Excise guidelines for the tobacco industry

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

1 INTRODUCTION

1.1 PURPOSE

This Chapter deals with:

•

what excise is

•

an overview of excise legislation relevant to tobacco

•

who administers excise, and

•

when are you involved in the excise system.

It provides a general introduction to excise as it relates to tobacco and ' tobacco goods '.

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 & Ors ^[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 imposed by the Excise Tariff Act 1921 is imposed on the manufacture or production in Australia of specified goods. 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 tobacco, is contained in the:

•

Excise Tariff Act 1921 (Excise Tariff Act)

•

Excise Act 1901 (Excise Act), and

•

Excise Regulation 2015 (Excise Regulation)

•

Taxation Administration Act 1953.

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, refer to 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 manufactured or produced in Australia that are listed in the Schedule. 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 Schedule of excisable goods and the duty rates

The Schedule is 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:

•

alcoholic beverages (other than wine) and spirits

•

cigarettes and other tobacco goods, and

•

fuel and oils.

The following is the tobacco goods section of the Schedule:

Figure 1: Extract of the table in the Schedule to the Excise Tariff Act

* For the current rates of duty, refer to Excise duty rates for tobacco

Tobacco, cigars and cigarettes are all classified to item 5 of the Schedule but only cigars and cigarettes are in stick form, so if the individual sticks do not exceed 0.8 grams in weight of tobacco (that is, not including filters or paper), they are classified to subitem 5.1. Products such as cigars and cigarettes with more than 0.8 grams of tobacco, pipe tobacco, ready rubbed tobacco and snuff are classified to subitem 5.5.

Although snuff is listed in the Schedule, there is currently a permanent ban on its supply, along with chewing tobacco, under the Trade Practices Act 1974 – Consumer Protection Notice No. 10 of 1991 – Permanent Ban on Goods. ^[5]

What is tobacco?

It is necessary to understand what tobacco is and what plants produce tobacco leaf to determine whether a product is classified to item 5 of the Schedule.

Tobacco is defined in the Excise Tariff Act ^[6] as 'tobacco leaf subjected to any process other than curing the leaf as stripped from the plant'.

This means that until tobacco leaf is subjected to processes after curing it is not excisable.

The Excise Act further clarifies that 'for the purposes of this Act, treat as tobacco any thing (including moisture) added to the tobacco leaf during manufacturing or processing'.

Although tobacco seed, plant or leaf (up to and including leaf that has been cured) are not 'excisable goods', they are subject to special provisions in the Excise Act which strictly control production or possession of these goods and provide for penalties.

The species of the Nicotiana genus that are generally used for smoking, chewing or snuff are considered to produce tobacco leaf. Those species are currently Nicotiana tabacum, Nicotiana rusticum and Nicotiana sylvestris.

Should other species of Nicotiana be developed where the leaves are generally used for smoking, chewing or as snuff then those species would also be considered to produce tobacco leaf.

Indexation of the duty rate

The rates of excise duty are set in the Schedule. Both alcohol and fuel duty rates are indexed each 6 months by reference to the All Groups Consumer Price Index published quarterly by the Australian Bureau of Statistics, in accordance with section 6A of the Excise Tariff Act.

Tobacco is indexed by reference to the average weekly ordinary time earnings (AWOTE) figures produced bi-annually by the Australian Bureau of Statistics in accordance with section 6AA of the Excise Tariff Act.

The AWOTE figure is published twice a year, in February and August. The indexation of duty rates for tobacco occurs in March and September.

Indexation increases also apply to rates which are set by a tariff proposal and not yet passed into law.

We publish these new rates in the Commonwealth Gazette and, for ease of reference, we provide a working tariff which shows a table with up-to-date rates taking account of the indexation increases, refer to Excise duty rates for tobacco .

Tariff proposals

Tariff proposals ^[7] 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 Parliament or, if 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. ^[8]

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. ^[9]

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 paid will be refunded to you.

1.3.2 EXCISE ACT 1901

The Excise Act imposes controls on tobacco in 3 main areas:

•

grow, deal in, store and move tobacco seed, plant and leaf

•

manufacture of ' excisable tobacco goods ', and

•

payment of duty for excisable tobacco goods.

The production of excisable tobacco goods such as cut tobacco and cigarettes is controlled by the granting (or refusal) of licences to manufacture excisable tobacco goods on which the liability for duty is imposed at the time of manufacture.

Excise controls and powers are broadly applicable to all goods which are excisable goods. Because tobacco seed, plant and leaf are not excisable goods, special provisions relating to them are contained in the Excise Act to allow similar control to be exercised over them as is exercised over other excisable goods.

The Excise Act imposes strict controls and has penalties for growing, dealing, possession and movement of tobacco seed, plant and leaf without authority.

Grow, deal in and move tobacco seed, plant or leaf

Before you can grow tobacco seed, plant or leaf, you need a producer licence granted under the Excise Act. ^[10]

Before you can deal in (that is, buy and sell) tobacco seed, plant or leaf, you need a dealer licence granted under the Excise Act. ^[11]

Before you can move tobacco seed, plant or leaf, you need permission granted under the Excise Act. ^[12]

Manufacture of excisable tobacco goods

Before you can manufacture tobacco goods, you need a manufacturer licence granted under the Excise Act. ^[13]

Tobacco goods are deemed to have been entered and delivered into home consumption when they are manufactured. ^[14]

Unlike other excisable goods, a storage licence under the Excise Act ^[15] cannot be granted to store excisable tobacco goods.

Consequently, you do not need a permission granted under the Excise Act ^[16] to remove excisable tobacco goods once manufactured.

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

For more information about movement permissions for tobacco seed, plant, or leaf, refer to Chapter 5 Movement permissions.

Payment of duty for excisable tobacco goods

The Excise Tariff Act imposes duty when excisable tobacco goods 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 tobacco goods.

In general terms, duty must be paid on tobacco goods at the time the goods are manufactured and deemed entered and delivered into home consumption.

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

1.3.3 EXCISE REGULATION 2015

The Excise Regulation set out provisions in relation to tobacco such as:

•

the circumstances allowing refunds, remissions and drawbacks

•

the period for making refund applications

•

amount of duty for tobacco leaf-related penalties.

The Excise Regulation also include rules specific to the tobacco industry in relation to delivering tobacco leaf for specific purposes.

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. ^[17] This means you deal with the Australian Taxation Office (ATO) for Australian-manufactured tobacco goods but also in relation to any tobacco seed, plant, or leaf whether it comes from Australia or elsewhere.

Imported tobacco goods are not subject to control under the Excise Act unless used in the further manufacture of excisable goods. Customs duty is applied to imported tobacco goods at rates equivalent to the excise duty applied to locally manufactured tobacco goods.

The Department of Home Affairs (Australian Border Force) is responsible for administration of the Customs Act 1901 and Customs Tariff Act 1995.

Who you need to deal with is summarised in the following table.

1.5 INVOLVEMENT IN THE EXCISE SYSTEM

You are involved in the excise system if you:

•

produce tobacco seed, plant or leaf

•

deal in tobacco seed, plant or leaf

•

manufacture tobacco goods (excisable goods)

•

are seeking a refund, remission or drawback of excise duty.

1.6 MORE INFORMATION

If you need more information on excise, as it relates to tobacco, 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 15 business days and finalise private rulings 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.

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

1.7 TERMS USED

Excisable tobacco 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 listed in the Schedule to the Excise Tariff Act.

These Guidelines deal with both controlled tobacco products (tobacco seed, plant and leaf) and excisable tobacco goods.

The term excisable tobacco goods include:

•

pouch tobacco

•

cigars

•

cigarettes

•

shisha or molasses tobacco, and

•

snuff.

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Amendment history

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© 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