Excise guidelines for the alcohol industry

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1 INTRODUCTION

1.1 PURPOSE

This Chapter deals with:

•

what excise is

•

an overview of excise legislation relevant to alcohol

•

who administers excise, and

•

when you are involved in the excise system.

It provides a general introduction to excise as it relates to 'alcohol products'.

Further detail on the matters discussed is contained in later chapters.

1.2 WHAT IS EXCISE?

The Commonwealth of Australia Constitution Act (Constitution) provides that only the Commonwealth can impose duties of excise. ^[1]

In Ha v New South Wales ^[2] ( Ha ), the High Court explained a duty of excise as follows ^[3] :

… duties of excise are taxes on the production, manufacture, sale or distribution of goods, whether of foreign or domestic origin. Duties of excise are inland taxes in contradistinction from duties of customs which are taxes on the importation of goods.

Excise is imposed by the Excise Tariff Act 1921 on goods dutiable under the Schedule to that Act (Schedule) and manufactured or produced in Australia. It can be seen that this clearly fits the definition of duty of excise as described by the High Court in the Ha case.

1.3 OVERVIEW OF EXCISE LEGISLATION

The principal legislative framework for the excise system, relating to alcohol, is contained in the:

•

Excise Tariff Act 1921 (Excise Tariff Act)

•

Excise Act 1901 (Excise Act), and

•

Excise Regulation 2015 (Excise Regulation).

The Excise Tariff Act imposes excise on certain goods manufactured or produced in Australia ^[4] and the Excise Act sets out the administration of excise duties. The imposition of excise duties is in a separate Act to their administration because the Constitution provides that laws imposing taxation (such as excise) shall only deal with the imposition of tax.

To change the Excise Tariff Act, an amending Act must be passed through Parliament. However, there are parliamentary procedures which allow for changes to the excise tariff to apply immediately, pending amendment of the Act through Parliament. These procedures are known as tariff proposals.

For more information on tariff proposals, see Section 1.3.1 Excise Tariff Act 1921.

1.3.1 Excise Tariff Act 1921

There are 3 key provisions in the Excise Tariff Act that operate to:

•

impose excise duty

•

identify excisable goods and the applicable duty rates (the Schedule), and

•

index the duty rate.

Imposition of excise duty

Section 5 of the Excise Tariff Act imposes excise duty on goods that are dutiable under the Schedule and manufactured or produced in Australia. Excise duty is imposed at the time of manufacture or production of the relevant goods. The Schedule lists the various goods that are subject to excise and the rate of duty applicable. It is sometimes referred to as the excise tariff.

The definition of manufactured or produced

The term 'manufacture' is defined in section 4 of the Excise Act and includes all processes (that is, operations or actions) used in the manufacture of excisable goods. The definition in the Excise Act is an inclusive one, that is, it includes some processes that might otherwise not generally be considered as manufacture. 'Produce' is not defined in the Excise Act or the Excise Tariff Act.

The Commissioner's view on the meaning of 'manufactured or produced' is set out in Excise Ruling ER 2012/1 Excise: the meaning of the expression 'manufactured or produced' for the purposes of the Excise Acts.

The phrase 'manufactured or produced' for the purposes of the Excise Act and Excise Tariff Act, requires that something new or different results from a process.

It will be a question of fact and degree as to whether the end product constitutes a new or different thing from that out of which it was made or results. This involves a process of evaluating and weighing a range of factors for the particular circumstance.

We consider that the factors that may be taken into account in determining whether a new or different thing has been manufactured or produced for excise purposes include:

•

The thing did not previously exist. The parts have been combined to form a thing that is distinct (for example, commercially distinct) from that out of which it is made.

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The thing that is brought into existence has new or different qualities, properties or combinations thereof from that out of which it is made or derived. It may be any quality that indicates a difference – qualities such as colour, shape, or chemical composition.

•

A change in form (for example, change from solid to liquid, or liquid to gas) where a new or different thing has resulted from this change – for example it has new qualities, properties or combinations thereof.

•

Manufacture or production may involve the application of skill, knowledge or labour to a thing that brings into existence a new or different thing having a distinctive character or use.

Having regard to the operation of the excise system, it is considered that the phrase 'manufactured or produced' for the purposes of the Excise Acts requires that something new or different having a distinctive character or use, results from a process, which is captured under the Excise Acts.

This means that 'manufactured or produced' in the sense contemplated by the Excise Acts does not include activities that amount to reasonable steps taken in the course of consuming existing excisable (or excise equivalent) products once they have found their way into home consumption. If the excise legislation has been complied with, appropriate duties will have been paid on the products that have been delivered into home consumption, and the delivery of those products will have been authorised. Any subsequent dealings with those products that are consistent with the manner in which consumption of those products would normally occur, falls outside the scope of the Excise Act.

It will be a question of fact and degree whether, in the particular circumstances, the activities undertaken by a person amount to reasonable steps taken in the course of consuming existing excisable goods. Factors that may be relevant in establishing whether the use of excisable goods that have found their way into home consumption amounts to the manufacture or production of a good for excise purposes include the scale of production, method of production, volume of goods produced and whether the products are used in making other distinct marketable goods. Issues such as quantification, packaging and the application of brand names could evidence the 'marketable' factor.

We accept that where a bartender uses duty-paid alcohol to prepare mixed alcoholic beverages (for example, cocktails) behind a bar upon a customer's request for immediate consumption, this will not amount to the manufacture or production of a good dutiable under the Schedule.

This would also apply in circumstances where a bartender uses duty-paid alcohol to prepare a mixed alcoholic beverage upon a customer's request, which is dispensed in a sealed single-serve takeaway container for consumption shortly thereafter. The single-serve container into which the beverage is dispensed should not be capable of medium to long-term storage.

The schedule of excisable goods and the duty rates

The Schedule includes a table that lists the goods manufactured or produced in Australia that are subject to excise duty. These are called 'excisable goods'. The goods that are currently subject to excise fall within 3 broad groups:

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alcoholic beverages with an alcohol by volume of more than 1.15% (but excluding products on which wine equalisation tax (WET) applies) and spirits

•

cigarettes and other tobacco products, and

•

fuel and oils.

Within those 3 broad groups, the Schedule provides 8 different items and those items are (in most cases) further broken down into subitems. The table contains a description of the items and subitems and provides the rate of duty applicable to them.

The following is the alcohol products section of the table:

Figure 1: Extract of the table in the Schedule to the Excise Tariff Act, with rates of duty as at 3 February 2025

You can find the current rates of duty, along with those applicable prior to 3 February 2025 at Excise duty rates (referred to in this Guide as the Tariff working page or working tariff).

Indexation of the duty rate

The rates of excise duty are set in the Schedule. However, section 6A of the Excise Tariff Act provides that the rates of duty may increase every 6 months (generally 1 February and 1 August). The amount of any increase is calculated by reference to the All Groups Consumer Price Index published quarterly by the Australian Bureau of Statistics.

These increases are commonly referred to as indexation. We publish these in the Commonwealth Gazette and, for ease of reference, we provide a working tariff which shows an up to date rate taking account of the indexation increases.

Indexation increases also apply to rates set under a tariff proposal.

Tariff proposals

Tariff proposals ^[5] are a means of changing the excise tariff so that the change is effective from the time it is proposed rather than after the enactment of an Excise Tariff Amendment Act. Rates may be adjusted up or down or products may be added or removed under a tariff proposal.

Changes to the excise tariff can be notified in the Parliament or, if the Parliament is not sitting, by notice in the Gazette. We then apply the proposal as if it is law.

The tariff proposal is required to be validated by an Act within 12 months giving retrospective effect to the date of the proposal. ^[6]

You cannot commence proceedings against us for any action taken to collect the amount set by the tariff proposal during the periods specified in section 114 of the Excise Act unless it is sanctioned by a Supreme Court of a state or territory. ^[7]

Effectively, this means you need to pay in line with a tariff proposal. Any increases in rates or introduction of new products through a tariff proposal must ultimately be levied by an amending Act, but we will protect the revenue by collecting amounts in line with the proposal.

If an amending Act validating the changes outlined within the tariff proposal is not passed within the prescribed periods, any additional amounts will be refunded to you.

1.3.2 Excise Act 1901

All excisable goods are subject to our control

Under section 61 of the Excise Act, all excisable goods are subject to the CEO's control until they are delivered for home consumption or exported to a place outside Australia. Excisable goods subject to the CEO's control are called 'underbond' goods.

The CEO is the Commissioner of Taxation.

Goods are delivered for home consumption when they are released into the Australian market in an authorised manner, whether through the lodgment and passing of an entry or under a periodic settlement permission.

Manufacture, storage and movement of excisable alcohol products

Before you can legally manufacture ' excisable alcohol products ' you need a manufacturer licence granted under the Excise Act. ^[8] Under this licence you are also permitted to store excisable goods of a kind specified in the licence upon which duty has not been paid, including like products that you did not manufacture. It is an offence to manufacture excisable goods unless you have an excise manufacturer licence that specifies the goods you intend to manufacture.

If you are not a manufacturer, or you wish to store excisable goods upon which duty has not been paid and that are not of a kind specified in your manufacturer licence, you need a storage licence granted under the Excise Act that specifies the kind of excisable goods you wish to store. ^[9]

Before you can remove excisable alcohol products from premises covered by a licence, on which duty has not been paid, you need permission (a movement permission) granted under the Excise Act. ^[10]

There are several types of movement permission that we can issue. These include:

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a 'one-off' permission to move goods specified in the permission to another place specified in the permission

•

an ongoing permission to move goods of a kind specified in the permission to another place specified in the permission (and such a permission remains in place until revoked)

•

an ongoing permission to move goods of a kind specified in the permission to any other place licensed to manufacture or store goods of that kind

•

permission to deliver goods for export.

Generally, we will not grant permission to move underbond excisable alcohol products on which duty has not been paid to a place that is not covered by either a manufacturer licence or a storage licence or unless the place is a wharf or airport and the goods are for export.

For more information about the excise licensing regime, refer to Chapter 2 Licensing: Applications.

For more information about movement permissions, refer to Chapter 5 Movement permissions.

Payment of duty on excisable alcohol products

The Excise Tariff Act imposes duty when excisable alcohol products are manufactured. The Excise Act specifies when the duty must be paid, how and what you must report to us, the relevant time to determine the rate of duty in force and provides a mechanism to require payment where duty has not been correctly accounted for on excisable alcohol products.

In general terms, duty must be paid on the goods before they are delivered into home consumption (other than being delivered to another premises covered by a licence). Permission may be granted to deliver the goods prior to paying the duty.

For more information about payment of duty, refer to Chapter 6 Payment of duty.

1.3.3 Excise Regulation 2015

The Excise Regulation sets out provisions in relation to excisable goods such as:

•

refunds and remissions, and

•

drawbacks.

For more information about remissions, refunds and drawbacks, refer to Chapter 7 Remissions, refunds, drawbacks and exemptions.

1.4 ADMINISTRATION OF EXCISE

The Commissioner of Taxation has the general administration of the Excise Act and the Excise Tariff Act. ^[11] This means you deal with the Australian Taxation Office (ATO) when you are involved in the manufacture or storage of alcohol products manufactured in Australia.

Customs duty applies to imported alcohol products. The Australian Border Force (ABF) is responsible for administration of the Customs Act 1901 (Customs Act) and Customs Tariff Act 1995 (Customs Tariff Act); however, the ATO has been delegated responsibility for administering imported alcohol that is warehoused under the Customs Act.

1.5 INVOLVEMENT IN THE EXCISE SYSTEM

You are involved in the excise system if you:

•

manufacture excisable alcohol products

•

store or own excisable alcohol products upon which excise duty has not been paid.

1.6 MORE INFORMATION

If you need more information on excise, as it relates to alcohol, contact us via:

•

ATO Online Services

•

phone 1300 137 290 , or

•

write to us at

Australian Taxation Office
PO Box 3514
ALBURY NSW 2640

We will ordinarily respond to electronic requests within 28 business days and finalise private rulings within 28 days of receiving all necessary information. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

Most of your business reporting and transactions can be done through ATO Online services .

1.7 TERMS USED

Excisable alcohol products

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are manufactured or produced in Australia and are listed in the Schedule to the Excise Tariff Act or an Excise Tariff alteration.

As this Guide deals with alcohol products, we have used the term excisable alcohol products.

Excisable alcohol products include:

•

beer

•

spirits

•

premixed drinks known as ready-to-drink (RTD) beverages

•

brewed beverages that are not beer, and

•

spirit for non-beverage use, including denatured spirit.

1.8 LEGISLATION (quick reference guide)

In this Chapter, we have referred to the following legislation:

•

Excise Act 1901

–

section 4 – definitions

–

section 7 – general administration of Act

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section 25 – only licensed manufacturers to manufacture excisable goods

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Part IV – manufacturer, storage, producer and dealer licences

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section 61A – permission to remove goods that are subject to CEO's control

–

section 114 – time for commencing action

•

Excise Tariff Act 1921

–

section 1A – general administration of Act

–

section 5 – duties of excise

–

section 6A – indexation of CPI indexed rates

–

The Schedule

•

Commonwealth of Australia Constitution

–

section 90 – exclusive power over customs, excise, and bounties

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Amendment history

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

References