Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
Chapter 1 - Overview
1.1 This Chapter provides an overview of the amendments to the Excise Act 1901 (Excise Act) to be made by this Bill. A detailed explanation of the amendments is contained in the following Chapters.
Purpose of the amendments
1.2 The amendments will address deficiencies in existing provisions of the Excise Act that regulate the production, dealing, manufacturing and storage of tobacco. The amendments will create a more robust statutory framework to support the compliance initiatives of the Australian Taxation Office (ATO). They are designed to protect the excise revenue base from the illicit trade in tobacco, and from arrangements prone to duty evasion and deferral in relation to excisable goods generally.
Date of effect
1.3 The amendments will apply from the date of Royal Assent [Clause 2] . As there will be licences and permissions in force at that time, transitional provisions will ensure the continuity of those licences and permissions under the proposed new arrangements.
Background to the amendments
1.4 The Excise Act contains rules dealing with liability to excise duty. Excise duty is a tax levied on certain products when entered by the owner or manufacturer for consumption in Australia. Excise duty is currently collected on petroleum, crude oil, tobacco and alcohol.
1.5 The Excise Act regulates activity relating to these products prior to the time at which excise duty is paid. The Excise Act contains long-standing provisions which regulate the production of, and dealing in, tobacco leaf. The Excise Act also contains rules governing manufacturing and storage which apply both to tobacco and to other excisable goods. The Excise Act and associated statutes (the 'Excise Acts', as defined in section 4 of the Excise Act) are currently administered by the Commissioner of Taxation under delegation from the Chief Executive Officer of Customs.
1.6 These amendments are designed to support a strategy of improving compliance with the excise law and protecting the excise revenue base, with a particular focus directed against illicit tobacco.
|New law||Current law|
|Growing tobacco will be regulated. Only a licensed producer will be permitted to produce tobacco seed, plants and leaf.||Existing controls are limited to the regulation of tobacco leaf after it has been stripped from the plant.|
|Permission will be needed to move tobacco leaf. An identification label will need to be attached to bales of tobacco leaf prior to their movement from a producer's premises unless there is an express permission for movement without a label.||The movement of tobacco leaf is not regulated.|
|Conveyances will be able to be stopped and searched for excisable goods or tobacco leaf at any place .||Only conveyances which are about to leave a factory or other 'Excise place' may be stopped and searched, and only for excisable goods.|
|A 2-tier structuring of some offence provisions which provide for increased maximum penalties, including a 2 year maximum term of imprisonment, where the requisite mental element is established.||Current penalties for some offences have no deterrent effect because they are small relative to the potential proceeds from illegal activity.|
|Introduction of pecuniary penalties for the offence of unauthorised movement of tobacco leaf and the counterfeiting of tobacco bale labels.||There are no controls on the movement of tobacco leaf.|
|Introduction of a fixed 20 penalty units infringement notice penalty for selling or possessing tobacco on which duty has not been paid.||No infringement notice scheme.|
|Increase the maximum penalty to 500 penalty units for existing offences dealing with the movement of excisable goods without authority or permission.||Current maximum penalty - usually $5,000.|
|Comprehensive scheme for the granting, suspension and cancellation of licences for:
|There is no basis for refusing an application for registration as a producer or dealer or for the declaration of an approved place as a place for storing excisable goods. There is very limited scope for suspending or cancelling a manufacturing licence.|
1.7 This Bill will increase the maximum penalties for a number of offences against the Excise Act. In addition to increasing the level of fines, in some instances by a factor of 10, provision is also made for a term of imprisonment to be imposed. In sentencing an offender, a court will have the discretion of imposing a fine, a prison sentence or, where appropriate, a combination of both. [Schedule 1, item 57, new section 127A]
Tiered structure of offences
1.8 The revised offence provisions will introduce a tiered penalty structure. The higher level of penalty will apply where the requisite fault elements are established. A lower level of penalty will apply if only the physical elements of the offence are established, that is, where the offence is one of strict liability. This is consistent with the classification of offences in the Criminal Code.
Multiple of the duty that would be payable if goods had been entered for home consumption
1.9 In addition to specifying a fixed maximum fine, some of the penalty provisions include the alternative of a multiple of the duty that would be payable if the goods that are the subject of the offence had been entered for home consumption. The maximum multiple stated is 5.
1.10 This alternative permits the court to calculate a fine by reference to the potential loss to revenue associated with the offence, and to impose a penalty of an exemplary nature as a means of deterring offenders.
1.11 In calculating the amount of the penalty, the duty is to be determined at the rate that applied on the day on which the offence occurred, if that day is known. Otherwise, it is to be determined at the rate that applied on the day on which prosecution for the offence was instituted. [Schedule 1, item 12, definition of 'penalty day' in subsection 4(1)]
Infringement notice scheme
1.12 New Part XA will be inserted in the Excise Act to provide a scheme for imposing and discharging penalties for relatively minor offences without the time, expense and distress of court proceedings.
1.13 This Bill proposes that a person who sells or possesses excisable goods on which excise duty has not been paid may be subject to a penalty imposed by an infringement notice instead of being prosecuted for the offence [Schedule 1, item 59, new subsection 129A(1)] . A person remains liable to prosecution if they do not pay the penalty in accordance with the notice [Schedule 1, item 59, new subsection 129A(2)] .
1.14 An infringement notice is expected to be issued in circumstances where there is a high degree of certainty that the physical element of the offence exists and the risk of frequency of the offence is high, but the seriousness of the offence or degree of culpability of the offender is relatively low.
Issuing an infringement notice
1.15 The infringement notice scheme provides for written notice to be given to a person of their liability to an infringement notice penalty. A notice must be issued within 12 months of the offence being committed [Schedule 1, item 59, new section 129B] . Under new section 129C the notice must contain the following information:
- the day on which the notice is issued;
- brief details of the alleged offence, including the day and place at which the offence happened;
- the name of the person to whom the notice is issued;
- the amount of the penalty, which is set at 20 penalty units;
- how the penalty can be paid; and
- the fact that, unless the notice is withdrawn, payment of the penalty within due date or such further time as is allowed will excuse the person from liability to prosecution for the offence.
1.16 Payment of the infringement notice penalty is due by the date specified in the notice, which must be at least 28 days after the issue date. [Schedule 1, item 59, new section 129D]
1.17 Except where the notice is withdrawn, payment of the penalty will excuse the person from liability to prosecution for the offence. [Schedule 1, item 59, new section 129E]
1.18 An infringement notice may be withdrawn if, in all the circumstances, it is considered appropriate to do so [Schedule 1, item 59, new section 129F] . It may be appropriate to withdraw the notice if it is considered that the offence is of sufficient seriousness to warrant prosecution and the consequent higher penalty.
1.19 The amendments made by this Bill recognise that licences issued under new Part IV may be held by a partnership. As a partnership does not have separate legal personality it is necessary for provisions that are phrased in terms of the actions of a person, to have effect as if the partnership were a person or as if the acts of a partner were the acts of the partnership.
1.20 The general rule that partners are jointly and severally liable for partnership liabilities is to be applied. Offences that would be stated as being committed by a partnership are to be taken to have been committed by each partner who is a party to, or knowingly concerned in, the relevant act or omission. [Schedule 1, item 21, new section 6A]
1.21 To achieve gender neutrality in drafting, provisions in the Excise Act that refer to 'he', 'him', 'his' or 'himself' are to have 'or she', 'or her' or 'or herself' added. [Schedule 1, items 68 to 71]