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  • Alcohol Stakeholder Group key messages 10 July 2019

    Welcome and introductions

    Tony Poulakis, Private Wealth, ATO

    Tony Poulakis welcomed members to the meeting and advised members that he had recently taken up the role of Assistant Commissioner for the Excise Centre.

    Matthew Duckworth was the new Assistant Secretary of Customs and Border Revenue. This was part of the new Customs Group which had recently been moved from the Department of Home Affairs into Australian Border Force. Both expressed an interest in working with industry to streamline or simplify processes administered by Government where possible.

    No conflicts of interest were declared. Minutes of the meeting of 8 June 2018 had been finalised and published on the ATO website. There were no outstanding action items.

    Compliance focus areas

    Results from 2018–19 and focus areas for 2019–20 – wine equalisation tax (WET)

    Wendee Mundy, Private Wealth, ATO

    Wendee Mundy reminded members of the focus for WET for 2018–19 around support and education relating to WET reforms. As part of this, ATO staff participated in a regional roadshow. A WET: Back to BasicExternal Link webinar is now available on the ATO website and a number of updates had been made to the ATO website content and WET rulings to reflect legislative changes.

    The plan for 2019–20 was to monitor WET reporting and trends. There were no standout issues identified subsequent to the new measures – trends were in line with expectations. The main focus for compliance would be ongoing monitoring as the final BAS for the financial year was lodged as well as looking at some lighter touch products for those willing to engage – and stronger for those deliberately not complying. Analysis on the WET Tax Gap would be undertaken over next few months. The ATO welcomes any intelligence that members are able to provide which may assist in targeting non-compliant behaviour in the industry – by contacting the Tax Integrity Centre. The ATO would also be looking at possible overclaims and ineligible export claims.

    Results from 2018–19 and focus areas for 2019–20 – Alcohol excise

    John Collins, Private Wealth, ATO

    The focus for 2018–19 was on improving the client experience, with more education and opportunities for clients to 'do the right thing' with an approach of prevention before correction. Compliance planning in 2019–20 would focus on clients with outstanding lodgments and/or debt as well as looking at registration, reporting, mandatory lodgment and some issues regarding increasing excise debt levels for some small businesses. Alcohol refund checks will continue to be carried out in 2019–20.

    The New to Excise Program continued in supporting clients new to the excise system. In 2018–19, approximately 250 new clients were contacted and provided with support. Learnings from this process are fed in to the program to ensure that clients are offered appropriate support at the most appropriate time. Issues mainly related to difficulty in calculating the excise duty and record keeping. This program will continue in 2019–20.

    The ATO conducted two regional visits in 2018–19 – to northern and southern Tasmania. Two visits are also planned for 2019–20. Approximately 10 clients are visited on each of these.

    The Excise Client Manager (ECM) program continues with staff providing real time advice and support and early engagement with our largest excise clients.

    Chris Callen asked here about an opportunity for best practice to be shared as a result of excise governance workshops. (see action items)

    Illicit Alcohol Strategy

    Joe Limongelli, Private Wealth, ATO

    Joe Limogelli provided an update about work being carried out on illicit alcohol activities – those who make the excisable product without holding a licence and also those clients that have a manufacturers’ licence and deliberately make and sell products without making appropriate excise payments. The ATO continues to develop data capabilities to monitor these activities in addition to various intel networks including police forces and community information. The process from developing a risk profile, undertaking audits through to the identification of non-compliant behaviour which could lead to restrictions on or cancellation of licences, financial or penal provisions and possible penalties for sellers of illicit product was discussed. Outcomes of illicit activity over the previous 12 months had included seven prosecutions. The ATO will be working on messaging to retailers regarding consequences of the sale of illicit alcohol and may consult with Alcohol Stakeholder Group (ASG) members to better tailor messaging and assist with delivery of those messages.

    ATO updates

    Kathryn Traczyk provided an update on the Contemporary Excise Experience (CEE) funding to upgrade the excise and EEG payment system which will be provided in 2020–21. This work would move paper to online lodgement. The ATO is commencing work on a design build, with a three year IT build expected. Excise systems would be brought online, followed by claims and then authorisations.

    Recent ATO activities

    Caraline Hill, Private Wealth, ATO
    Naomi Schell, Private Wealth, ATO

    Caraline Hill provided an update on the regional visit program which had been operating for four years and will be continued in 2019. In 2018–19, northern and southern Tasmania were visited due to the increase in the number of licence holders in those regions. 30 clients (distillers and brewers) were visited with issues discussed including where the client had changed areas undertaking excise activities without advising the ATO of the change to the licence space; awareness of the time limit change in claiming the manufacturer’s refund; the client not having appropriate permissions to destroy heads and tails collected as part of the distillation process; clarification around record keeping; and usefulness of ATO website content.

    Two regions will be visited for the ATO to provide support and education to businesses including a review of the client’s activities of what they were licensed to do; what they were doing and whether there were any proposed changes. ATO staff provide advice as to obligations relating to excise and the visits are mainly educational. Where compliance issues arise, they are followed up as part of the regional visit process.

    Naomi Schell provided an update regarding ATO technical advice and guidance. Significant work had been undertaken including:

    • In late 2018, ATO staff had delivered a series of 12 presentations around Australia which had been promoted and facilitated by the AGWI to assist tax professionals and members of the wine industry on the changes to WET legislation. Over 300 people had attended the sessions which were conducted across six states. The number of issues raised varied with no common themes. Questions relating to the Cellar Door Grant Scheme were referred to Wine Australia as administrator of that grant. A WET Back to Basics webinar was uploaded to the ATO website in March 2019. To date, the webinar had been viewed approximately 2000 times.
    • The 2018-19 Budget contained two alcohol excise measures which commenced on 1 July 2019. These related to the Alcohol Manufacturer Refund Scheme increasing the maximum refund from $30,000 to $100,000 and the extension of the concessional draft beer rate to kegs of 8 litres or more (rather than 48 litres). The measures had been fully implemented with all public advice and guidance products updated to reflect the changes.
    • A comprehensive review of all alcohol excise public advice and guidance products was being undertaken to confirm whether they were still required and how they could better assist clients.
    • Strength and Volume Determinations that had been due to sunset had been remade and were updated to simplify language and requirements to make it easier for clients to understand and comply. This related to Excise (Alcoholic Strength of Excisable Goods) Determination 2019 and Excise (Volume – Alcoholic Excisable Goods) Determination 2019.

    ATO communications update

    Claudia Bianco, ATO Corporate

    Claudia Bianco provided a summary of communications activities over the previous year, including the Back to Basics WET webinar; messaging about the new measure for alcohol excise; indexation on 31 July to take effect on 5 August. The ATO is keen for industry associations to share messaging with members and would be happy to prepare tailored articles for industry newsletters.

    The ATO will be reviewing content on ato.gov.au relating to alcohol and welcome feedback from clients at any time, particularly around search terms. Content may be rewritten or restructured. That will then be user tested with clients.

    Claudia encouraged members to engage on social media – Facebook, Twitter, LinkedIn. This is not just for excise but also across income tax and other measures.

    Overview of myGovID and Relationship Authorisation Manager (RAM)

    Kathryn Traczyk, Private Wealth, ATO

    Kathryn Traczyk advised members of digital identity changes by the ATO to improve how clients access whole-of-government services on behalf of business. From March 2020, AUSkey will be phased out and replaced by myGovID. This is an app which individuals are able to download and have their identify approved which would then allow access to business information. The RAM is able to store business authorisations. myGovID is currently available on IOS and is being rolled out in Android in August.

    Kathryn referred to improvements in the new systems including the need to only prove identification once; and a comparison of myGovID taking 5 steps to authorise employees; whereas AUSkey uses 25 steps for the same process.

    Members were keen to be kept informed of the rollout of myGovID and RAM as it would involve significant work for businesses.

    Tony Poulakis advised members that the ATO had recently restructured some business lines and that the Excise Product Leadership Branch would now be called the Excise Centre, aligning with the recently created GST Centre and Not for Profit Centre. Excise Client Managers (ECMs – formerly RMs) continue to provide assistance and support to industry.

    Update on ATO consultation surveys

    Rowena Troth, Private Wealth, ATO

    Rowena Troth provided an update of two ATO requests relating to stakeholder feedback.

    The first related to a request in August 2018 from the previous Chair, Raj Srikhanta, to members asking for feedback on the ATO and the stakeholder group meetings and arrangements. Responses from the four external stakeholder groups had been collated and worked through by Excise Centre staff to identify potential solutions to any issues raised. Generally, responses had been very positive on the working relationship with the ATO and Excise Centre.

    In March 2019, a separate request had been sent to members of external stakeholder groups seeking feedback on consultation across the ATO. Responses had been collated and would be used to provide an effectiveness measure of ATO consultation. Individual stakeholder group responses would not be provided to secretariats. It was expected that the outcome of this survey would be published in the ATO Annual report.

    Australian Border Force, Matthew Duckworth

    Matthew Duckworth spoke to the group about work being undertaken to combat the black economy at the border. These activities often had clear links to organised crime and resources are being allocated to gain a better understanding of those links. A permit was now required to import tobacco and warehouses are no longer licensed to store tobacco product where duty has not been paid. Previously, tobacco and other excise equivalent goods (alcohol and petroleum) were identified as the main source of illicit trade and illicit revenue evasion. Australian Border Force (ABF) compliance activities had led to the identification of $170m in underpaid revenue.

    There has been an increasing focus on counterfeit goods, which also relates to alcohol. These occur where identifier / batch numbers have been removed from bottles. The ABF is considering current declaration requirements at the border, as well as how products are represented beyond the border.

    ABF amended the tariff rate on craft beer to reflect recent excise changes. They were also looking at issues around maturation requirements for brandy, whisky and rum.

    Matthew advised members of the Border Watch portal (accessible through the ABF website) where industry and members of the public are able to report suspicious activity. This was one of the most important sources of intelligence to target risk assessment and other compliance activities for the ABF.

    Industry Association business insights

    Australian Grape and Wine, Tony Battaglene

    Tony Battaglene advised members of the amalgamation this year of the Winemakers Federation of Australia (WFA) and Australian Vignerons (AV) (formerly Wine Grape Growers Association) to Australian Grape and Wine which is now the peak national body for the Australian wine industry.

    The WET Back to Basics seminars were very useful for the industry. At this stage of the new measures taking effect, it appeared anecdotally that the policy intent was working. The AGW will continue to monitor arrangements for more factual evidence. Issues to date have related to the one quote system for distributors and the 85% rule, however there are no solutions without impacting the integrity of the measures. Treasury advised that they are monitoring to ensure that rules are operating as intended.

    The 2019 vintage was slightly down from 2018. The market in China was good and while there was a slight reduction in lower value product, higher value product was at a good level. Industry are seeing quite a bit of copycat product being exported with breaches of intellectual property. The AGW is creating a 'copycat register' which was searchable by label. Industry also noted illicit/counterfeit product being exported. ABF will hold discussions with AGW out of session regarding a Notices of Objection scheme.

    Treasury advised that the Department of Agriculture and Water Resources and the Department of Foreign Affairs and Trade were also working on copycat exports.

    Tony Battaglene expressed AGW’s appreciation of the work of Naomi Schell and Sally Fonovic of the Excise Centre, whose WET presentations gave industry clients a very positive view of the ATO.

    Independent Brewers’ Australia (IBA), Jamie Cook

    Jamie Cook provided an overview of the demographics of the independent brewers’ group and noted that while small, it is a fast-growing industry. In the previous 12 months, the number of brewing companies numbered 600. Not all of these are excise-paying entities. The IBA appreciated the ATO’s communications regarding recent changes to craft brewers.

    Excise payment processing is an issue that is challenging for members. The timing of those payments was impacted by extended payment terms with national retailers which can cause significant cash flow problems for craft brewers. Another issue for the industry is fragmentation of products in the market place caused by innovation and creativity. This leads to a blending of categories – beer, spirits and wine – which impacts on members of the Alcohol Stakeholder Group.

    The ATO’s New to Excise Program will be promoted more by the IBA for new members.

    Australian Distillers’ Association (ADA), Alasdair Malloch

    Alasdair Malloch advised members that the ADA currently has 201 members which are located across Australia, predominantly in the eastern states. There have been 137 new members since January 2017. These are located evenly across city, regional and rural locations. Approximately 30% sell directly to international markets. The average still size is 750 litres and average excise paid is approximately $300,000 pa. Each distillery employs around six people with most producing whisky and gin – and to a lesser extent, vodka and liqueurs.

    ADA members appreciate recent new measures regarding the distillers’ rebate, however have a preference for volumetric tax.

    Members entering the industry do not have a strong knowledge of distilling – or the process and record keeping required. New entrants require quite a bit of education. The standard process for new members in the ADA is that they sign up as an associate member in the first instance.

    The industry is seeing quite a lot of innovation – as for craft brewing.

    Spirits and Cocktails Australia, Nicole Lestal

    Nicole Lestal advised that Spirits and Cocktails Australia was formerly known as Distilled Spirits Industry Council of Australia (DSICA) and represents global spirits manufacturers. The group has a concern about the high excise on spirits and have concern that this has the potential to flow on to an increase in illegal activity.

    Members discussed issues in the batch codes at the border and concerns that where these products reach retailers, they may not be detected by state food authorities. Spirits and Cocktails Australia have spoken to the NSW Food Authority and the Victorian equivalent, who have indicated that they considered this issue as a low level compliance issue for their agencies.

    Tony Battaglene advised that the AGWI are undertaking a project with Cider Australia focusing on product classification to better define the difference in classification of products. They will be discussing these issues with brewers and distillers and aiming to result in more rigour, particularly in the food standards code.

    Treasury and ABF indicated that they were happy to engage with industry on specific issues.

    Susan Bultitude advised members of regulations which were due to sunset at the end of 2019 – Wine Equalisation Tax Regulations. It was not expected that significant amendments would be made.

    Caraline Hill advised that the ATO is reviewing guidance on the ATO website for the Alcohol Manufacturers’ Refund in relation to the reference of 'legally and economically independent'. Inquiries have been received from existing licensed entities and those looking to join the industry. Marg Whelan advised that this is also driven by the way that business works, for example breweries and cellar doors sharing infrastructure; various industries working out of one premises. The ATO is considering issuing indicators for businesses to self-assess. Industry associations will be consulted when work is further progressed.

    The ATO Tax Gap for WET was published in 2018 for the first time. The Alcohol tax gap is being worked on however the ATO could not confirm when that would be published.

    Jeanette Weedon advised that ABF is also reviewing sunsetting regulations. They will be going out to industry regarding regulations relating to measurement of alcohol (ATO reviewed in March).

    Victoria Angove queried whether the alcohol manufacturers’ rebate would be available to international producers. Advice was that the rebate would not apply as it was paid to the entity paying excise, eg domestic producers.

    Other business

    Tony Poulakis encouraged members to share key messages from this forum with their association members.

    There was no other business. The meeting closed at 3.15pm.

    Action item update

    Action item

    10072019-2-1

    Due date

    30 October 2019

    Responsibility

    John Collins, ATO

    Action item details

    ATO to provide general advice about best practice for governance arrangements.

    Completed – The ATO has published a Tax risk management and governance review guide – link provided for reference.

    At the 2020 Alcohol Stakeholder Group meeting, the ATO will provide insights from the level of confidence work carried out by Excise Client Managers.

     

    Action item

    10072019-3-2

    Due date

    1 August 2019

    Responsibility

    Rowena Troth, ATO

    Action item details

    A copy of the presentation and relevant links will be provided to members following the meeting.

    Completed – A copy of the presentation and relevant links were provided to ASG members by email on 2 August 2019.

     

    Action item

    10072019-7-1

    Due date

    When issued

    Responsibility

    Rowena Troth, ATO

    Action item details

    Members to be advised when the Wine Equalisation Tax Regulation issues for public consultation.

    Completed – The link to the Treasury public consultation on WET regulation issues was provided to ASG members by email on 2 August 2019.

    Attendees

    Attendees details listed below.

    Organisation

    Member

    ATO

    Tony Poulakis (Chair), Private Wealth

    ATO

    Andrew McIver, Private Wealth

    ATO

    Caraline Hill, Private Wealth

    ATO

    Claudia Bianco, ATO Corporate

    ATO

    Daryl Behn, Private Wealth

    ATO

    Joe Limongelli, Private Wealth

    ATO

    John Collins, Private Wealth

    ATO

    Kathryn Traczyk, Private Wealth

    ATO

    Margaret Whelan, Private Wealth

    ATO

    Naomi Schell, Private Wealth

    ATO

    Rowena Troth (Secretariat), Private Wealth

    ATO

    Sally Fonovic, Private Wealth

    ATO

    Wendee Mundy, Private Wealth

    Alepat Taylor

    Frank Ciampa

    Angove's Proprietary Ltd

    Victoria Angove

    Asahi Holdings

    Steven Logan

    Australian Border Force

    Matthew Duckworth

    Australian Border Force

    Jeanette Weeden

    Australian Distillers' Association

    David Ridden

    Australian Distillers' Association

    Alasdair Malloch

    Australian Grape and Wine Incorporated

    Tony Battaglene

    Brown-Forman Australia

    Suzanne Grosvenor

    Carlton and United Breweries

    Irsan Bunyamin

    Coca Cola Amatil Ltd

    Chris Callen

    Coopers Brewery Ltd

    Brad Grunert

    Gage Roads Brewing Co

    Brent Stockden

    Independent Brewers' Association

    Jamie Cook

    Lion Ltd

    Sonja Icanovski

    Manildra Group

    Jennifer Eisenhuth

    Metcash Trading Ltd

    Paul Onley

    Pernod Ricard

    Rachel Whiteley

    Samuel Smith & Son Pty Ltd

    Bob Smart

    Spirits and Cocktails Australia

    Nicole Lestal

    Stone & Wood Brewing Company Pty Ltd

    Chris Pensabene

    Treasury

    Susan Bultitude

    Treasury

    Stephen Jones

    Treasury Wine Estates

    Catherine Dishon

    Vok Beverages Pty Ltd

    Ashlee Louise-George

    Wilmar BioEthanol (Australia) Pty Ltd

    Trevor Barr

    Woolworths Ltd

    Neil Owen

    Apologies

    Members apologies listed below.

    Organisation

    Member

    Accolade Wines Australia Ltd

    Annalisa LoBasso

    Brewers' Association of Australia

    Brett Heffernan

    Cider Australia

    Warwick Billings

    Coles Finance

    George Nikolaou

    Tarac Australian Pty Ltd

    Robert Pelton

    The Drinks Association

    Georgia Lennon

    Wine Australia

    Steve Guy

      Last modified: 13 Feb 2020QC 61403