Excise guidelines for duty-free shops

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

9 REMISSIONS AND EXEMPTIONS

9.1 PURPOSE

This Chapter deals with:

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when you can apply for a remission

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when excisable goods are exempt from excise duty

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who can access excisable goods free of excise duty

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how to apply for a remission

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how to obtain permission to deliver goods to diplomatic and consular personnel

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what requirements must be met to make sales to diplomatic and consular personnel, and

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penalties that can apply to offences in relation to remissions and exemptions.

9.2 INTRODUCTION

A ' remission ' of excise duty extinguishes the liability for duty that was created at the point of manufacture. Where a remission circumstance validly applies on ' excisable goods ', no excise duty will ever be paid on those goods.

In some circumstances, the excise duty liability may be subject to a complete or partial remission. ^[229]

9.3 POLICY AND PRACTICE

9.3.1 APPLYING FOR A REMISSION OF EXCISE DUTY

You can apply for a remission of excise duty payable on your excisable goods if the following circumstances apply while the goods are subject to ' excise control ' ^[230] :

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where the excisable goods have deteriorated or been damaged, pillaged, lost or destroyed, or become unfit for human consumption ^[231]

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where the goods are not worth the amount of excise duty payable on the goods. ^[232]

'Pillage' means 'to strip of money or goods by open violence, as in war; plunder'. ^[233] This does not cover simple cases of theft.

For more information about payment of duty, refer to Chapter 8 Accounting for excisable goods.

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Example 9A

A carton of bottled brandy is dropped inside the duty-free shop, damaging the contents. The duty-free shop applies for a remission of duty on the damaged goods. On receiving approval, the duty-free shop destroys the damaged goods and retains records of the destruction.

Example 9B

Other excisable beverages containing milk products remain unsold in a duty-free shop and have deteriorated to a point where they are unfit for human consumption. The duty-free shop applies for a remission of duty on the beverages. On receiving approval, the duty-free shop destroys the unsaleable stock and retains records of the destruction.

Example 9C

A carton of spirits is water damaged and the packaging and labels of the bottles is severely affected. They are only able to be sold at a greatly reduced price, which is less than the excise duty that is payable on the spirits. The duty-free shop applies for a remission of duty on the beverages. On receiving approval, the duty-free shop destroys the unsaleable stock and retains records of the destruction.

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9.3.2 WHEN EXCISABLE GOODS ARE EXEMPT FROM EXCISE DUTY

Excisable goods are exempt from duty if they are:

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sold for use as ship's or aircraft's stores ^[234] , or

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subject to remission without application. ^[235]

Ship's and aircraft's stores

Ship's and aircraft's stores are goods for the use of passengers or crew on international journeys or for the service of ships or aircraft on international journeys (for example, alcohol for sale to passengers on board a cruise liner).

There are limits on the quantities of excisable products that are not liable to excise duty as ship's or aircraft stores. ^[236]

Excisable alcohol beverages (other than beer) must be sold to passengers or crew by the glass or nip. ^[237]

If you supply ship's or aircraft's stores ' underbond ', you must obtain a movement permission to move the goods from the premises covered by your licence to the place of export.

When excisable goods are subject to remission without application

Excisable goods may be subject to remission without application ^[238] (effectively meaning they are exempt from duty) when they are sold by duty-free shops:

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to diplomatic missions and foreign consular posts for official use but not for trade ^[239] (refer to Section 9.3.1 Applying for a remission of excise duty), and

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for use by the personnel of sea-going vessels of the Australian Defence Force. ^[240]

Some restrictions apply to excisable goods for the Australian Defence Force. The goods must be for consumption by the personnel of sea-going vessels of the Royal Australian Navy or Australian Military Forces when:

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such vessels are in full commission, and

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the products are consumed on such vessels. ^[241]

Only certain excisable goods are eligible for this concession, including:

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ale, port and other beer

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brandy

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whisky

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rum

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gin

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liqueurs, and

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tobacco goods.

Ready-to-drink beverages (for example, pre-mixed rum and cola or other mixers in bottles or cans) do not qualify for this concession.

To supply excisable goods under these circumstances, you must first ensure the receiver meets the relevant criteria. For example, you should only accept orders, stating that the goods are for official use, on the official stationery, or official order, of eligible people or organisations. You must keep a copy of this documentation.

You do not have to apply for a remission in these circumstances and you do not have to include these transactions on a ' duty-free operator return '.

9.4 PROCEDURES

9.4.1 APPLYING FOR A REMISSION

An application for a remission must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested. ^[242]

We may inspect or supervise the disposal of goods to ensure that excisable goods do not find their way into the Australian domestic market.

If underbond goods must be destroyed off site, you must apply for a movement permission to move them from the premises covered by the licence to the place of destruction.

Unless excisable goods have been accidentally destroyed, you should contact us before moving or destroying any that are subject to remission. We will provide you with direction and advise if the goods are to be inspected or the destruction supervised.

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

To apply for a remission, send us a completed Excise remission . You can use the Excise remission instructions to help you complete this form.

The easiest way to apply for a remission is by using ATO Online services . Alternatively, to apply for a remission, send us a completed Excise remission . Help to complete this form is available at Help completing the PDF form .

If you are not satisfied with our decision to refuse your remission, you can request a review of our decision by lodging an objection within 60 days of our decision.

For information about your review rights, refer to Chapter 10 Reviews and objections.

9.4.2 OBTAINING A PERIODIC SETTLEMENT PERMISSION TO DELIVER GOODS TO DIPLOMATIC MISSIONS AND CONSULAR PERSONNEL

Duty-free shops are only allowed to sell underbond goods to diplomatic missions (embassies) and consular posts and claim a remission without application, providing that they have applied for and been granted a separate permission to deliver goods for home consumption 'without entry' to diplomatic and consular personnel. ^[243]

A periodic settlement permission (PSP) is the most common arrangement for the recurrent delivery of goods subject to excise into the Australian domestic market. A PSP allows the reporting of deliveries and payment of duty owed on a periodic basis after the goods have been ' delivered into the Australian domestic market '. ^[244]

Your PSP will be conditioned to only allow duty-free deliveries to diplomatic missions and consular posts. ^[245] As sales to diplomatic missions and consular posts are not liable to excise duty, the period for lodging returns can be set for any period (for example, weekly, monthly, quarterly or annually). ^[246] Your PSP requires you to lodge an excise return (even a nil return) following the end of the set period. ^[247]

If you apply for a storage licence with permission to sell duty-free, you can use your application form to indicate whether you need permission to deliver goods to diplomatic and consular missions. You do not need to complete a separate application.

If you originally chose not to apply for permission to deliver goods to diplomatic and consular missions, contact us and provide, in writing, your:

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licence details (if you have one), and

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reasons for applying for this permission.

Permission to deliver goods to diplomatic and consular missions is not transferable to another person and remains in force until revoked.

We may also:

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refuse to grant a PSP

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impose further conditions on your PSP, or

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revoke your PSP.

Failure to comply with a condition may result in the revocation of the PSP. ^[248] In such an instance, we would take into account a variety of factors, including your compliance history.

A decision to refuse, impose conditions on, or to revoke a PSP is a reviewable decision. ^[249]

For information about your review rights, refer to Chapter 10 Reviews and objections.

For more information about diplomatic and consular sales, phone us on 1300 137 295 .

9.4.3 REQUIREMENTS THAT APPLY TO DIPLOMATIC AND CONSULAR PERSONNEL SALES

When making diplomatic and consular sales, you are required to:

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only make sales after receiving official orders from appropriate diplomatic mission or consular post personnel

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only deliver goods to diplomatic mission or consular posts or authorised personnel

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ensure each order is accompanied by an appropriate invoice and retain appropriate records

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only accept orders on the official stationery, or official order, of eligible people or organisations. You must keep a copy of this documentation.

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Example 9D

A duty-free shop receives an order on the official stationery from an officer at a diplomatic mission for alcohol, with a statement that it is for official use. The duty-free shop delivers the alcohol free of duty, into the Australian domestic market (to the diplomatic mission), under the terms of their PSP.

The duty-free shop needs to retain copies of the order, invoice and all other relevant documentation for their records.

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9.4.4 MORE INFORMATION

If you need more information on excise, as it relates to duty-free shops, contact us via:

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ATO Online Services

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phone 1300 137 290 , or

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write to us at

Australian Taxation Office
PO Box 3514
ALBURY NSW 2640

We will ordinarily respond to written information requests within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

9.5 PENALTIES THAT CAN APPLY IN RELATION TO REMISSIONS AND EXEMPTIONS

The following are the penalties that may apply after conviction for an offence.

Deliver

If you deliver excisable goods into the Australian domestic market contrary to your permission, the penalty is a maximum of 2 years in prison or the greater of 500 ' penalty units ' and 5 times the amount of duty on the excisable goods. ^[250]

Evade

If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 penalty units. ^[251]

False or misleading statements

If you make a false or misleading statement, or an omission from a statement in respect of duty payable on particular goods, to us, a penalty not exceeding the sum of 50 penalty units and twice the amount of duty payable on those goods. ^[252]

9.6 TERMS USED

Deliver into the Australian domestic market

Deliver into the Australian domestic market ^[253] is the term we use in this Guide for when excisable goods are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

Normally, this will be by delivering the goods away from premises covered by a licence but includes using those goods yourself (for example, sales to staff).

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However, there are several cases where issues closely related to it are considered. ^[254]

The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to exporting them.

Duty-free operator return

A duty-free operator return is a document that you use if you operate a duty-free store that is:

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on-airport – to report stocktake shortages or surpluses of excisable alcohol goods

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outwards off-airport – to report missed or found dockets and stocktake shortages or surpluses of excisable alcohol goods, or

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where you also hold a licence to store excisable alcohol goods at a site that is not a duty-free store – to report any shortages or surpluses of stock at your storage site.

Excisable goods

Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are listed in the Schedule, and manufactured or produced in Australia.

For operators of duty-free shops, this will include:

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alcohol goods that are produced or manufactured in Australia and are subject to excise, and

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imported alcohol goods that have undergone a process of manufacture or production in Australia – for example, high-strength imported whisky which has been reduced by adding water (in Australia) before it is bottled, constitutes manufacture or production for excise purposes. Vodka imported in bulk and repackaged in Australia, does not constitute manufacture for excise purposes.

This will not include:

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other imported alcohol goods (because these goods are subject to customs duty)

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wine (which is generally subject to wine equalisation tax), and

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cigarettes and other tobacco goods as there is currently no licensed manufacture of tobacco in Australia.

For more information about customable alcoholic beverages, refer to Chapter 22 of Schedule 3 to the Customs Tariff Act 1995.

Examples of excisable goods include Australian-made:

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beer

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spirits, and

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pre-mixed drinks known as ready-to-drink beverages.

Excise control

Section 7 of the Excise Act refers to the CEO as having 'general administration of this Act'. In this Guide, we will also refer to this general administration as excise control.

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market (referred also as to home consumption ^[255] ) or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Penalty units

The value of a penalty unit is contained in section 4AA of the Crimes Act 1914 , and is indexed regularly. The dollar amount of a penalty unit is available at Penalties .

Remission

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.

Underbond

This is an expression not found in excise legislation but it is widely used to describe goods that are subject to excise control. Excisable goods that are subject to excise control are commonly referred to as 'underbond goods' or as being 'underbond'. This includes goods that have not yet been delivered into the Australian domestic market and goods moving between premises under a movement permission.

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Amendment history

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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