an excise manufacturer licence or to pay extra excise duty has been reinstated and extended to 31 October 2021.
The ATO has also updated its position on takeaway mixed alcoholic beverages (takeaway cocktails). An excise manufacturers licence is no longer required where bars prepare takeaway cocktails using duty paid alcohol in a sealed, single serve container to be consumed shortly after purchase.
Meeting close
Tony Poulakis thanked members for their attendance and contributions today and for their broader assistance and contributions throughout the year.
The meeting closed at 4.00pm.
Attendees
Organisation |
Attendees |
|---|---|
ATO |
Tony Poulakis (Chair), Excise Centre |
ATO |
Adriana Rus, Excise Centre |
ATO |
Bennett Sandhu, Excise Centre |
ATO |
Brett O’Neill, Tax Counsel Network |
ATO |
Caraline Hill, Excise Centre |
ATO |
Claudia Bianco, ATO Corporate |
ATO |
Joe Limongelli, Excise Centre |
ATO |
Kadu Kapadia, Policy, Analysis and Legislation |
ATO |
Margaret Whelan, Excise Centre |
ATO |
Michael Hughes, Excise Centre |
ATO |
Naomi Schell, Excise Centre |
ATO |
Nathan Lindemann, Excise Centre |
ATO |
Paul Macklin, Excise Centre |
ATO |
Rowena Troth (Secretariat), Excise Centre |
ATO |
Telly Nikolakopoulos, Excise Centre |
ATO |
Wendee Mundy, Excise Centre |
Alepat Taylor |
Chris Parton |
Alepat Taylor |
Frank Ciampa |
Angove's Proprietary Ltd |
Victoria Angrove |
Asahi Group Holdings |
Paul Jackson |
Australian Border Force |
Tom Watson |
Australian Distillers’ Association |
Paul McLeay |
Australian Grape and Wine Incorporated |
Tony Battaglene |
Bickfords Group |
Ashlee Louise George |
Bickfords Group |
Rebecca Tolhurst |
Brewers Association of Australia |
Sarah Lovett |
Brown-Forman Australia Pty Ltd |
Alex Khlimankov |
Cider Australia |
Jane Anderson |
Coca-Cola Amatil |
Karen McCoy |
Coles Financial Services |
George Nikolaou |
Coopers Brewery |
Brad Grunert |
Department of the Prime Minister and Cabinet |
Anthony Barnard |
Department of the Prime Minister and Cabinet |
Paul Hubbard |
Diageo Australia Ltd |
Rebecca Carter |
Diageo Australia Ltd |
Tomomi Yamada |
Endeavour Group Limited |
Con Karatonis |
Independent Brewers Association |
Peter Philip |
Lion |
Sonja Icanovski |
Manildra Group |
Debbie Forster |
Manildra Group |
Kirsty Beavon |
Metcash |
Paul Onley |
Pernod Ricard |
Rachel Whiteley |
Samuel Smith and Son |
Bob Smart |
Spirits and Cocktails Australia |
Greg Holland |
Treasury |
Joshua Toohey |
Treasury |
Timothy Woltmann |
Treasury Wine Estates |
Catherine Dishon |
Wilmar BioEthanol (Australia) Pty Ltd |
Scott Johnstone |
Wine Australia |
Steve Guy |
Apologies
Organisation |
Members |
|---|---|
Accolade Wines Australia Limited |
Annalisa LoBasso |
Australian Border Force |
Matthew Duckworth |
Brown-Forman Australia Pty Ltd |
Jorge Jiminez |
Cider Australia |
Warwick Billings |
Gage Roads Brewing Co Ltd |
Phil McClintock |
Stone & Wood Brewing Company Pty Ltd |
Chris Pensabene |
Tarac Australia Pty Ltd |
Robert Pelton |
The Drinks Association |
Georgia Lennon |
Wilmar BioEthanol (Australia) Pty Ltd |
Trevor Barr |
Woolworths Ltd |
Neil Owen |