Excise guidelines for the tobacco industry

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About this guide

This guide is intended to be a reference tool for the tobacco industry to assist its members to meet their Excise obligations. It contains information about the excise system and how it applies to tobacco and tobacco products that are produced or manufactured in Australia. The guide will provide you with a broad outline of excise law and your compliance obligations - it does not cover every aspect of how excise law applies to every situation. Throughout this guide you will find important notes (look for the  symbol) that will help you with key information you should note. You will also find 'more information' boxes (look for the

 symbol) that will show any further steps you may need to take or supplementary information you may need to refer to. The 'danger' notes (look for the

 symbol) give prominence to information that is critical to compliance. They suggest the highest level of urgency or facts you must comply with.  If this guide does not fully cover your circumstances, please seek help from us or a professional adviser. You can contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

TERMS WE USE

When we say you, we mean you as a member of the tobacco industry who is either registered or wishes to register for excise. Some technical terms used in this guide may be new to you - some are defined in the legislation, others are not. They are shown in bold when first used and are explained at the end of that chapter. The terms CEO, Collector, and Commissioner are all used in the legislation in reference to various officers. In most instances in this guide we have not used these specific terms and simply refer to 'us' or 'we'.

01 - INTRODUCTION

1.1 PURPOSE

1.2 WHAT IS EXCISE?

1.3 OVERVIEW OF EXCISE LEGISLATION

1.3.1 EXCISE TARIFF ACT

1.3.2 EXCISE ACT

1.3.3 EXCISE REGULATIONS

1.4 WHO ADMINISTERS EXCISE?

1.5 WHEN AM I INVOLVED IN THE EXCISE SYSTEM?

1.6 WHAT DO I DO IF I NEED MORE INFORMATION?

1.7 TERMS USED

1.8 LEGISLATION (QUICK REFERENCE GUIDE)

1.1 PURPOSE

This chapter deals with:
  • what excise is
  • an overview of excise legislation relevant to tobacco
  • who administers Excise, and
  • when you are involved in the excise system.
It provides a general introduction to excise as it relates to tobacco and tobacco products. Further detail on the matters discussed is contained in later chapters.

1.2 WHAT IS EXCISE?

The Commonwealth of Australia Constitution Act (the Constitution) provides that only the Commonwealth can impose duties of excise.[1] In Ha & Anor v. State Of New South Wales & Ors; Walter Hammond & Associates Pty Limited v. State Of New South Wales & Ors[2] (Ha), the High Court explained a duty of excise as follows:
"... 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."[3]
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. The Constitution also provides that laws imposing taxation (and excise is a tax) shall only deal with the imposition of tax. The Excise Tariff Act 1921 imposes excise on relevant goods manufactured or produced in Australia and the Excise Act 1901 deals with administrative arrangements applying to the excise system.

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 Regulations 1925 (Excise Regulations).
To change the Excise Tariff Act requires an amending act to be passed through Parliament. There are parliamentary procedures which allow for the modification of the Excise Tariff so that the changes can be implemented immediately. These procedures are known as Tariff Proposals.

For more information on Tariff Proposals see Section 1.3.1 - Excise Tariff Act.

1.3.1 Excise Tariff Act There are three 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 to the Act. 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 to the Excise Tariff Act is a table that lists the goods that are subject to excise duty (if those goods are manufactured or produced in Australia). The goods that are currently subject to excise fall within three broad groups:
  • alcoholic beverages (other than wine) and spirits
  • cigarettes and other tobacco products, and
  • fuel and oils.
Within those three broad groups the schedule provides eight 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 tobacco products section of the table:
Excise duties
ItemSubitem Description of goods Rate of Duty
5   Tobacco, cigars, cigarettes and snuff  
  5.1 In stick form not exceeding in weight 0.8 grams per stick actual tobacco content $0.25450* per stick
  5.5 Other $318.14* per kilogram of tobacco content
*Rate of duty as at 1 August 2008. For the current rates of duty, refer to the Schedule under Excise Tariff Working Pages on our website. Tobacco, cigars and cigarettes are all classified to item 5 but only cigars and cigarettes are in stick form so, if the individual sticks do not exceed 0.8 grams in weight of tobacco (i.e. 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 to the Excise Tariff, there is currently a permanent ban on its supply, along with chewing tobacco, under subsection 65C(7) of the Trade Practices Act 1974. [4]
It is necessary to understand what tobacco is and what plants produce tobacco leaf to determine whether a product is classified to item 5. Tobacco is defined in the Excise Tariff Act[5] 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 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 are set in the Schedule to the Excise Tariff Act. However, section 6A provides that the rates of duty may increase every six 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 are a means of changing the Excise Tariff (rates can be adjusted up or down; products can be added or removed) so that it is effective from the time it is proposed rather than after the enactment of an Excise Tariff Amendment Act. Most of the processes relate to Parliamentary procedures, however, there are specific provisions in the Excise Act that provide for the making of tariff proposals when Parliament is not sitting.  Effectively 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. 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.[6] 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 technically does not impose excise 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, then any additional amounts will be refunded to you.
1.3.2 Excise Act The Excise Act imposes controls in three main areas:
  • grow, deal in and move tobacco seed, plant and leaf
  • manufacture, store and move excisable tobacco products, and
  • payment of duty for excisable tobacco products.
The Excise Act requires that tobacco not be manufactured outside our control. This is to ensure that the correct amount of duty is ultimately paid or the tobacco is otherwise satisfactorily dealt with. This is achieved by making various activities unlawful and allowing us to grant licences and permission to people to carry on those otherwise unlawful activities. 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.[7] Before you can deal in (i.e. buy and sell) tobacco seed, plant or leaf you need a dealer licence granted under the Excise Act.[8] Before you can move tobacco seed, plant or leaf you need permission granted under the Excise Act.[9] Manufacture, store and move excisable tobacco products Before you can manufacture tobacco products you need a manufacturer licence granted under the Excise Act.[10] Before you can store excisable tobacco products that you did not manufacture you need a storage licence granted under the Excise Act.[11] Before you can remove excisable tobacco products on which duty has not been paid, you need permission granted under the Excise Act.[12] Generally speaking we will not grant permission to move excisable tobacco products on which duty has not been paid to a place that is not covered by either a manufacturer licence or a storage licence.

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 for excisable tobacco products The Excise Tariff Act imposes duty when excisable tobacco 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 tobacco goods.  In general terms, duty must be paid on the goods before they are delivered from licensed premises (other than being delivered to another licensed premises). 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 Regulations The Excise Regulations set out provisions in relation to excisable goods such as:
  • refunds and remissions, and
  • drawbacks.
The regulations 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 WHO ADMINISTERS EXCISE?

The Commissioner of Taxation has the general administration of the Excise Act and the Excise Tariff Act.[13] This means you have to deal with us for Australian manufactured tobacco products and any tobacco seed, plant, or leaf. As excise is only levied on products manufactured in Australia, imported tobacco products are not subject to control by us. Customs duty, under the Customs Act 1901 (Customs Act) and Customs Tariff Act 1995 (Customs Tariff Act), is applied to imported tobacco products at the same rate as for excisable tobacco products. The Australian Customs Service is responsible for administration of the Customs Act and Customs Tariff Act. Who you need to deal with is summarised in the following table.
Customs Tax Office
Australian tobacco seed, plant or leaf No Yes
Imported tobacco seed, plant or leaf Yes Yes (after it has been released from Customs control)
Australian manufactured tobacco products No Yes
Imported tobacco products not for further manufacture in Australia Yes No
Imported tobacco products for further manufacture in Australia Yes Yes

1.5 WHEN AM I INVOLVED 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 products (excisable goods), or
  • store or own tobacco products on which duty has not been paid.

1.6 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on excise, as it relates to tobacco, contact us:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.

1.8 LEGISLATION (quick reference guide)

In this chapter, we have referred to the following legislation: 1.8.1 Excise Act 1901 Section 4 - Definitions Section 7 - General administration of Act Section 25 - Only licensed manufacturers to manufacture excisable goods Section 28 - Only licensed producers to produce tobacco leaf etc. Section 33 - Only licensed dealers to deal in tobacco leaf etc. Part IV - Manufacture, storage, producer and dealer licences Section 44 - Permission to move tobacco seed, tobacco plant and tobacco leaf Section 61A - Permission to remove goods that are subject to CEO's control Section 114 - Time for commencing action 1.8.2 Excise Tariff Act 1921 Section 1A - General administration of Act Section 5 - Duties of excise Section 6A - Indexation of rates of duty The Schedule 1.8.3 Commonwealth of Australia Constitution Section 90 - Exclusive power over customs, excise, and bounties 1.8.4 Trade Practices Act 1974 Section 65C - Product safety standards and unsafe goods
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

02 - LICENSING: Applications

2.1 PURPOSE

2.2 INTRODUCTION

2.2.1 WHY IS THERE A LICENSING REGIME?

2.2.2 WHAT IS A LICENCE?

2.3 POLICY AND PRACTICE

2.3.1 DIFFERENT LICENCE TYPES

2.3.2 WHAT ARE MY RESPONSIBILITIES AS A LICENCE HOLDER?

2.3.3 WHAT ELSE CAN YOU DO?

2.3.4 WHAT RECORDS DO I NEED TO KEEP?

2.3.5 HOW LONG IS MY LICENCE VALID FOR?

2.3.6 IS MY LICENCE TRANSFERABLE?

2.3.7 CAN MY LICENSING INFORMATION BE DISCLOSED?

2.4 PROCEDURES

2.4.1 HOW DO I REGISTER FOR EXCISE?

2.4.2 HOW DO I APPLY FOR A LICENCE?

2.4.3 HOW DO I CHANGE MY LICENCE DETAILS?

2.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

2.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO LICENCES?

2.6 TERMS USED

2.7 LEGISLATION (QUICK REFERENCE GUIDE)

2.1 PURPOSE

This chapter deals with:
  • why there is a licensing regime
  • what a licence is
  • different licence types
  • how long a licence is valid for
  • whether licences are transferable
  • disclosure of your licensing information
  • how to register for excise
  • how to apply for a licence
  • how to change your licence details, and
  • penalties that can apply to offences in relation to licences.

2.2 INTRODUCTION

2.2.1 WHY IS THERE A LICENSING REGIME? The Excise duty attached to excisable tobacco products forms a significant component of the overall value of the goods. Licensing of tobacco producers and dealers was introduced to combat the illicit trade in tobacco which threatened to erode the revenue base. 2.2.2 WHAT IS A LICENCE? A licence is an approval or authorisation to enable you to undertake activities as specified in the licence. If you undertake these activities without a licence or contravene your licence you are committing an offence and may be prosecuted. A licence is issued to a specific entity and specifies the site where the activities may be undertaken. This may require you to have more than one licence. Licences can be issued to:
  • individuals
  • partnerships and companies in their own right, and
  • individuals and companies in their capacity as trustees.
There may be different licensing processes depending on the type of entity applying for the licence.
A licence is not transferable.

2.3 POLICY AND PRACTICE

2.3.1 DIFFERENT LICENCE TYPES There are four licence types:
  • Producer
  • Dealer
  • Manufacturer, and
  • Storage.

Producer licence

A producer is a licensed grower of tobacco seed, plant or leaf. To be able to produce tobacco seed, plant or leaf, you must hold a valid producer licence. You cannot produce tobacco seed, plant or leaf at premises that are not specified in your licence.[14] Produce includes all the activities of growing tobacco plants such as germinating seeds, growing seedlings, planting out, harvesting seeds for future seasons and harvesting the leaves, up to and including curing the leaf as stripped from the plant.[15] You cannot grow or plant tobacco seed or plant, or hold tobacco seed, plant or leaf in anticipation of acquiring a producer licence. This means that you cannot produce samples to market to potential buyers if you do not hold a licence, nor can you store tobacco seed or seedlings. A producer licence also allows you to sell tobacco seed, plant or leaf that you produce to:
  • licensed dealers
  • licensed manufacturers, or
  • other licensed producers.
Conditions may be imposed on a producer's licence including requirements around storage and in relation to persons participating in the business. Typically those who would require a producer licence include:
  • farmers who grow tobacco leaf for sale to licensed manufacturers, and
  • nurseries growing tobacco seedlings for sale to licensed producers.

Dealer licence

To be able to deal in tobacco seed, plant or leaf, you must hold a valid dealer licence. You cannot deal in tobacco seed, plant or leaf at premises that are not specified in your licence.[16] Deal includes buying, selling, storing, distributing and importing. You may also need a dealer licence if you wish to display tobacco seed or plant; for example, if you operate a museum. You cannot deal in tobacco seed, plant or leaf in anticipation of acquiring a dealer licence. A dealer licence also allows you to buy from or sell tobacco seed, plant or leaf to:
  • licensed producers
  • licensed manufacturers, or
  • other licensed dealers.
Conditions may be imposed on a dealer licence including requirements for storage and in relation to persons participating in the business.
If you are a licensed producer you do not need a dealer licence to:
  • buy tobacco seed or plant, or

  • sell tobacco seed, plants or leaf.[17]

If you are a licensed manufacturer you do not need a dealer licence to buy tobacco leaf from a producer or dealer or to import tobacco leaf.

Manufacturer licence

To manufacture excisable tobacco products, the Excise Act requires you to be a licensed manufacturer[18] and that the goods are manufactured at licensed premises, using Australian grown and/or imported tobacco leaf,[19] in accordance with the conditions specified on your manufacturer licence.[20] 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. However, the definition itself refers to the processes that are used in the manufacture of excisable goods It is, therefore, relevant to examine the ordinary meaning of the word and determine its appropriateness for the purposes of the Excise Act. The courts have extensively examined the meaning of 'manufacture' in the context of legislation other than the Excise Act. Whilst it is not possible to directly adopt judicial interpretation of the word as it appears in other legislation, these cases do provide guidance. In summary, the courts have given the word 'manufacture' the meaning of either producing a thing which is different from its inputs, or bringing a new article into existence by skill or knowledge.[21] The courts considered processes that involved the application of knowledge, the application of skill, experience, services or labour which results in the conversion of materials into a saleable commodity may fall within the definition of 'manufacture'.  The commodity must be different from the inputs which went into making it. In an excise context, the conversion may result in a change in physical and/or chemical properties of goods, for example, in colour, shape, density, viscosity, distillation temperature, composition, texture, aroma or taste. In relation to tobacco the Excise Act excludes the curing process from being manufacture and the Schedule to the Excise Tariff Act defines 'tobacco' as being tobacco leaf subjected to any process other than curing the leaf as stripped from the plant. We consider that these common activities in relation to tobacco are manufacture:
  • threshing tobacco leaf
  • conditioning
  • blending
  • cutting, and
  • making tobacco products.
The following activities are examples of processes that are 'excise manufacture':
  1. Threshed tobacco leaf is cut and treated with heat and moisture and combined with filters and paper to form cigarettes.
  2. Cured tobacco leaves are cut to form 'roll your own' tobacco.
  3. Cured tobacco leaf is threshed to separate the lamina from the stem. The lamina is called 'cut rag'.
  4. Cured tobacco leaves are rolled together to form a cigar.
The following activities are examples of processes that are not 'excise manufacture'.
  1. Tobacco leaf, as stripped from the plant, is cured to convert it into leaf tobacco.[22]
  2. A person rolls a cigarette at home using papers and 'roll your own' tobacco on which duty has been paid.
You cannot commence to manufacture excisable tobacco products without a licence.  This means that you cannot test your manufacturing equipment or produce samples to market to potential buyers if you do not hold a licence. Imported whole or threshed leaf is subject to customs duty at the same rate as loose manufactured tobacco. If you intend to use imported whole or threshed leaf in the manufacture of excisable products you can avoid paying the customs duty if you follow the provisions in the Customs Act. If you have any questions regarding this you should contact the Australian Customs Service. However, in general, the provisions provide that if your licensed excise premises is also licensed as a Customs warehouse you can enter the imported whole or threshed leaf for warehousing and then use the imported leaf to manufacture excisable goods. The liability to pay the customs duty on the imported whole or threshed leaf is extinguished upon the manufacture of excisable goods.[23] You will then be liable to pay excise duty on the excisable tobacco products. You need permission to move any tobacco leaf so, if you use imported tobacco leaf, you need permission to move it from the place of importation to your manufacturing premises. [24]
If you use imported leaf, you require permission to import the leaf, as it is otherwise a prohibited import under the Customs Prohibited Import Regulations.[25]
You can only manufacture goods at the premises specified on your licence.[26] We may also give you written directions in regard to what parts of your factory any manufacturing process is to be carried on and inputs used in manufacture, and excisable tobacco products, respectively are to be kept.[27]
If you hold a valid manufacturer licence, you do not need a separate storage licence to store goods that you manufacture at those premises. The storage of your manufactured goods, whilst not manufacture in itself, is a normal part of the chain of events in manufacturing goods. It does not, however, include storing excisable goods manufactured by someone else. To store goods manufactured by someone else you will need a storage licence.
A manufacturer licence allows you to sell tobacco leaf to a dealer or manufacturer who is also licensed under the Excise Act.

Storage licence

If you have a manufacturer licence and wish to store your excisable tobacco products underbond at a place that is not specified in your licence you will require a separate storage licence for that place.  If you are in the business of wholesaling and distribution you may wish to store underbond excisable tobacco products (whether owned by you or someone else). In either case you would require a storage licence. Even if you are not the owner of the excisable tobacco products, you are still responsible for the security of the goods and may be liable to pay an amount equivalent to the duty if the excisable goods are not kept safely or are not satisfactorily accounted for. A storage licence will specify the type of excisable tobacco products and the location. It will also specify the activities, if any, you can undertake in relation to those goods, for example re-packaging[28] and whose excisable goods you can store, for example we could limit it to goods you own, or to goods owned by certain people.
You do not need a storage licence to store tobacco seed, plant and leaf as they do not become excisable until they have passed the first stage of manufacture. However you do need a producer or dealer licence to have tobacco seed, plant or leaf.
2.3.2 WHAT ARE MY RESPONSIBILITIES AS A LICENCE HOLDER? You are responsible for the secure storage of all tobacco seed, plant and leaf and excisable tobacco products held on your premises or under your control and must keep or store tobacco seed, plant or leaf and excisable tobacco products only at premises that are specified in your licence.[29] If you are a manufacturer, this includes stalks, refuse, clippings or waste arising from the manufacturing process. If you lose any tobacco leaf, you may be liable to pay an amount equivalent to the duty that would have been payable had that tobacco leaf been manufactured into tobacco products.[30] The amount of such a liability can be substantial as the rate of excise duty applicable is over $300 per kilogram of tobacco content. You may be responsible for paying an amount equal to the excise duty that would have been payable on any stolen, missing or unaccounted for excisable tobacco products.[31] Where, after we take stock of excisable tobacco products manufactured and the materials you use in the manufacturing process it appears to us, that not all the duty that should have been paid has been paid, you must pay the difference between the amount paid and the amount that should have been paid.[32]
If you wish to destroy any excisable tobacco products, you must first obtain permission from us to do so.
You must not move tobacco seed, plant or leaf, or excisable tobacco products, without approval from us. This includes moving tobacco seed, plant or leaf, or excisable tobacco products from your licensed premises to any other location or for export.[33]

For more information about obtaining permission to move tobacco refer to chapter 5 - Movement permissions.
If you are moving tobacco leaf away from the place specified on your licence, you must ensure that the tobacco leaf has a tobacco bale label attached at all times that the tobacco leaf is not at a licensed place, unless we approve otherwise in writing.[34]
You must also obtain permission from us before moving tobacco leaf,[35] or stalks, refuse, clippings or waste arising from the manufacturing process, [36] for destruction.
You are also responsible for ensuring that you comply with the Excise Act and all conditions of your licence.[37] You may deliver Australian tobacco leaf for a purpose such as medical, scientific, horticultural or agricultural use upon receipt of an approval from us.[38] You must keep, retain and produce records in accordance with a direction under section 50 of the Excise Act. If you are a manufacturer, you will also need to:
  • ensure tobacco products are only delivered into the Australian domestic market with appropriate authority, such as in accordance with a periodic settlement permission or Delivery authority[39]
  • pay the correct amount of excise duty[40]
  • provide all reasonable facilities to enable us to exercise our powers under the Excise Act[41]
  • provide sufficient lights, correct weights and scales, and all labour necessary for
    • weighing material received into your factory
    • weighing all excisable goods manufactured in your factory, and
    • taking stock of all material and excisable goods contained in your factory,[42] and
  • have no more than 30% moisture content in the manufactured tobacco product,[43] which is determined by drying it at a temperature of 100 degrees Celsius.[44]
If you have a storage licence, you will also need to:
  • ensure tobacco products are only delivered into the Australian domestic market with appropriate authority, such as in accordance with a periodic settlement permission or Delivery authority,[45] and
  • pay the correct amount of excise duty[46] if you are the owner or manufacturer.

For more information about duty liability and methods of payment refer to chapter 6 - Payment of duty.
2.3.3 WHAT ELSE CAN YOU DO? Access We have the right to enter your licensed premises at any time and can examine and take account of all the goods at the premises.[47] Note: we will usually only seek to enter your premises during normal business hours. Stop vehicles We can stop any vehicle leaving your licensed premises and check that there is proper documentation for tobacco leaf or excisable tobacco products leaving the premises. We can question the driver about any goods in the vehicle. We can direct that the vehicle be unloaded and goods taken to particular parts of the premises for further examination. We must not detain a vehicle for longer than is necessary to do the checking.[48] Search vehicles We can stop and search any vehicle (not just vehicles leaving a licensed premises) without a warrant if we have reasonable grounds for believing that the vehicle contains tobacco leaf or excisable tobacco products and that the vehicle has been used, is being used or will be used in the commission of an offence under the Excise Act (and certain offences in the Crimes Act 1914[49] and Criminal Code[50] relating to accessory after the fact, attempt to commit an offence, aid and abet someone to commit an offence and conspiracy to commit an offence).[51] Examine goods We can open packages and examine, weigh, mark and seal any excisable tobacco products that are subject to excise control and, if you are a manufacturer, lock up, seal, mark or fasten any plant in or on your factory.[52] We can also:
  • supervise the manufacture of excisable tobacco products,[53] and
  • take samples of materials, partly manufactured excisable tobacco products and excisable tobacco products subject to excise control, and tobacco products that we have reasonable grounds for suspecting are excisable tobacco products on which duty has not been paid[54]
2.3.4 WHAT RECORDS DO I NEED TO KEEP? Unlike other taxation laws the Excise Act does not have a general record keeping provision. The Excise Act does provide that a licence holder shall:
  1. keep such records and furnish such returns as directed
  2. keep these records for the period directed, and
  3. on demand, produce those records to us.[55]
Any such direction will be in writing and included with your licence. We can amend this direction at any time and will provide written notification of this to you. If you cease to hold an excise licence you must still keep all records of your previously licensed activities. Records must be kept for the period of time as directed. The following are examples of the records that we may direct you to keep: If you are a producer, details of:
  • number of hectares on which you grow tobacco leaf
  • quantity of tobacco leaf you harvest
  • packing dates
  • kiln or barn numbers
  • number of racks or clamps
  • pick numbers
  • date unloaded from the kiln or barn
  • number of bales made
  • Tax Office bale label number
  • quantity (in kilos) of loose cured tobacco leaf in storage (in bags or slings)
  • number of bales entered into your storage shed
  • number of bales sent to sale
  • date bales are sent to sale
  • total number of bales in storage, and
  • any tobacco leaf lost, including
    • the date of the loss
    • the cause of the loss
    • the quantity of tobacco leaf lost
    • who the loss was reported to, and
    • the Tax Office comment/verification.
We have created the 'Tobacco producer's record book'[56] to help you meet your record keeping obligations. If you are a dealer, details of:
  • all tobacco seed plant or leaf purchased
  • all tobacco seed plant or leaf sold, and
  • imported tobacco leaf.
If you are a manufacturer, details of:
  • all tobacco leaf received at your licensed premises
  • all tobacco leaf and excisable goods
  • held in your licensed premises
  • the amount of excisable tobacco produced showing all inputs, outputs and waste
  • all deliveries from your licensed premises
  • all duty payments and excise returns
  • any refunds and remissions, and
  • destruction of any waste materials.
If you have a storage licence, details of:
  • stock received
  • stock removed/delivered, including details of duty payments, underbond movements, refunds, remissions and destructions
  • stock on hand, and
  • entities and dates relating to the goods received at and delivered from the premises.
2.3.5 HOW LONG IS MY LICENCE VALID FOR? Your licence will state its expiry date. When first issued, the licence is valid until the next 30 September two years after the anniversary of the day it is granted.[57]
Example: If we grant a licence on 15 September 2007, it will expire on 30 September 2009. If we grant a licence on 15 October 2007, it will expire on 30 September 2010.
Upon renewal a licence is valid for a further three years starting from the day after the date of expiry of the existing licence, that is, 1 October three years from the year the existing licence expires. 2.3.6 IS MY LICENCE TRANSFERABLE? Generally you cannot transfer your licence to another individual, business entity or premises. The proposed new licence holder must apply for a new licence. You must also request cancellation of your current licence if you are no longer carrying out an excise activity. It is important that you advise us of any change in advance of it taking effect. The exception to the above rule arises when a licence holder dies. If this is the case, the licence is taken to be transferred to the person's legal personal representative. This allows for the finalisation of the affairs and, unless cancelled earlier, the licence is automatically cancelled 3 months after the licence holder died.[58]

For more information about cancelling licences refer to chapter 4 - Licensing: suspension & cancellation.
2.3.7 CAN MY LICENSING INFORMATION BE DISCLOSED? As well as the protection provided by the Privacy Act, the tax laws have secrecy provisions about using and disclosing taxpayer information. We can only look at, record, discuss or disclose information about you when it is a necessary part of our work, or where the law specifies that we may. Subsection 159(3) of the Excise Act allows us to record or disclose information about you in certain circumstances. For example, the Excise Act specifically allows us to disclose information about you to the Australian Customs Service. In relation to licensing information, the Excise Act specifically allows us to disclose information about:
  • whether another person holds a current excise licence, and
  • any conditions that apply to their licence.
Sub-section 159(3A) provides that such information may be disclosed:
  • to a person dealing or proposing to deal with another person in relation to goods subject to excise control, and
  • provided we are satisfied that disclosure is necessary for the purposes of ensuring the dealing or proposed dealing is in accordance with excise law.
Example You need to find additional storage space for your finished tobacco products and, therefore, need to check that the entity who offers to warehouse your products has a licence to store excisable tobacco products.
If we decide that the disclosure is necessary, we must provide the information in writing to the person who requires it. If the matter is urgent, we may advise by phone. However, we must later confirm the information by letter or fax. A disclosure may be initiated by us or by you when you request information. Anyone who receives such information should use it only for the purpose for which it was given. Any other use may be unlawful. Note: The Privacy Act 1988 imposes certain obligations on you concerning the privacy of information that you have received about an individual. Further information can be obtained from the Office of the Federal Privacy Commissioner at www.privacy.gov.au. Our decision in relation to the disclosure of protected information is not a reviewable decision. However you have the right to make a complaint to the Commonwealth Ombudsman about a range of administrative actions we take or the Privacy Commissioner if you think we have breached the Privacy Act in dealing with your personal information.

For information about your review rights refer to chapter 8 - Reviews and objections.

2.4 PROCEDURES

2.4.1 HOW DO I REGISTER FOR EXCISE? You must register for excise before you can be issued with a licence to produce, store, deal in, or manufacture excisable tobacco products. While it is not compulsory to provide an ABN or TFN for registration, it will help us to process your application. If you need an ABN, you can register online at www.abr.gov.au

To register for excise, complete an Application for excise registration (NAT 7103).
2.4.2 HOW DO I APPLY FOR A LICENCE? If you would like to apply for a licence, you should:
  • contact us, and
  • lodge an application form together with all the required supporting documents.
To contact us phone 1300 137 295. Our staff will:
  • discuss your particular circumstances with you
  • give you advice about the appropriate licence or licences
  • explain how to apply
  • explain your ongoing obligations as a licence holder, and
  • provide you with a licence application form.
There is no charge for an excise licence.

How do I lodge an application?

You need to complete the relevant form to apply for a producer, dealer, manufacturer or storage licence.[59] Before lodging your application form, make sure you have included the required supporting documents. Your application form contains information to help you work out which supporting documents you must provide. You may also need to complete other excise forms, depending upon your proposed activities. Supporting documents include:
  • an accurate plan of the premises that clearly indicates the area for production, dealing, manufacture or storage
  • a Consent to obtain information - individual (NAT 7112) form, or
  • a Consent to obtain information - company (NAT 7106) form
  • a Consent to criminal history record check (NAT 16358), and
  • an application for permission to move underbond goods.

For more information about movement permissions refer to chapter 5 - Movement permissions.
To lodge your completed application form and supporting documents:
  • fax them to us on (03) 9285 1168, or
  • post them to

    Excise Licensing Group

    Australian Taxation Office

    GPO Box 2318

    ADELAIDE, SA, 5001

You must not manufacture or store excisable goods, or produce or deal in tobacco seed, plant or leaf, before your licence has been granted.[60]
We will process your application within 28 days of the date we receive all required information.
2.4.3 HOW DO I CHANGE MY LICENCE DETAILS? We can amend your licence for changes that do not involve a change of entity or physical location. This includes a change of:
  • business name (that is your trading name)
  • postal address, or
  • street name or property address made by a relevant authority.
A change in composition of a partnership does not affect the continuity of that partnership. Any one or more of the partners may act on behalf of the partnership in notifying changes.[61] You must advise us of any of these changes within 30 days. We will then provide you with an amended licence. 2.4.4 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on licensing matters contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

2.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO LICENCES?

The following are the penalties that may apply after conviction for an offence. Produce If you produce tobacco seed or plant without a producer licence, the penalty is a maximum of two years in prison or 500 penalty units.[62] If you produce tobacco leaf without a producer licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[63] If your production of tobacco seed, plant or leaf does not comply with the Excise Act and any conditions specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units.[64] If you produce tobacco seed or plant at premises that are not specified in your licence, the penalty is a maximum of two years in prison or up to 500 penalty units.[65] If you produce tobacco leaf at premises that are not specified in your licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods [66] Deal in If you deal in tobacco seed or plant without a dealer licence, the penalty is a maximum of two years in prison or 500 penalty units.[67] If you deal in tobacco leaf without a dealer licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[68] If your dealing in tobacco seed, plant or leaf does not comply with the Excise Act and any conditions specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units.[69] If you deal in tobacco seed, plant or leaf at premises that are not specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units.[70] Manufacture If you manufacture excisable tobacco products without a manufacturer licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[71] If you manufacture excisable tobacco products contrary to the Excise Act or any conditions specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units.[72] If you manufacture excisable tobacco products at premises that are not specified in your licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[73] Keep or store If you are a licensed producer and you keep or store tobacco seed, or plant at premises that are not specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units.[74] If you are a licensed producer and you keep or store tobacco leaf at premises that are not specified in your licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[75] If you are a licensed dealer and you keep or store tobacco seed, or plant at premises that are not specified in your licence, the penalty is a maximum of two years in prison or 500 penalty units.[76] If you are a licensed dealer and you keep or store tobacco leaf at premises that are not specified in your licence, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[77] If you possess or have custody or control of excisable tobacco products without permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[78] If you possess or have custody or control of tobacco seed or plant without permission, the penalty is a maximum of two years in prison or 500 penalty units. If you possess or have custody or control of tobacco leaf without permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[79] 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.[80] Records If you do not keep, retain and produce records in accordance with a direction under section 50 of the Excise Act, the penalty is a maximum of 30 penalty units. Directions If you do not comply with a direction in regard to what parts of the factory can be used for various matters, the penalty is a maximum of 10 penalty units.[81] Counterfeit bale labels If you make and/or use counterfeit bale labels, the penalty is a maximum of 500 penalty units.[82] Moisture content If you have in your factory any manufactured tobacco containing more than 30% of moisture, the maximum penalty is 10 penalty units.[83] Facilities etc. If you do not provide all reasonable facilities for enabling us to exercise our powers under the Excise Act, the penalty is a maximum of 10 penalty units.[84] If you do not provide sufficient lights, correct weights and scales, and all labour necessary for weighing material received into, and all excisable tobacco products manufactured in, your factory, and for taking stock of all material and excisable tobacco products contained in your factory, the maximum penalty is 10 penalty units.[85] If we mark or seal excisable tobacco products or fasten, lock or seal any plant in your factory and you alter, break or erase the mark, seal, fastening or lock, the maximum penalty is 50 penalty units.[86] Marks and seals If we mark or seal excisable tobacco products and you alter, break or erase the mark or seal, the maximum penalty is 50 penalty units.[87]

2.6 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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.
Excise control Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export. Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act. Excise return An excise return[88] is the document that you use to advise us:
  • the volume of excisable tobacco products that you have delivered into the Australian domestic market during the period designated on your Periodic settlement permission, or
  • the volume of excisable tobacco products that you wish to deliver into the Australian domestic market following approval.
Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and at the time of writing is $110. Section 50, direction This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, licensed producer, licensed dealer, or proprietor of licensed premises, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us. Tobacco Tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant.[89] This means that until tobacco leaf is subjected to processes after curing it is not excisable. 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. 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.

2.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 2.7.1 Excise Act 1901 Section 4 - Definitions Section 6A - How this Act applies to partnerships Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods Section 25 - Only licensed manufacturers to manufacture excisable goods Section 26 - Licensed manufacturers to manufacture in accordance with Act and licence Section 27 - Licensed manufacturers to manufacture only at licensed premises Section 28 - Only licensed producers to produce tobacco leaf etc. Section 29 - Licensed producers to produce in accordance with Act and licence Section 30 - Licensed producers to store tobacco leaf etc. at licensed premises Section 31 - Licensed producers to produce tobacco leaf etc. at licensed premises Section 33 - Only licensed dealers to deal in tobacco leaf etc. Section 34 - Licensed dealers to deal in accordance with Act and licence Section 35 - Licensed dealers to store tobacco leaf etc. at licensed premises Section 36 - Licensed dealers to deal in tobacco leaf etc. at licensed premises Section 39 - Applications for licences Section 39D - Conditions of licence Section 39E - Duration of licences Section 39O - Death of licence holder Section 44 - Permission to move tobacco seed, tobacco plant and tobacco leaf Section 46 - Supervision by officers Section 49 - Facilities to officers Section 50 - Record keeping Section 51 - Collector may give directions Section 52 - Weights and scales Section 53 - Responsibility of manufacturers Section 54 - Liability to pay duty Section 58 - Entry for home consumption etc. Section 60 - Persons to keep excisable goods safely etc. Section 61A - Permission to remove goods that are subject to CEO's control Section 61C - Permission to deliver certain goods for home consumption without entry Section 62 - Deficiency in duty Section 68 - Exemption Section 75 - Destruction of waste tobacco Section 76 - Limitation of amount of moisture in tobacco Section 77 - How moisture determined Section 77AA - Tobacco leaf stock may be checked Section 86 - Officers to have access to factories and approved places Section 87 - Power to stop conveyances about to leave an excise place Section 87AA - Searches of conveyances without warrant Section 91 - Examine all goods Section 92 - Seals etc. not to be broken Section 106 - Samples Section 117 - Unlawful possession of excisable goods Section 117I - Counterfeit tobacco labels Section 120 - Offences Section 159 - Protection of confidentiality of information 2.7.2 Excise Regulations 1925 33 - Approval for uses and destruction of tobacco leaf 2.7.3 Excise Tariff Act 1921 The Schedule 2.7.4 Customs Act 1901 Section 105B - Extinguishment of duty on excise-equivalent goods 2.7.5 Customs (Prohibited Imports) Regulations 1956 4D - Importation of unmanufactured tobacco leaf 2.7.6 Crimes Act 1914 4AA - Penalty units 6 - Accessory after the fact 2.7.7 Criminal Code Act 1995 11.1 - Attempt 11.2 - Complicity and common purpose 11.5 - Conspiracy
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

03 - LICENSING: Assessing applications

3.1 PURPOSE

3.2 INTRODUCTION

3.3 POLICY AND PRACTICE

3.3.1 LICENSING CRITERIA

3.3.2 WHAT ARE LICENCE CONDITIONS?

3.3.3 WHAT ARE SECURITIES?

3.3.4 ASSESSING YOUR APPLICATION TO RENEW YOUR LICENCE

3.4 PROCEDURES

3.4.1 WHAT HAPPENS IF MY LICENCE IS NOT GRANTED?

3.4.2 WHAT WILL HAPPEN IF MY LICENCE IS GRANTED?

3.4.3 HOW DO I RENEW MY LICENCE?

3.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

3.5 WHAT PENALTIES CAN APPLY FOR OFFENCES IN RELATION TO MAKING AN APPLICATION?

3.6 TERMS USED

3.7 LEGISLATION (QUICK REFERENCE GUIDE)

3.1 PURPOSE

This chapter deals with:
  • licensing criteria
  • licence conditions
  • securities
  • assessing your application to renew your licence
  • what happens if your licence is not granted
  • what will happen if your licence is granted
  • records you need to keep
  • how to renew your licence, and
  • penalties that can apply to offences in relation to making an application.

3.2 INTRODUCTION

The Excise Act provides us with the discretion whether to grant or refuse a licence. We base the decision on the information you supply. However subsection 39A(2) provides that if we consider certain criteria exist they can be the basis for refusal. In summary those criteria are:
  • whether you or an associate are not 'fit and proper'
  • whether you do not have, or have available to you, the skills and experience required to carry out the activity that would be authorised by the licence
  • the physical security of the premises is not adequate
  • the plant and equipment to be used at the premises is not suitable
  • you will not have a market for the goods
  • you would not be able to keep proper books of account for audit purposes
  • the grant of a storage licence would delay liability for duty, or
  • it is necessary to refuse to grant the licence to protect the revenue.
These criteria are explained in more detail below. How any of these criteria affects a particular licence application depends on the facts in each particular case. There are, however, some criteria that are critical, for instance:
  • you are not 'fit and proper'
  • existence of a market, and
  • protection of the revenue.

3.3 POLICY AND PRACTICE

3.3.1 LICENSING CRITERIA (1) 'Fit And Proper' Person or Company[90] The nature of the entity applying for the licence will affect who is assessed as being fit and proper:
  • if an individual, the individual is assessed
  • if a partnership, each partner is assessed, and
  • if a company, the company is assessed.
Persons other than the applicant can also be assessed as to whether they are fit and proper. These persons are:
  • another person who would participate in the management or control of the premises that is the subject of the licence application
  • if the applicant is a company, then any director, officer, or shareholder of the company that would participate in the management or control of the company, and
  • certain associates of the applicant (associates can be people or companies).

What does fit and proper mean?

The term 'fit and proper' is not defined in the Excise Act or Excise Regulations. Fit and proper is dependant on the purpose of the legislation and the proposed activities of the person concerned. In general qualities of diligence, honesty and the likelihood of observance of the law are pivotal characteristics to be taken into account in considering fitness and propriety. In an Excise context we are assessing the suitability of the person applying for a licence to have access and control over tobacco seed, plant or leaf and excisable tobacco products. The Excise Act provides a definitive list of factors that we will take into account in determining whether a person or company is fit and proper. These factors generally relate to:
  • any prosecution history
  • solvency
  • the honesty of information provided by the applicant
  • compliance with tax obligations, and
  • licensing history.
In assessing these factors we will consider whether your circumstances demonstrate that you will be diligent, honest, and likely to observe Excise laws. A single factor will not necessarily be determinative on its own of whether a person or company is 'fit and proper'. It will depend on the facts and circumstances of each case. The weight afforded to each factor in reaching a decision about whether a person or company is 'fit and proper' is a matter for us to decide. We are deciding whether the person or company is fit and proper, and will do so after considering all relevant information. Some factors apply to both individuals and companies; others are specific to individuals or to companies. Individual or company:
  • whether, within a year of lodging the application, the person or company has been charged with:
    • an offence under the excise legislation, or
    • an offence under Commonwealth, State or Territory law punishable by imprisonment for one year or longer (for an individual), or by a fine of 50 penalty units or more
  • whether, within 10 years of lodging the application, the person or company has been convicted of:
    • an offence under the excise legislation, or
    • an offence under Commonwealth, State or Territory law punishable by imprisonment for one year or longer (for an individual), or by a fine of 50 penalty units or more
  • the extent of the person's or company's compliance, within 4 years of lodging the application, with any law administered by us (e.g. income tax, GST)
  • whether the person has held an excise licence which has been cancelled, or
  • the person's or company's financial resources.
Individual only
  • whether the person has participated in the management or control of a company that has had its excise licence cancelled
  • whether the person is an undischarged bankrupt
  • any misleading statement made in the application by the person, or
  • where any false statement was made in the application- whether the person knew it was false.

False and misleading statements are discussed below in 'Where a person makes false or misleading statements in their application'.
Company only
  • whether a receiver has been appointed over the property, or part of the property, of the company
  • whether the company is under administration under the Corporations Act 2001 (Corporations Act)
  • whether there is a current deed of company arrangement in place under Part 5.3A of the Corporations Act, or
  • whether the company is being wound up.

Where a person makes false or misleading statements in their application[91]

It is important that you provide information that is accurate and complete. If your application (i.e. your completed application form, any supporting documentation and any oral statements made), contains false or misleading statements we will take this into account. Misleading statements. With regard to this element, the term 'mislead' is not defined in the Excise Act. The Australian Oxford Dictionary, 2004, 2nd edn, Oxford University Press, Melbourne defines 'mislead' as follows:
  1. cause (a person) to go wrong, in conduct, belief, etc.
  2. lead astray or in the wrong direction.
A misleading statement does not have to successfully mislead us, but it can be taken into account if it was reasonably foreseeable that we could have been misled when assessing the application. Misleading may be by omission as well as what has been said.
Example You advise us that you have installed a state of the art security system at your premises. While true, you failed to advise us that a design fault has resulted in repeated false alarms to the point where you have switched off the security system and have no intention of re-engaging it. The design fault cannot be remedied. The only security actually in operation at the premises is a rusty padlock. The information you provided, whilst not false, could lead us to believe that your premises are secure. This is misleading.

 

False statements

We can only take false statements into account if you knew they were false.[92] In essence, a statement is false if it is not true. A false statement may be made expressly, or via omission. An example of the former is where you state you have no criminal convictions when in fact you have been convicted. An example of the latter would be to leave the question on your application form in relation to criminal convictions blank when in fact you have been convicted. In both instances, a false statement has been made.

Who are the associates that can be assessed for fit and proper?[93]

To avoid situations where people with a high risk of non-compliance are able to exercise control over licence holders, certain associates can be assessed under the fit and proper person test. The word associate effectively takes it meaning from the Income Tax Assessment Act 1936 and is summarised below:
  • An associate of a natural person (otherwise than in the capacity of trustee) includes:
    • a relative[94] of the individual, for example, their spouse, parent, sibling, uncle, aunt
    • a partner of the individual or a partnership in which the individual is a partner
    • if a partner of the individual is a natural person otherwise than in the capacity of trustee, the spouse or child of the partner
    • a trustee of a trust under which the individual or their associate benefits, or
    • a company under the control of the individual or their associate.[95]
Although an associate includes a spouse, a legally married spouse of a person who lives separately and apart on a permanent basis is not an associate.[96]
  • An associate of a company includes:
    • a partner of the company or a partnership in which the company is a partner
    • if a partner of the company is an individual, the spouse or child of the partner
    • a trustee of a trust under which the company or their associate benefits
    • another entity (a company, partnership, trustee or an individual), or its associate(s) who controls the company, or
    • another company which is under the control of the company or the company's associate.[97]
The control of a company looks to whether another entity (including individuals):
    • has sufficient influence over the company, or
    • holds a majority voting interest in the company.
  • An associate of a trustee includes an entity or an associate of the entity that benefits or is capable of benefiting either directly or indirectly under the trust.[98]
  • For a partnership an associate includes each partner of the partnership or associate of the partner.[99]
(2) Skills And Experience[100] The next criterion we will cover relates to skills and experience. Skills and experience are not defined in the Excise Act or Excise Regulations. There is no Excise case law regarding skills and experience. In forming an opinion as to whether you have the required skills and experience we will consider your ability to:
  • carry out the activity requiring a licence
  • conduct a business, and
  • comply with excise obligations.
It is important to note that you, as the applicant, do not necessarily need to possess the skills and experience yourself provided that you can demonstrate that you will use another person's skill and experience, for example by hiring them or using a consultant. Should that be the case, we will assess the other person's skills or experience.
Example Mr X, as a Director of Z Transport and Logistics Pty Ltd, applies for a storage licence. Neither Mr X nor any of his staff have the skills and experience to comply with the company's excise obligations. This poses a risk that excisable tobacco products may be sold without adequate record keeping, and may adversely affect revenue and compliance. Therefore, when assessing this element of subsection 39A(2) in isolation, Z Transport and Logistics Pty Ltd would fail the requirements of skills and experience. However, a decision on granting a licence is made based on an assessment of all elements of subsection 39A(2). Z Transport and Logistics Pty Ltd may choose to address the deficiency in skills and experience by such measures as appointing a Manager who has the relevant skills and experience.
(3) Physical Security of The Premises[101] Physical security relates to measures that prevent unauthorised access to tobacco leaf or excisable tobacco products and thus protects against theft or loss of goods and excise revenue. In forming an opinion about the physical security at the premises or storage place for tobacco leaf, we will consider:
  • the nature of the site
  • the kinds and quantities of goods to be kept, and
  • the procedures and methods adopted to ensure the security of goods.
Consideration of the nature of the site can include:
  • construction (for example floor, walls, ceiling, windows and doors) and whether material is difficult to penetrate or remove
  • barriers (for example fences or wire) to a standard that would prevent unauthorised access
  • locks and bars
  • alarms, security lighting, security guard patrols or closed-circuit TV cameras
  • physical security of all warehouse facilities within the site, and
  • fire alarms, smoke detectors, sprinklers etc.
Consideration of the kind and quantity of goods to be kept at the site can include:
  • the ease with which goods can be handled, for example, cartons of cigarettes are easier to move than fuel in a large refinery tank
  • the rate of excise duty applicable to the goods (goods that attract a greater rate of excise duty represent a greater revenue risk), and
  • the greater the quantity of excisable goods to be dealt with, the higher the level of physical security that would be required.
Consideration of the security procedures and methods can include:
  • gate security system that would identify all people entering and leaving the site, and confirm their right to do so
  • gate security system that would identify the type and quantity of all goods entering and leaving the site
  • surveillance system
  • procedures to handle and retain information from surveillance system (if there is one)
  • access control, for example by limited distribution of keys and access swipe cards or codes
  • security responses when breaches are detected, for example back to base system, and
  • an independent security audit function to oversee all of the above.
(4) Suitability of Plant and Equipment[102] This criterion is only considered in relation to manufacturer licences or storage licences. Plant and equipment are considered suitable if they are capable of performing the intended tasks and will allow you to properly account for tobacco leaf and excisable tobacco products and calculate the correct amount of excise duty. Plant and equipment that are used in relation to goods at licensed premises include:
  • manufacturing machines
  • packing machines
  • weighing equipment for determining tobacco content, and
  • counting equipment to determine numbers of sticks/packs/cartons/shippers.
(5) Market for the Goods[103] In this criterion, we are primarily concerned with the presence of an available market within Australia. That market must be legal. Licensing is concerned with minimising the risk of tobacco seed, plant or leaf, or excisable tobacco products, entering an illicit market in Australia and the resultant loss of revenue. You must provide sufficient information to identify your proposed market. You may be able to demonstrate that you have a market by, for example, supplying:
  • evidence of contracts (including 'in principle' contracts) you have negotiated, or
  • a business plan which outlines the market you have identified.
A legitimate market may exist overseas for locally manufactured excisable tobacco products, or tobacco seed, plant or leaf. Applications relating to overseas markets may be subject to additional scrutiny and you may be required to provide additional information or documentation as evidence of the legitimacy of your overseas market. Therefore, market should be taken to mean that there exists a proven or demonstrated demand for a commodity, or an opportunity for (legally) buying or selling (trading in) a specified commodity. In such cases a market can be either in Australia or overseas. If you intend to manufacture excisable goods and use them within the operation of your business, or entirely for personal (non-commercial)[104] use, you do not need to meet the market test. An example of this situation is a tertiary education facility which grows tobacco for research purposes. (6) Ability to Keep Proper Books of Account[105] This criterion is whether you can keep 'proper accounts and records' that enable us to audit those records. It is your ability to keep the required records that must be determined. You may be asked to demonstrate:
  • the recording systems you intend to use, whether they are manual or electronic
  • where an electronic record keeping system is used, systems documentation showing details such as screens, reports available and security controls, and
  • the internal documentation supporting the recording systems, ensuring that the recording systems will record sufficient detail. 
(7) Delay Liability for Duty (Storage Licence Only)[106]

This criterion only relates to an application for a storage licence where the granting of the licence would delay liability for the duty.

The liability for Excise is imposed on goods at the time of manufacture.[107] However, it is not actually paid until a later point. The wording in paragraph 39A(2)(k) "...delay the liability for duty" suggests that one is able to delay the point in time in which the liability arises. However, this is not possible as the imposition of excise, and therefore the time at which the liability arises, is not dependent on any further dealings or processes on those goods. It is only the payment of the liability, the duty, which can be delayed depending on how the goods are dealt with. We consider that the only possible interpretation of section 39A(2)(k) is that it operates to delay the time the liability must be paid. A storage licence allows for the storage of excisable goods on which duty has not been paid. It effectively allows a manufacturer to defer the payment or transfer the liability to a storage licence holder.  The question then arises as to how far down the distribution chain payment of an excise liability may be deferred. It is our view that we may refuse to grant a storage licence where the grant of the licence would delay payment of duty beyond the point of storage occurring in the normal wholesale distribution of the goods.  Using a different perspective, we may refuse to grant a storage licence when refusal is necessary to ensure that excise duty is paid before goods reach the retail level in the distribution chain. In forming an opinion as to whether the granting of an excise storage licence would delay liability for duty, we will consider:
  • the purpose for which the goods are to be stored, and
  • whether the premises in question are for storage occurring in the normal wholesale distribution of the goods, or for storage beyond the normal wholesale distribution of the goods (for example, storage for a retail premises).
(8) Protect the Revenue[108] The term 'necessary to protect the revenue' is not defined in the Excise Act.

The meaning of 'protect the revenue' was considered by Deputy President Forgie in Martino v Australian Taxation Office.[109] She said:

' 50. ... The expression "protect the revenue" is not defined in the Act and I am not aware of any authorities that have considered it. The word "revenue" has been considered in Stephens v Abrahams (1902) 27 VLR 753 by Hodges J. ...Hodges J took:

"... the 'revenue' to be moneys which belong to the Crown, or moneys to which the Crown has a right, or moneys which are due to the Crown,

51. The ordinary meanings of the word "protect" include "keep safe, take care of" ... and they would seem to be the senses in which the word is used in the expression "protect the revenue". Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally.

52. What is meant by the word "necessary"? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447:

"As to the word 'necessary' it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way.'
'Protect the revenue' therefore means ensuring that the Commonwealth receives the full amount of excise duty that is ultimately payable  and we do not spend more Commonwealth funds than necessary to carry out our responsibilities. 3.3.2 WHAT ARE LICENCE CONDITIONS? Licence conditions form part of your licence. They are restrictions, limitations or modifying circumstances. They may define permissible activities and require you to take certain actions if defined circumstances arise. If you fail to comply with a condition, we may suspend or cancel your licence.[110] All excise licences are subject to certain conditions imposed by:
  • the Excise Act, and
  • us ('special conditions').
We are able to add, vary or modify special conditions even after the licence has been granted. [111] We will notify you in writing if we do so and provide you with an amended licence that includes the amended conditions. Conditions imposed under the Excise Act You must advise us in writing within 30 days if:[112]
  • you or any person participating in the management or control of a licensed company or premises is charged with or convicted of:
    • an offence against a provision of the Excise Act, or
    • an offence against a law of the Commonwealth, a State or a Territory that is punishable by imprisonment for a period of one year or longer or by a fine of 50 penalty units or more
  • you become bankrupt
  • a person not listed in the licence application starts to participate in the management or control of the licensed premises or company, as the case may be
  • there is a change in the membership of a partnership that holds a licence
  • a company that holds a licence comes under receivership, administration or begins to be wound up
  • there is a change that substantially affects the physical security of the licensed premises or plant and equipment used in relation to excisable goods at the premises
  • you hold a manufacturer licence and you cease to manufacture excisable goods at the licensed premises
  • you hold a storage licence and you cease to keep and store goods at the licensed premises
  • you hold a producer licence and you cease to produce tobacco seed, plant or leaf, or
  • you hold a dealer licence and you cease to deal in tobacco seed, plant or leaf.
Special conditions We can also impose special conditions on your licence if we find it necessary to protect the revenue or ensure compliance with the Excise Act.[113] Examples of conditions that have been imposed under this provision are:
  • the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee
  • restrict the storage of excisable goods (by a storage licence holder) to ship's stores and aircraft's stores, and/or
  • restrict the quantity of excisable goods that a licensed manufacturer may manufacture.
The examples of special conditions given above are only for illustrative purposes.  The decision to impose special conditions is considered on a case by case basis.  You can apply to have these special conditions varied, revoked or added. We will consider and advise you of our decision. If you are not satisfied with any decision we make about a special condition, you can ask for a review by lodging an objection.[114]

For more information about your review rights refer to chapter 8 - Reviews and objections.
3.3.3 WHAT ARE SECURITIES? We can use special conditions as a mechanism to increase the level of protection of the revenue or to ensure compliance with the Excise Act. However, prior to granting the licence we may also require you to provide a security to achieve the same result. Even if we don't require a security prior to the granting of the licence, we may ask for a security at a later time. We can also ask you to increase the value of any security you may already have given.[115] A security can be a bond, guarantee, cash deposit or similar financial product for an amount of money which may be forfeited if there is a failure to comply with the Excise Act. It is not necessary for a liability to arise as a result of the failure to comply, for the security to be forfeit. There is no statutory limit to the amount of a security but the amount is generally set by reference to the level of revenue at risk. We cannot apply these securities against other tax debts. We review securities every three years, at which time they may be extended, revised or cancelled. The decision to require a security is not a reviewable decision. However, there may be other avenues for review for example, you may seek an informal review of our decision.

For information about your review rights refer to chapter 8 - Reviews and objections.
3.3.4 ASSESSING YOUR APPLICATION TO RENEW YOUR LICENCE Licences are only valid for a specified period. Renewal of a licence is not automatic and you must apply to renew your licence before it expires. In assessing an application to renew a licence we consider the same criteria that exist for cancelling a licence. That is, if reasons exist for us to cancel your licence (assuming that it had not expired) then we may not renew your licence.

For more information about the criteria for cancelling a licence refer to chapter 4 - Licensing: Suspension & cancellation.
If you have applied before the date of expiration on your licence but we have not made a decision by this date, the licence remains in force until such time as we do make a decision.
If we refuse your licence renewal, you may object against the decision.

For more information about your review rights refer to chapter 8 - Reviews and objections
As an alternative to non-renewal of a licence, we may:
  • alter existing conditions on your licence
  • impose new conditions, or
  • require you to provide a financial security.

If you have not applied to renew your licence then the licence expires on 30 September and you can no longer carry out excise related activities.

3.4 PROCEDURES

3.4.1 WHAT HAPPENS IF MY LICENCE IS NOT GRANTED? If we do not grant a licence, we will notify you of the decision and provide you with an explanation for our decision. If you are not satisfied with our decision, you can ask for a review by lodging an objection within 60 days of the day we notify you.[116]

For more information about your review rights refer to chapter 8 - Reviews and objections
3.4.2 WHAT WILL HAPPEN IF MY LICENCE IS GRANTED? If we grant you a licence, we will post it to you. All special conditions will form part of the licence.  We will also provide you with an establishment number for the premises specified on your licence. This will be needed in some of your dealings with us. You may receive a visit or phone call to see whether you understand your obligations or need further assistance to comply. 3.4.3 HOW DO I RENEW MY LICENCE? We will send you an invitation to renew your licence at least six weeks before the licence expires. We will also send an application form containing your details. You must verify the details on the application, provide any required information, sign and return it to us before your licence expires.
Your existing licence will remain valid until we make a decision about your application for renewal.[117]
Licences are renewed for a period of three years.
Example: Your licence is due to expire on 30 September 2008 (the expiry day). On 1 September 2008 you apply to renew the licence. We have not decided the application by the end of 30 September 2008. The licence continues in force automatically past 30 September 2008 until we decide the application. On 15 October 2008 we decide to renew the licence. The renewed licence expires on 30 September 2011.

 

If you wish to renew your licence but you have not received an invitation to renew within four weeks of the date of expiry you need to contact us.
3.4.4 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on licensing matters contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

3.5 WHAT PENALTIES CAN APPLY FOR OFFENCES IN RELATION TO MAKING AN APPLICATION?

The following are the penalties that may apply after conviction for an offence. 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.[118]

3.6 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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

Tobacco Tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant.[119] This means that until tobacco leaf is subjected to processes after curing it is not excisable. 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.

3.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 3.7.1 Excise Act 1901 Section 16 - Right to require security Section 17 - Form of security Section 18 - General security may be given Section 19 - Cancellation of bonds Section 20 - New sureties Section 21 - Form of security Section 22 - Effect of security Section 39 - Applications for licences Section 39A - It is in the Collector's discretion whether to grant licence Section 39B - Determining whether a natural person is fit and proper Section 39C - Determining whether a company is fit and proper Section 39D - Conditions of licence Section 39DA - Changing licence conditions on own initiative Section 39F - Renewal of licences Section 39G - When the Collector may suspend a licence Section 39Q - Review of decisions Section 120 - Offences 3.7.2 Excise Tariff Act 1921 Section 5 - Duties of excise The Schedule 3.7.3 Income Tax Assessment Act 1997 Section 995-1 - Definitions 3.7.4 Income Tax Assessment Act 1936 Section 318 - Associates 3.7.5 Corporations Act 2001 Section 9 - Dictionary Part 5.3A - Administration of a company's affairs with a view to executing a deed of company arrangement 3.7.6 Crimes Act 1914 4AA - Penalty units
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

04 - LICENSING: Suspension & cancellation

4.1 PURPOSE

4.2 INTRODUCTION

4.3 POLICY AND PRACTICE

4.3.1 WHAT HAPPENS IF I CEASE MY EXCISE BUSINESS?

4.3.2 WHEN CAN YOU SUSPEND AND/OR CANCEL MY LICENCE?

4.4 PROCEDURES

4.4.1 SERVICE OF NOTICES

4.4.2 WHAT DO I DO IF I NEED MORE INFORMATION?

4.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO SUSPENSIONS AND CANCELLATIONS

4.6 TERMS USED

4.7 LEGISLATION (QUICK REFERENCE GUIDE)

4.7.1 Excise Act 1901

4.7.2 Excise Tariff Act 1921

4.7.3 Crimes Act 1914

4.1 PURPOSE

This chapter deals with:
  • what happens when you cease your business
  • when your licence can be suspended or cancelled
  • service of notices, and
  • penalties that can apply to offences in relation to suspensions and cancellations.

4.2 INTRODUCTION

Your licence remains in force until it expires or is cancelled. However, activities approved under your licence may be restricted if we suspend your licence. Suspension may be a temporary measure or may lead to the cancellation of your licence. We can cancel your licence if:
  • you ask us to do so (for example, where you intend to cease business), or
  • we make a decision to do so because one or more of the following criteria are present:
  • you or an associate are not 'fit and proper' as an individual or company
    • a director, officer or shareholder who participates in the management or control of the company is not a 'fit and proper' person
    • a person who participates in the management or control of the premises is not a 'fit and proper' person
    • you do not have, or have available to you, the skills and experience required to carry out the activity authorised by the licence
    • the physical security of the premises is inadequate
    • the plant and equipment used at the premises are such that there is inadequate protection of the revenue in relation to the goods at the premises
    • you have no market for the goods covered by the licence
    • you are not keeping proper books of account for audit purposes
    • you have breached a condition of your licence
    • you have made a false or misleading statement to us [120]
    • suspension is necessary for the protection of the revenue, or
    • if you are the holder of a manufacturer licence or storage licence, suspension is necessary to ensure you comply with excise law.

4.3 POLICY AND PRACTICE

4.3.1 WHAT HAPPENS IF I CEASE MY EXCISE BUSINESS? Your licence conditions require you to notify us within 30 days if you permanently cease activities that require an excise licence. To finalise your excise obligations you must request in writing a cancellation of your licence. Before we can cancel your licence we must be satisfied that you no longer have any tobacco seed, plant or leaf or excisable tobacco products. To be satisfied of this we will:
  • arrange a final audit of goods at the licensed premises, and
  • work out if you are liable to pay any excise duty.
Although your licence conditions require you to notify us within 30 days of cessation of activities, you are encouraged to notify us at the earliest opportunity. This will enable us to assist you to check your records and any stock on hand prior to closure of the site for excise purposes. If you want to sell your business with the stock included, we can coordinate your licence cancellation with the licence approval for the new owner. (This does not mean that the new owner will automatically be granted a licence). This will ensure the premises and goods are covered by a licence at all times. If you do not intend to sell the goods with your business, you can:
  • pay any outstanding excise duty on goods held at the licensed premises and then dispose of them as you wish, or
  • move the goods to another licence holder's premises, provided you have permission from us to move goods to those premises. [121]
We will cancel your licence by giving you written notice.[122] 4.3.2 WHEN CAN YOU SUSPEND AND/OR CANCEL MY LICENCE?

What is the difference between suspension and cancellation?

Suspension of a licence is a temporary measure we may take that limits the activities you can undertake during the period of suspension. It could be followed by cancellation of the licence or revocation of the suspension. Cancellation is a permanent measure which has the effect of prohibiting you from undertaking the activities for which you were previously licensed.

When can you suspend or cancel my licence?

We can suspend or cancel your licence if we have reasonable grounds for believing:[123]
  • you are not 'fit and proper' as an individual or company*
  • a director, officer or shareholder who participates in the management or control of the company is not a 'fit and proper' person*
  • a person who participates in the management or control of the premises is not a 'fit and proper' person*
  • you are an associate of a person or a company that is not 'fit and proper'*
  • you do not have, or have available to you, the skills and experience required to carry out the activity authorised by the licence*
  • the physical security of the premises is inadequate*
  • the plant and equipment used at the premises are such that there is inadequate protection of the revenue in relation to the goods at the premises*
  • you have no market for the goods covered by the licence*
  • you are not keeping proper books of account for audit purposes
  • you have breached a condition of your licence
  • you have made a false or misleading statement to us
  • suspension is necessary for the protection of the revenue*, or
  • if you are the holder of a manufacturer licence or a storage licence, suspension is necessary to ensure that you comply with excise law.

* For an explanation of these criteria, please refer to section 3.3.1 - Licensing criteria in Chapter 3 - Licensing: Assessing applications.

The criteria which have not been the subject of previous considerations are covered below:
  • you are not keeping proper books of account for audit purposes. For this criterion, we are assessing your actual record keeping practices during the licence period and whether they are in an adequate state for an audit.
  • you have breached a condition of your licence. A breach means you have not complied with a condition. In deciding whether or not to suspend we will take into account the following:
    1. the severity of the breach
    2. the circumstances surrounding the breach, and
    3. what the condition is (i.e. the risk it is addressing).
  • you have made a false or misleading statement to us. In considering your initial application the false or misleading statements we take into account are in your application. Once you have been granted a licence we can take any statements (including for example in a return, letter or response to a question) you have made in relation to your excise activities.
  • suspension is necessary to ensure you comply with excise law (this only applies to manufacturer and storage licences). Where we consider that you are not complying with your obligations under the Excise Act, for example, if you have been manufacturing excisable tobacco products in contravention of your manufacturer licence.[124]

What happens if you suspend my licence?

If we believe your conduct warrants consideration of suspension of your licence we will generally advise you of our concerns and provide you with an opportunity to rectify the issues identified. If we decide to suspend your licence, this will be done by serving a Notice of suspension. The notice may be served on you, or given to a person who appears to participate in the management or control of the licensed premises. A Notice of suspension will state that, if you want to stop the cancellation of your licence, you must provide us with a written statement, within seven days of the notice being served, giving reasons why your licence should not be cancelled. We will include our reasons for deciding to suspend your licence with the Notice of suspension. The notice will also state when the suspension takes affect, which could be immediately. When your licence is suspended, unless you have written permission from us, it is against the law to: 
  • if you are the holder of a producer licence, produce or store tobacco seed, plant or leaf
  • if you are the holder of a dealer licence, deal in or store tobacco seed, plant or leaf
  • if you are the holder of a manufacturer licence, manufacture excisable tobacco products or keep or store tobacco leaf, or
  • if you are the holder of a storage licence, keep or store excisable tobacco products at licensed premises.[125]
During the period of suspension we may give you written permission to:[126]
  • keep or store goods at your licensed premises
  • carry out a process at your premises, or
  • move goods from your premises to another place.
As a result of a suspension, we may:
  • require the owner (you or a third party) of tobacco seed, plant or leaf or excisable tobacco products to move the goods from your premises to another place
  • require payment of any costs incurred by us as a result of the suspension
  • carry out a stocktake so that the total excise liability is known, and
  • take control of your licensed premises and any tobacco seed, plant or leaf or excisable tobacco products stored at these premises.
If we suspend your licence we have 28 days to cancel your licence.  During this period we can revoke the suspension if you satisfactorily address the issues which led to the suspension.  If we revoke a licence suspension we will do so in writing. We may impose additional conditions or allow you to resume your excise activities under the existing conditions. All decisions relating to the suspension of a licence are reviewable by lodging an objection.

For more information about your review rights refer to chapter 8 - Reviews and objections.

What happens if you cancel my licence?

We can cancel your licence for the same reasons we can suspend your licence.

We can cancel your licence without previously suspending your licence. This may occur where we consider the issues require immediate action. For example systemic delivery of excisable tobacco products without payment of required duty.
If we cancel your licence we will serve you with a Notice of cancellation. If we cancel your licence, you are not permitted to manufacture, store, produce or deal in excisable products or tobacco seed, plant or leaf. You are also not permitted to move excisable goods without our permission. If we decide to cancel your licence, this will be done by serving a Notice of cancellation. The notice may be served on you, or given to a person who appears to participate in the management or control of the licensed premises. We will include our reasons for deciding to cancel your licence with the Notice of cancellation At the same time, we will serve the owner of the excisable tobacco products (whether that is you or someone else) notice in writing to either:
  • pay the duty on the goods, or
  • move the goods to another place in accordance with our permission.
This notice is served in the same manner as the Notice of cancellation.
If the owner does not comply with the notice to pay duty or move the goods, we may remove them from the owner's control. If, after six months, the owner has not:
  • lodged a written claim for the goods, and
  • paid the duty and other movement and storage related expenses
then we may sell or dispose of the excisable tobacco products.[127] Dealing with tobacco seed, plant or leaf when a licence is cancelled If tobacco seed, plant or leaf remains on the premises after cancellation we can give you permission to move it to someone who does have a licence.[128] If you do not do so, we can seize the tobacco seed plant or leaf as forfeited goods.

If we cancel your licence, you must retain all records that you have been directed to keep, for the period you have been directed.  
If you are not satisfied with our decision to cancel your licence or dispose of your excisable goods, you can request a review of our decision by lodging an objection.[129]

For more information about your review rights refer to chapter 8 - Reviews and objections

Can I apply for another licence if I have had a licence cancelled?

Yes, you can apply for another licence. However we will take the reasons for the cancellation into account when considering any new application.

4.4 PROCEDURES

4.4.1 SERVICE OF NOTICES Notices of suspension or cancellation and directions to deal with excisable tobacco products will be served either:[130]
  • personally or by post[131] on you, or
  • personally on a person who, at the time the notice is served, appears to participate in the management or control of the licensed premises.
4.4.2 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on suspension or cancellation of a licence contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

4.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO SUSPENSIONS AND CANCELLATIONS

The following are the penalties that may apply after conviction for an offence. Produce If you produce tobacco seed or tobacco plant when your producer licence is suspended, the penalty is a maximum of two years in prison or up to 500 penalty units.[132] If you produce tobacco leaf when your producer licence is suspended, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[133] Deal in If you deal in tobacco seed or plant when your dealer licence is suspended, the penalty is a maximum of two years in prison or 500 penalty units.[134] If you deal in tobacco leaf when your dealer licence is suspended, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[135] Manufacture If you manufacturer excisable tobacco products when your manufacturer licence is suspended, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[136] Keep or store If you store excisable tobacco products when your storage licence is suspended, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[137] If you keep or store tobacco leaf when your manufacturer licence, producer licence or dealer licence is suspended, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[138] Remove If your licence has been cancelled or expired, you must not remove excisable tobacco products on which duty has not been paid, from the premises specified in the licence. The penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[139] If your licence has been cancelled or expired, you must not remove tobacco seed or plant from the premises specified in the licence. The penalty is a maximum of two years in prison or 500 penalty units.[140] If your licence has been cancelled or expired, you must not remove tobacco leaf from the premises specified in the licence The penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[141]

4.6 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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.
Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110. Tobacco Tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant.[142] This means that until tobacco leaf is subjected to processes after curing it is not excisable. 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.

4.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 4.7.1 Excise Act 1901 Section 26 - Licensed manufacturers to manufacture in accordance with Act and licence Section 39G - When the Collector may suspend a licence Section 39J - Method of suspension Section 39K - Activities that are prohibited during suspension Section 39L - Cancellation of licences Section 39M - Removal of goods on cancellation etc. of licence Section 39N - Removal of goods by Collector on cancellation etc. of licence Section 39P - Service of notices Section 39Q - Review of decisions 4.7.2 Excise Tariff Act 1921 The Schedule 4.7.3 Crimes Act 1914 4AA - Penalty units
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

05 - MOVEMENT PERMISSIONS

5.1 PURPOSE

5.2 INTRODUCTION

5.3 POLICY AND PRACTICE

5.3.1 WHAT DIFFERENT PERMISSION TYPES ARE THERE?

5.3.2 CAN I GET A MOVEMENT PERMISSION?

5.3.3 WHAT IS INCLUDED IN A MOVEMENT PERMISSION?

5.3.4 DOES THE RECEIVING PREMISES HAVE TO BE LICENSED?

5.3.5 WILL I NEED TO PAY A SECURITY?

5.3.6 WHAT HAPPENS WHEN MY MOVEMENT PERMISSION IS GRANTED?

5.3.7 WHAT ARE MY RESPONSIBILITIES?

5.3.8 WHAT HAPPENS IF MY APPLICATION IS NOT APPROVED?

5.3.9 WHEN AND HOW CAN A MOVEMENT PERMISSION BE REVOKED OR CANCELLED?

5.4 PROCEDURES

5.4.1 HOW DO I APPLY FOR A MOVEMENT PERMISSION?

5.4.2 HOW DO I AMEND MY CONTINUING MOVEMENT PERMISSION?

5.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO MOVEMENT PERMISSIONS?

5.6 TERMS USED

5.7 LEGISLATION (QUICK REFERENCE GUIDE)

5.1 PURPOSE

This chapter deals with:
  • why you need a movement permission
  • different movement permission types
  • whether you can get a movement permission
  • what is included in a movement permission
  • whether the receiving premises have to be licensed
  • whether you will need to pay a security
  • what happens when your movement permission is granted
  • your responsibilities
  • what happens if your application for a movement permission is not approved
  • when and how a movement permission can be revoked or cancelled
  • how to apply for a movement permission
  • how to amend a continuing movement permission, and
  • penalties that can apply to offences in relation to movement permissions.

5.2 INTRODUCTION

Under the excise system, control of goods from the time of creation to the point of payment of the liability lies with the Commissioner. To maintain this control, the Excise Act requires that excisable goods are not to be moved without permission.  We refer to this form of permission as a movement permission. It is a permission we provide in writing that authorises you to move specified goods from one specified place to another.[143] This permission may be subject to conditions. The permission holder retains responsibility for any liability arising on the tobacco leaf and excisable tobacco products until they are taken up into the stock of the new premises. The legislation differentiates between tobacco seed, plant and leaf, all of which are not excisable goods, and manufactured tobacco products, which are excisable goods. Even though the legislation differentiates between the two the effect is the essentially the same. You need permission to move these goods from one place to another place.[144]
In this chapter, 'goods' refers to both tobacco seed, plant and/or leaf and excisable tobacco products.

5.3 POLICY AND PRACTICE

5.3.1 WHAT DIFFERENT PERMISSION TYPES ARE THERE? Depending on your circumstances, you may apply for a permission to move specified goods once (single permission) or goods of a particular kind on a continuing basis (continuing permission). Continuing permissions are used where you have a need to move goods in a regular pattern (for example, a delivery each week to the same premises). A single permission is used when movements are not to a continuing or regular pattern to the same premises. There are four types of movement permission:
  • Single movement permission (non-export) - a permission to move specified goods from one specified place to another specified place (effective for one movement)
  • Continuing movement permission (non-export) - a permission to move goods of a kind specified from one specified place to another specified place on a continuing basis
  • Single movement permission (export) - a permission to move specified goods to a place of export (effective for one movement), or
  • Continuing movement permission (export) - a permission to move goods of a kind specified to a place of export on a continuing basis.
An export movement permission is not an authority to export. You must obtain this separately from Customs.
5.3.2 CAN I GET A MOVEMENT PERMISSION? You can be granted a movement permission if you are the owner of:
  • the licensed place from where the goods are despatched or
  • the licensed place where the goods are received.
You can also be granted a movement permission if you are the owner of the goods even if you do not hold a current excise licence. 5.3.3 WHAT IS INCLUDED IN A MOVEMENT PERMISSION? Each movement permission we approve contains three parts:
  1. The permission This specifies
    • the permission holder.
  2. The conditions Movement permissions can be subject to conditions that are necessary to protect the revenue or ensure compliance with the Excise Act. In general, the conditions listed below are considered necessary to do that. As a standard condition, you must provide to both the despatching and receiving premises a consecutively numbered document with each movement of goods that specifies:
    • the despatching premises and destination
    • the date of despatch
    • the number and type of packages
    • a description of the goods
    • a statement that the goods are underbond, and
    • any other information necessary to permit the goods to be dealt with at the destination.
    A condition can also have a restriction limiting the volume of goods that can be moved within a specific period of time, or at any one time. A condition that is imposed by the law on movement permissions for tobacco leaf requires each tobacco bale to have a tobacco bale label attached. The tobacco bale label must remain attached to the bale while the bale is not on premises specified in a manufacturer, producer or dealer licence. Tobacco bale labels are available from us and serve to uniquely identify each tobacco bale. The requirement for a tobacco bale label can be waived but we need to give you specific written permission. This would be considered where you can demonstrate reasons why the tobacco leaf cannot be put into bales.[145] 
  3. The Schedule This specifies:
    • the premises from which the goods can be removed
    • the premises to which the goods can be moved
    • the goods by tariff item that can be moved under the permission, and
    • for single movement permissions, the period or dates in which the goods may be moved.
    If you own both the licensed premises between which goods are being moved, the schedule may not specify all these details but only that any movement of goods between premises licensed to you is approved. The type of goods may be expressed generally (for example 'excisable goods', or 'excisable tobacco products') or specifically, by tariff item number or description. A single movement permission will specify the kind and quantity of the goods that can be moved, for example 20 (outer cartons) x 20 (inner packs) x 250 cigarettes = 100,000 sticks classified to excise tariff sub-item 5.1.
5.3.4 DOES THE RECEIVING PREMISES HAVE TO BE LICENSED? Generally, the receiving premises should be licensed. However, we may authorise underbond movement of goods to an unlicensed 'specified place', for example a waste destruction facility.[146] 5.3.5 WILL I NEED TO PAY A SECURITY? Prior to granting a movement permission, we may also require you to provide a security to protect the revenue or ensure compliance with the Excise Act. Even if we don't require a security prior to the granting of the movement permission, we may ask for a security at a later time. We can also ask you to increase the value of any security you may already have given.[147] A security can be a bond, guarantee, cash deposit or similar financial product for an amount of money which may be forfeited if there is a failure to comply with the Excise Act. It is not necessary for a liability to arise as a result of the failure to comply, for the security to be forfeit. There is no statutory limit to the amount of a security but the amount is generally set by reference to the level of revenue at risk, As part of assessing your application for a movement permission, we will decide whether you must provide a security. We will take into account:
  • whether you currently hold an excise licence
  • whether the despatching and receiving premises are licensed
  • the type of goods involved
  • the amount of the liability on the goods
  • the tax compliance record of
    • the applicant for the permission
    • the despatching premises
    • the receiving premises, and
  • the susceptibility of the goods to be lost or diverted into home consumption without the payment of duty.
We cannot apply these securities against other tax debts. We review securities linked to continuous movement permissions every three years, at which time they may be extended, revised or cancelled. Compliance with a single movement permission is assessed on completion of the movement of the excisable goods covered by the permission. The decision to require a security is not reviewable under the objection process.

For information about your review rights refer to chapter 8 - Reviews and objections.
5.3.6 WHAT HAPPENS WHEN MY MOVEMENT PERMISSION IS GRANTED? When your movement permission is granted, it will be sent to you. You can then move your goods in accordance with the schedule. You will need to keep appropriate records to track the movement of your goods.  5.3.7 WHAT ARE MY RESPONSIBILITIES? Where you have had possession, custody or control of goods we may request you (the permission holder) to account for the goods. If you are able to demonstrate that the goods have been lawfully moved under a movement permission, this will be considered a satisfactory accounting. It is important that you keep good records of any movements of goods from your premises. If you cannot satisfactorily account for the goods, we may demand an amount equal to the duty that would have been payable on the goods.[148] The permission holder is accountable for the goods:
  • from the time they are removed from the despatching premises, and
  • until they are delivered to the receiving premises.
Accountability then transfers to the receiving premises. If there is a discrepancy between the quantity shown in the delivery documentation and the physical quantity received you should contact us.
In the exceptional case where the goods are moved to unlicensed premises, accountability for the goods remains with you, as the permission holder.
5.3.8 WHAT HAPPENS IF MY APPLICATION IS NOT APPROVED? If we do not approve your application for a movement permission, or to amend your existing movement permission, we will notify you in writing. If you are not satisfied with our decision, you can ask us to review it. You will not be able to move the goods to the place nominated in the application.

For information about your review rights refer to chapter 8 - Reviews and objections
5.3.9 WHEN AND HOW CAN A MOVEMENT PERMISSION BE REVOKED OR CANCELLED? A continuing permission remains in effect until it is cancelled.[149] We can cancel your movement permission if:
  • you ask us to do so
  • we consider that there is a risk to the revenue, or
  • we have cancelled the licence of the receiving or despatching premises.
If we decide to cancel your movement permission, we will notify you in writing. The cancellation will take effect from the time:
  • you are served with the cancellation notice, or
  • specified on the cancellation notice.
A decision to revoke or cancel a permission is not a reviewable decision.

For information about your review rights refer to chapter 8 - Reviews and objections.

5.4 PROCEDURES

5.4.1 HOW DO I APPLY FOR A MOVEMENT PERMISSION? To apply for a movement permission, you should complete the relevant form, available on our website. If you do not have control of the proposed receiving premises (licensed or unlicensed), we require you to obtain a letter from the operator of these premises stating that they will accept responsibility for the underbond goods when received. The application forms contain details of the statement required from the operator of the receiving premises.
If you need to deliver goods to new premises within specified periods please ensure that you allow sufficient time for your application to be determined. Generally, we will make a decision on your application within 28 days unless we need further information.
5.4.2 HOW DO I AMEND MY CONTINUING MOVEMENT PERMISSION? If you wish to amend your existing continuing movement permission (for example, change the schedule of receiving premises), you must send us either:
  • a new application form with the amending details, or
  • a letter including the permission number and necessary changes.
If you wish to add new receiving premises to your existing permission, you must also provide us with a letter from the operator of the receiving premises accepting responsibility for the underbond goods when received. The application form contains details of the statement required from an operator of the receiving premises. We will consider your request and send you a new or amended permission if approved. In the meantime you cannot move goods outside your current permission. 5.4.3 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on movement permissions contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

5.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO MOVEMENT PERMISSIONS?

The following are the penalties that may apply after conviction for an offence. Move If you move tobacco seed or plant without a movement permission, the penalty is a maximum of two years in prison or up to 500 penalty units.[150] If you move tobacco leaf without a movement permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[151] If you move excisable tobacco products without a movement permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[152] If you move tobacco seed or plant contrary to your movement permission, the penalty is a maximum of two years in prison or 500 penalty units.[153] If you move tobacco leaf contrary to your movement permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if tobacco leaf had been manufactured into excisable goods.[154] If you move excisable tobacco products contrary to your movement permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[155]

5.6 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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.
Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110. Tobacco Tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant.[156] This means that until tobacco leaf is subjected to processes after curing it is not excisable. 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. 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.

5.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 5.7.1 Excise Act 1901 Section 16 - Right to require security Section 17 - Form of security Section 18 - General security may be given Section 19 - Cancellation of bonds Section 20 - New sureties Section 21 - Form of security Section 22 - Effect of security Section 44 - Permission to move tobacco seed, tobacco plant and tobacco leaf Section 60 - Persons to keep excisable goods safely Section 61A - Permission to remove goods that are subject to the CEO's control Section 75 - Destruction of waste tobacco Section 77AA - Tobacco leaf stock may be checked Section 117A - Unlawfully moving excisable goods Section 117D - Unlawfully moving tobacco leaf 5.7.2 Excise Tariff Act 1921 The Schedule 5.7.3 Crimes Act 1914 4AA 5.7.4 Acts Interpretation Act 1901 Section 33 - Exercise of powers and duties
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

06 - PAYMENT OF DUTY

6.1 PURPOSE

6.2 INTRODUCTION

6.3 POLICY AND PRACTICE

6.3.1 WHEN IS DUTY PAYABLE?

6.3.2 WHEN IS DUTY PAYABLE UNDER PERIODIC SETTLEMENT?

6.3.3 WHEN IS DUTY PAYABLE UNDER PREPAYMENT OF EXCISE DUTY?

6.3.4 WHEN IS DUTY NOT PAYABLE?

6.3.5 HOW DO I WORK OUT THE AMOUNT OF DUTY TO PAY?

6.3.6 WHAT DO I DO IF I HAVE A DISPUTE AS TO THE DUTY?

6.3.7 DO I HAVE TO ACCOUNT FOR TOBACCO LEAF AND EXCISABLE TOBACCO PRODUCTS?

6.4 PROCEDURES

6.4.1 HOW DO I GET A PSP?

6.4.2 WHAT DOES MY PSP INCLUDE?

6.4.3 WHAT MUST I DO TO DELIVER TOBACCO PRODUCTS INTO THE AUSTRALIAN DOMESTIC MARKET?

6.4.4 HOW DO I LODGE EXCISE RETURNS AND PAY EXCISE DUTY?

6.4.5 WHAT DO I DO IF I HAVE MADE AN ERROR ON MY EXCISE RETURN?

6.4.6 WHAT DO I DO IF I NEED MORE INFORMATION?

6.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO PAYMENT OF DUTY?

6.6 TERMS USED

6.7 LEGISLATION (QUICK REFERENCE GUIDE)

6.1 PURPOSE

This chapter deals with:
  • when duty is payable
  • when duty is payable under periodic settlement
  • when duty is payable under prepayment of excise duty
  • when duty is not payable
  • how to work out the amount of duty you're liable to pay, including tariff proposals and quotas
  • whether you have to account for tobacco leaf and excisable tobacco products
  • how to get a Periodic settlement permission (PSP)
  • what your PSP will include
  • what to do to deliver tobacco products into the Australian domestic market
  • how to lodge excise returns and pay excise duty
  • what to do if you have made an error on your excise return, and
  • penalties that can apply to offences in relation to payment of duty.

6.2 INTRODUCTION

Excise duty is imposed at the time of manufacture of excisable tobacco products.[157] However, the duty is not required to be paid at the time of manufacture. This chapter focuses on the payment of duty and the factors that influence when and how much duty is payable.   To ensure the duty is ultimately acquitted, excisable tobacco products remain subject to our control until they are delivered:
  • into the Australian domestic market, or
  • for export to a place outside Australia.[158]
The liability for duty, imposed at the time of manufacture, can be acquitted by:
  • payment of the duty
  • export of the goods
  • remission, or
  • use in the manufacture of other excisable goods.
Alternatively the liability can be transferred with the goods if they are sold while underbond.

6.3 POLICY AND PRACTICE

6.3.1 WHEN IS DUTY PAYABLE? When the liability for duty becomes payable depends on how authority is given to deliver the excisable tobacco products into the Australian domestic market. Authority to deliver excisable tobacco products into the Australian domestic market can be given on a continuing basis, known as a periodic settlement permission (PSP),[159] or on an ad hoc basis, known as prepayment of duty.[160] 6.3.2 WHEN IS DUTY PAYABLE UNDER PERIODIC SETTLEMENT? Under a periodic settlement permission the duty is paid after the excisable tobacco products are delivered into the Australian domestic marketTo understand when the duty is paid in the case of periodic settlement requires an understanding of what the permission is and what your obligations are under such permission. A PSP allows you to report deliveries and to pay duty on a periodic basis after the goods have been delivered into the Australian domestic market.[161] Periodic settlement is the most common arrangement for the delivery of goods into the Australian domestic market. Under a PSP, you must:
  • lodge an excise return, on the due date specified in your PSP. The return details the goods you have delivered into the Australian domestic market during the settlement period, and
  • pay the duty on the goods you have delivered within the settlement period on the due date specified.
You do not need to have an excise licence to have a PSP.
Example Buy Me Pty Ltd does not hold an excise licence. A licensed manufacturer manufactures excisable tobacco products for Buy Me under contract. Under the terms of the contract, Buy Me has title to the goods from the time of manufacture and will pay the excise duty. Buy Me may be granted a PSP. The PSP is for the period Monday to Sunday. Therefore, Buy Me is able to arrange delivery of excisable tobacco products into the Australian domestic market and defer payment of excise duty, on those goods, until after the end of period. On the first working day after the end of the period (i.e. Monday, unless it is a public holiday in which case it will be due on Tuesday) Buy Me must lodge an excise return for any excisable tobacco products delivered during the period and pay the excise duty owing on those goods. We will send Buy Me written confirmation, after the excise return has been processed.
6.3.3 WHEN IS DUTY PAYABLE UNDER PREPAYMENT OF EXCISE DUTY? Under prepayment, the duty is paid before the excisable tobacco products are delivered into the Australian domestic market. If you do not hold a PSP, you must receive a Delivery authority from us before you are allowed to deliver the excisable tobacco products into the Australian domestic market. We require you to pay any applicable duty before we give you a Delivery authority. To request a Delivery authority you need to lodge an excise return (NAT4285). 
That is, you must:
  • lodge an excise return
  • pay the relevant duty, and
  • receive a Delivery authority from us.[162]

You must not deliver excisable tobacco products into the Australian domestic market before receiving the Delivery authority.
6.3.4 WHEN IS DUTY NOT PAYABLE? There are circumstances in which no duty will be payable. These include where:
  • goods are exported
  • a remission circumstance applies, or
  • excisable tobacco products that are subject to our control are used in the manufacture of other excisable tobacco products.
6.3.5 HOW DO I WORK OUT THE AMOUNT OF DUTY TO PAY? To work out how much duty you need to pay you will need to know the:
  • classification of the excisable tobacco products
  • quantity of the excisable tobacco products you deliver into the Australian domestic market, and
  • rate of duty on the excisable tobacco products.

Classification of excisable tobacco products

The Schedule to the Excise Tariff Act lists those goods that, if manufactured in Australia, are subject to excise. The table also contains the rate of duty applicable to the goods. For the excisable tobacco products the relevant part of the table is as follows:
Excise duties
Item Subitem Description of goods Rate of Duty
5   Tobacco, cigars, cigarettes and snuff  
  5.1 In stick form not exceeding in weight 0.8 grams per stick actual tobacco content $0.25450* per stick
  5.5 Other $318.14* per kilogram of tobacco content
*Rate of duty as at 1 August 2008. For the current rates of duty, refer to the Schedule under Excise Tariff Working Pages on our website. Tobacco, cigars and cigarettes are all classified to item 5 but only cigars and cigarettes are in stick form so, if the individual sticks do not exceed 0.8 grams in weight of tobacco (i.e. 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.

Quantity of excisable tobacco products 

Duty for excisable tobacco products is levied on the quantity of the goods themselves. Tobacco quantity is measured in sticks (e.g. cigarettes) or kilograms of tobacco content which includes any thing (including moisture and other additives) added to the tobacco leaf during manufacturing or processing When calculating the quantity of tobacco content in kilograms you should calculate to two decimal places.

Rate of duty on excisable tobacco products

The rate of duty is set in the table in the Schedule to the Excise Tariff Act. The rates of duty on excisable tobacco products are subject to change. They are indexed twice a year in accordance with increases in the CPI (usually on 1 February and 1 August).[163] For ease of reference we provide a 'working tariff', incorporating indexation changes, on our website. The rate of duty you use is the rate contained in the working tariff for the subitem. It will also depend on whether you have a PSP. If you do it is the rate applicable at the time you deliver the excisable tobacco products into the Australian domestic market.  If you do not have a PSP, then it is the rate applicable at the time you make the pre-payment.[164]
Example When goods are delivered into the Australian domestic market under a PSP, the rate of duty that applies is the rate in force at the time the goods are delivered. On 1 August 2008 a manufacturer delivers cigarettes under its PSP. The cigarettes are classified to subitem 5.1 of the Excise tariff. The rate of duty that applies is the rate in force on 1 August 2008 - $0.25450 per stick.
 
Example When goods are delivered into the Australian domestic market under a prepayment, the rate that applies is the rate in force at the time payment is made. On 31 July 2008 a manufacturer that does not hold a PSP prepays duty for the delivery of cigarettes. The cigarettes are delivered on 4 August 2008. The cigarettes are classified to subitem 5.1 of the Excise tariff. The rate of duty that applies is the rate in force on 31 July 2008 - $0.24757 per stick.

 

The amount of duty payable is then calculated by multiplying the quantity of excisable tobacco products by the applicable rate of duty.

 

Example 10,000 cigarettes are delivered into the Australian domestic market on 4 August 2008. The cigarettes are classified to subitem 5.1 of the Excise tariff and have a duty rate of $0.25450 per stick. Therefore, the duty payable is 10,000 sticks x $0.25450 = $2545.00
What happens if the rate changes during my settlement period? If the rates of duty change within your settlement period, you may lodge two excise returns or, alternatively, include separate lines for the same product on one return; that is:
  • one return or line for goods delivered under the old rates, and
  • one return or line for goods delivered under the new rates.
Example The rate of duty for tobacco in stick form not exceeding 0.8 g per stick actual tobacco content increases on and from 1 August 2008 (a Friday) from $0.24757 to $0.25450 per stick. Sovereign Tobacco holds an excise storage licence and a PSP specifying a weekly settlement period commencing Monday. Sovereign Tobacco delivers into the Australian domestic market 750,000 cigarettes on Thursday 31 July and 3,000,000 cigarettes on Friday 1 August. In its excise return for Monday 4 August, Sovereign Tobacco uses separate line entries for product delivered at the old rate and at the new rate:
LineTariff itemQuantity UnitsDuty rateExcise amount
15.1750,000 stick$0.24757$185677.50
25.13,000,000stick $0.25450$763500.00
How can the rate change? In addition to indexation, as described above, the applicable rate of excise duty can also be affected by:
  • changes to the Excise Tariff Act (including tariff proposals), or
  • quotas.
Changes to the Excise Tariff Act Where the Government decides to change the rate of excise applying to certain excisable goods, or to start applying excise to certain goods or stop applying excise to certain goods this requires an amendment to the Excise Tariff Act. The Government normally notifies the intention to do this with a tariff proposal.
Tariff proposals Tariff proposals are a means of changing the Excise Tariff (rates can be adjusted up or down; products can be added or removed) so that it is effective from the time it is proposed rather than after the enactment of an Excise Tariff Amendment Act. Most of the processes relate to Parliamentary procedures however there are specific provisions in the Excise Act that provide for the making of tariff proposals when Parliament is not sitting.  Effectively 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. 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.[165] 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 technically does not impose excise 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, then any additional amounts will be refunded to you.
Quotas Quotas are a means of ensuring that people cannot gain an advantage by anticipating rises in excise rates and then delivering more excisable tobacco products than they would normally. Effectively they restrict the quantity of excisable tobacco products you can deliver into the Australian domestic market at the existing excise rate. If you exceed your quota for the period you will need to pay the duty at the new rate. Where we believe that persons are anticipating an increase in the rate of duty, and as a result the clearances of excisable tobacco products in a particular period is likely to be greater than it otherwise would be, we will publish a notice in the Commonwealth Gazette. This notice will state that a particular period is a 'declared period'.[166] The 'declared period' is the period during which quotas will operate. To establish what your quota is we will consider the amounts of your past deliveries.[167] Once we have established your quota we will give you a written quota order that specifies the maximum level (which can be nil)[168] of excisable tobacco products that you can deliver into the Australian domestic market at the applicable excise rate in force during the declared period.  If at anytime during the declared period you exceed your quota you are required to pay the duty on the excess goods at the existing rate, and in addition we may require you to pay a security, by cash deposit, equal to the duty on the excess goods.[169]

If you have a periodic settlement permission and you have exceeded your quota then the PSP stops being the authority for you to deliver goods during the declared period.[170] This means you will need to prepay the duty on any further deliveries into the Australian domestic market during the declared period.
At the end of the declared period we will reconcile your deliveries with your quota. If you delivered into the Australian domestic market more than your quota, then the duty for the amount in excess of the quota is calculated at the rate in force the day after the declared period ends. Therefore if the rate has gone up you will pay the higher rate of duty on the amount in excess of your quota. We can vary or revoke a quota order any time before the end of the declared period or 60 days after the making of the quota order whichever occurs last. 6.3.6 WHAT DO I DO IF I HAVE A DISPUTE AS TO THE DUTY? If you dispute:[171]
  • the amount of duty
  • the rate of duty, or
  • the liability of goods to duty (for example, whether the goods are excisable)
you may deposit with us the amount of duty demanded. (These disputes do not apply to changes brought about by a tariff proposal.)

For more information on tariff proposals see section 6.3.5 - How do I work out the amount of duty to pay?
Once the goods have been properly entered on an excise return, you will be entitled to delivery of the goods. The deposit you made will be the proper duty unless you commence an action against us, within 6 months after you make the deposit, and that action is determined in your favour. If any action is determined in your favour, any excess of the deposit over the proper duty will be refunded to you along with payment of interest, calculated at 5%. These provisions do not apply in cases where we are of the opinion that any evasion of the excise duty under the Excise Act has been committed or attempted. 6.3.7 DO I HAVE TO ACCOUNT FOR TOBACCO LEAF AND EXCISABLE TOBACCO PRODUCTS? Yes, where you have or had possession, custody or control of any tobacco leaf[172] and/or excisable tobacco products[173] (subject to our control) you have to be able to satisfactorily account for them. If we ask you to account for tobacco leaf or excisable tobacco products, and you cannot satisfactorily do so, then you may be required to pay an amount equal to the duty.[174] If we require this payment you will be given a written demand. The amount you are required to pay is calculated using the rate of duty in force on the day the demand is made. When requested to account for goods you must be able to show that:
  • the goods are still under excise control
  • duty has been paid
  • duty was not payable (for example, where a remission applied), or
  • the goods have otherwise been dealt with in accordance with the law (for example, moved under a movement permission).
Goods will not have been accounted for satisfactorily just because they were:
  • given away for promotional purposes[175]
  • stolen from licensed premises,[176] or
  • delivered into the Australian domestic market under the mistaken belief that they were not excisable.[177]
We may also demand payment from you if you have failed to keep excisable tobacco products safely (for example, if you have a break-in and a theft occurs, you will be required to pay an amount equal to the duty that would have applied to the excisable tobacco products that have been stolen). Our decision to demand payment is a reviewable decision.[178]

For information about your review rights refer to chapter 8 - Reviews and objections.
In determining whether you have accounted for the excisable tobacco products, we may allow you to offset any stock shortages and surpluses.
Example A licensed distributor of tobacco products is asked to account for their excisable tobacco products. They carry out a stocktake and there is a surplus of 4000 sticks of Brand X and a shortage of 10000 sticks of Brand Y. We will allow the distributor to offset the surplus and shortage. Therefore, there are 6000 sticks that have not been accounted for. A demand will be issued for an amount equal to the excise duty payable on the 6000 sticks. The licence holder corrects book stock to take up the surplus floor stock of 4000 sticks and, when the demand is paid, write off the shortage of 10000 sticks.

 

Example A licensed distributor of tobacco products is asked to account for their excisable tobacco products. They carry out a stocktake and there is a surplus of 12500 sticks of Brand A and a shortage of 5000 sticks of Brand B. We will allow the distributor to offset the surplus and shortage. Therefore, there are no sticks that have not been accounted for but there is a surplus of 7500 sticks. The licence holder corrects book stock to take up the surplus floor stock of 12500 sticks and write off the shortage of 5000 sticks.

 

If you have a storage licence and stock excisable alcoholic goods and tobacco products, you may only offset tobacco against tobacco and alcohol against alcohol.

6.4 PROCEDURES

6.4.1 HOW DO I GET A PSP? If you apply for a manufacturer or storage licence, you can use your application form to indicate whether you intend to pay excise duty either periodically or prior to delivery. You do not need to complete a separate PSP application. If you do not have a licence, or you originally chose not to pay excise duty periodically, contact us and provide us in writing with your:
  • licence details (if you have one), and
  • reasons for applying for a PSP.
If we approve your PSP, we will notify you in writing within seven days of receiving your request.
A PSP is not transferable to another person and remains in force until revoked.
A request to add or delete delivery establishments from a PSP is treated as if it were a request for a new permission. However, your PSP number will remain unchanged. We may also:
  • refuse to grant a PSP
  • impose conditions on a PSP, or
  • cancel a PSP.
Failure to comply with a condition may result in the cancellation of the PSP.[179] In such an instance, we would take into account a variety of factors, including your payment history. A decision to refuse or to cancel a PSP is not a reviewable decision.

For information about your review rights refer to chapter 8 - Reviews and objections.

For more information about PSPs, contact us by phoning 1300 137 295.
6.4.2 WHAT DOES MY PSP INCLUDE? Your PSP in relation to excisable tobacco products will include:
  1. permission to deliver excisable tobacco products into the Australian domestic market

  2. conditions, such as:

    • settlement period - the period specified on which goods can be delivered[180]
    • the type of goods that may be delivered from each premises,
    • quantity limits (if any)
    • when you must pay the duty
    • how you must pay - permitted methods (e.g. EFT, cheque, at a Post Office)
    • when and how to lodge your excise return,[181] and
    • record-keeping requirements

  3. a schedule listing:

    • one or more premises from which deliveries may be made.
Example A PSP specifies a settlement period starting on Saturday and ending on Friday. It states that excise returns must be lodged by 4 pm on the first business day after the end of the settlement period. It also says that the duty on deliveries made during the settlement period must be paid at the same time as the excise return is required to be lodged. You must lodge an excise return and pay the duty by 4 pm on Monday for all goods delivered during the settlement period. When a public holiday falls on a Monday, the excise return is due for lodgment and duty is to be paid by 4 pm on Tuesday, the next business day.
Where you have deliveries in different states of Australia there may be different public holidays in those states. If your returns are prepared by an office in a state different from that in which the delivery into the Australian domestic market occurs, lodgment is due on the next business day in the state where the return is prepared.[182] 6.4.3 WHAT MUST I DO TO DELIVER TOBACCO PRODUCTS INTO THE AUSTRALIAN DOMESTIC MARKET?

Delivery under periodic settlement permission

If we provide you with a PSP, you must take the following steps to deliver excisable tobacco products into the Australian domestic market:
  1. deliver the tobacco products into the Australian domestic market: (the products are now no longer subject to excise control)
  2. complete and submit your excise return in accordance with the timeframes in the permission, and
  3. pay the duty to us in accordance with the timeframes in the permission.

Delivery after prepaying the excise duty

If you do not have a PSP, you must take the following steps to deliver excisable tobacco products into the Australian domestic market:
  1. complete and submit your excise return
  2. pay the duty to us
  3. obtain a Delivery authority from us, and
  4. deliver the tobacco products into the Australian domestic market.
6.4.4 HOW DO I LODGE EXCISE RETURNS AND PAY EXCISE DUTY? To lodge your excise return (NAT 4285):
  • fax it to us on 1300 131 456, or
  • post it to:

    Excise Returns Processing Unit

    PO Box 9100

    WOLLONGONG, NSW, 2500.
You can pay excise duties:
  • by electronic funds transfer, including direct credit and BPAY
  • in person at a Post Office, or
  • by mail (cheque or money order).
If you are required to pay your other tax debts electronically, you must also make your payment for excise duty by electronic funds transfer.

We do not accept credit card payments.
If you pay the excise duty at a Post Office, you must use a payment advice. To obtain a payment advice booklet, phone us on 13 72 26 or, if you need further information, 1800 815 886 and supply us with your Australian business number (or Excise Identification Number) and client account number. Lodgment of an excise return and payment of any duty must be made by the due time stated on your PSP. This means that we must receive the funds by that time.[183] Failure to pay on time may result in the cancellation of your PSP.

To obtain an excise return (NAT 4285):

For more information about completing your excise return refer to the Excise return instructions (NAT 15436).
6.4.5 WHAT DO I DO IF I HAVE MADE AN ERROR ON MY EXCISE RETURN? You may correct errors in your excise return or add new lines by lodging an amending excise return and referencing the number of your original return. If your amendment results in a shortfall in excise duty paid, you must pay the additional duty when you lodge the amending return. If your amendment results in an overpayment of excise duty, you may apply for a refund or treat the amount as a credit and offset it against the duty you are liable to pay in your next excise return. An amending return can only be used to change product details. If you wish to change other information in your original excise return (for example client details or the settlement period) you must lodge a new excise return form as the amending excise return form does not cater for changes to these sections. The new return must contain the amended details and refer to the original return. You should also request cancellation of the original return.

To obtain an Amending excise return (NAT 4286):

For more information about completing your Amending excise return refer to the: Amending excise return instructions (NAT 15772)
6.4.6 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on payment of duty contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

6.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO PAYMENT OF DUTY?

The following are the penalties that may apply after conviction for an offence. Move, alter or interfere If you move, alter or interfere with excisable tobacco products that are subject to excise control, without permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[184] Deliver If you deliver excisable tobacco products into the Australian domestic market contrary to your permission, the penalty is a maximum of two years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable tobacco products.[185] Evade If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable tobacco products.[186] 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.[187]

6.6 TERMS USED

Deliver into the Australian domestic market[188] 'Deliver into the Australian domestic market' is the term we use in this manual for when excisable tobacco products 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 licensed premises 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.[189] The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to export. 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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.
Excise control Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export. Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act. Excise return An excise return[190] is the document that you use to advise us:
  • the volume of excisable tobacco products that you have delivered into the Australian domestic market during the period designated on your PSP, or
  • the volume of excisable tobacco products that you wish to deliver into the Australian domestic market following approval.
Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110. Remission A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.

For more information about remissions see chapter 7 - Remissions, refunds, drawbacks and exemptions.
Tobacco Tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant.[191] This means that until tobacco leaf is subjected to processes after curing it is not excisable. 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 and Nicotiana rusticum. 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.

6.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 6.7.1 Excise Act 1901 Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods Section 58 - Entry for home consumption etc. Section 59 - Payment of duty Section 59A - Declared period quotas - effect on rates of Excise duty Section 60 - Persons to keep excisable goods safely etc. Section 61 - Control of excisable goods Section 61C - Permission to deliver certain goods for home consumption without entry Section 77AA - Tobacco leaf stock may be checked Section 114 - Time for commencing action Section 120 - Offences Section 154 - Deposit of duty Section 162C - Review of decisions 6.7.2 Excise Tariff Act 1921 Section 5 - Duties of excise Section 6A - Indexation of rates of duty The Schedule 6.7.3 Crimes Act 1914 4AA
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

07 - REMISSIONS, REFUNDS, DRAWBACKS & EXEMPTIONS.

7.1 PURPOSE

7.2 INTRODUCTION

7.3 POLICY AND PRACTICE

7.3.1 WHEN CAN I APPLY FOR A REMISSION OF EXCISE DUTY?

7.3.2 WHEN CAN I APPLY FOR A REFUND OF EXCISE DUTY?

7.3.3 WHEN CAN I APPLY FOR A DRAWBACK OF EXCISE DUTY?

7.3.4 WHAT HAPPENS IF I AM OVERPAID A REFUND OR DRAWBACK?

7.3.5 WHEN ARE EXCISABLE TOBACCO PRODUCTS EXEMPT FROM EXCISE DUTY?

7.4 PROCEDURES

7.4.1 HOW DO I APPLY FOR A REMISSION OR REFUND?

7.4.2 HOW DO I APPLY FOR A DRAWBACK?

7.4.3 WHAT DO I DO IF I NEED MORE INFORMATION?

7.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO REMISSIONS, REFUNDS, DRAWBACKS AND EXEMPTIONS?

7.6 TERMS USED

7.7 LEGISLATION (QUICK REFERENCE GUIDE)

7.1 PURPOSE

This chapter deals with:
  • when you can apply for a remission, refund or drawback
  • what happens if you are overpaid a refund or drawback
  • when tobacco products are exempt from excise duty
  • who can access tobacco products free of excise duty
  • how to apply for a remission, refund or drawback, and
  • penalties that can apply to offences in relation to remissions, refunds, drawbacks and exemptions.

7.2 INTRODUCTION

A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture. A refund is the repayment of duty that has already been paid. A drawback is a repayment of duty already paid. It is similar to a refund, but applies where duty-paid goods are exported. In some circumstances the duty you pay on goods may be subject to a complete or partial refund or drawback.[192]

7.3 POLICY AND PRACTICE

7.3.1 WHEN CAN I APPLY FOR A REMISSION OF EXCISE DUTY? You can apply for a remission of excise duty payable on your excisable tobacco products if the following circumstances apply while the goods are subject to excise control:
  1. Where the tobacco products have deteriorated or been damaged, pillaged, lost or destroyed, or become unfit for human consumption [193]
    In an Excise context, 'pillaged' means stolen. While a remission of excise duty is available for goods that have been pillaged, this does not prevent us from requiring an amount equal to the duty be paid by a person who has had possession, custody or control of the excisable tobacco products. Each case needs to be assessed on its own merit. However, where the person who had possession of the excisable tobacco products at the time they were pillaged was not liable to pay the duty then one person might be entitled to a remission of the duty but another person might be required to pay an amount equal to the duty.

    For more information about payment of duty see chapter 6 - Payment of duty.
    Where excisable tobacco products have deteriorated, been damaged or destroyed, or become unfit for human consumption, while they were subject to excise control, they may be subject to a remission.
    Example Cigarettes become stale, at the manufacturer's premises, after remaining unsold and the manufacturer wants to destroy them. The manufacturer applies for a remission of duty on the cigarettes. On receiving approval, the manufacturer destroys the unsaleable stock and retains records of the destruction (e.g. date, volume and type of goods destroyed).
    However, if excisable tobacco products are lost then the same circumstances will apply as described above for goods that are pillaged.
  2. Where the goods are not worth the amount of excise duty payable on the goods.[194]

    Example The goods have become unsaleable, due to changed packaging requirements, and they cannot be sold (but are not unfit for human consumption).
  3. The excisable tobacco products are for sale to diplomatic or consular missions and the goods are to be delivered under your PSP.[195]

    Example A manufacturer receives an order from a diplomatic mission for cigarettes, for official use. The manufacturer delivers the cigarettes, into the Australian domestic market (to the diplomatic mission), under the terms of their PSP. (The terms of the PSP may require the manufacturer to submit an Excise remission (NAT 4289) to us, after delivery of the cigarettes.)
7.3.2 WHEN CAN I APPLY FOR A REFUND OF EXCISE DUTY? You can apply for a refund of excise duty paid on excisable tobacco products if the following circumstances apply:
  1. Duty has been paid on excisable tobacco products, however it is later found that, while the goods were subject to excise control (i.e. while they were at the licensed site), they deteriorated or had been damaged, pillaged, lost or destroyed, or become unfit for human consumption.[196]

    Example 1 A manufacturer delivers cigarettes into the Australian domestic market and pays duty under their PSP. After the product has gone into the market, it is found to be unfit for human consumption due to a fault in the packaging. It is evident that the product became unfit for consumption while the goods were still subject to excise control. The manufacturer applies for a refund of duty on the cigarettes. Example 2 A storage licence holder who does not have a PSP pays the excise duty on tobacco products in accordance with a pre-payment return. They receive a delivery authority.  Before the tobacco products are removed from the licensed premises they are destroyed by fire. As the tobacco products were still subject to excise control when they were destroyed, the licence holder can apply for a refund of duty on the tobacco products.
  2. Duty-paid tobacco products, while the goods are subject to excise control, are not worth the amount of excise duty paid.[197]

    Example A storage licence holder who does not have a PSP pays the excise duty on tobacco products in accordance with a pre-payment return. They receive a delivery authority.  Before the tobacco products are removed from the licensed premises they become unsaleable, due to changed packaging requirements, and they cannot be sold (but are not unfit for human consumption). As the tobacco products were still subject to excise control when they became unsaleable, the licence holder can apply for a refund of duty on the tobacco products.
  3. Duty has been paid through manifest error of fact or patent misconception of the law.[198] This circumstance applies to an error that is evident, obvious or apparent and also in situations where duty has been paid for goods entering the Australian domestic market that are not in fact excisable. In both cases a refund of the duty paid would be payable.
    Example A tobacco manufacturer calculates the excise on pouch tobacco on the basis that the packages contain 50 grams whereas they only contain 30 grams. Excess duty is paid through an obvious error of fact. The manufacturer applies for a refund of the duty overpaid through manifest error of fact.


  4. Duty-paid goods have been taken up as ship's stores or aircraft's stores.[199] Ship's stores on overseas ships and aircraft's stores on international flights are not subject to excise duty. Where duty has been paid and the excisable tobacco products are subsequently re-directed for use on ships or aircraft travelling overseas, this refund circumstance may apply.
  5. Under a directive by a Minister of State,[200] duty-paid goods are withdrawn from circulation on grounds of public health or safety and returned to the manufacturer.[201]

  6. Duty paid tobacco products are returned, or are deemed to have been returned, to the manufacturer of those goods and the returned tobacco is destroyed or mixed with other tobacco products of a similar kind, i.e. loose tobacco with loose tobacco, cigarettes or cigars with tobacco that is to be used in the manufacture of cigarettes or cigars, snuff with other snuff.[202]
    Goods do not need to be returned to the place of manufacture. It is sufficient if goods are returned to storage premises licensed to the manufacturer or to premises licensed to an entity having contractual storage and distribution arrangements with the manufacturer.

    A refund will not be allowed for returned goods under this circumstance unless a notice of intention to destroy or mix the goods has been given at least seven days before that event.[203]
    Example Cigarettes have gone stale at retailers' premises. The manufacturer's sales representative arranges for the return of the cigarettes to the manufacturer's distribution premises with a refund or credit to the retailer. The manufacturer notifies us at least 7 days before they destroy the cigarettes that they intend to destroy them. The manufacturer applies for a refund of duty on the returned cigarettes. Note: refund circumstance 1 does not apply because the goods have gone stale after they passed out of excise control. 


  7. Duty has been paid on excisable tobacco products and they are sold to a diplomatic or consular mission.[204]
7.3.3 WHEN CAN I APPLY FOR A DRAWBACK OF EXCISE DUTY? You can apply for a drawback if you export tobacco products that have had excise duty paid on them.[205] We will only pay a drawback if:[206]
  • prior to the exportation, you advise us that you intend to claim a drawback (We can exempt you from this requirement, in writing, either on all claims for drawback or any particular claim.[207])
  • before exportation of the excisable tobacco products on which duty has been paid, the goods are available for inspection by us, and
  • you have not claimed a refund of excise duty in relation to the exported excisable tobacco products
  • the  excisable tobacco products will not be returned to Australia after they have been exported
  • you keep records showing:
    • that duty was paid on the tobacco products (for example invoice), and
    • the tobacco products were exported (for example, an export declaration number or bill of lading)
  • you lodge a drawback claim in the approved form no later than 12 months after the tobacco products were exported, and
  • the amount of the claim is at least $50.
The amount of the drawback will not exceed the amount of excise duty that was paid.[208]
Example A cigarette distributor purchases a quantity of duty-paid cigarettes. The distributor notifies us that they intend to export the cigarettes.  They then export them to Fiji. The cigarette distributor applies for a drawback of the duty component of the cigarettes. To support the application, the company provides the Tax Office with copies of invoices of purchase and the Bills of Lading, which will include details of the export declaration notice (EDN) number.
7.3.4 WHAT HAPPENS IF I AM OVERPAID A REFUND OR DRAWBACK? If we overpay you by way of a refund or drawback then you must pay the overpaid amount back. We can require that you pay back the amount and if you do not repay the amount within the time we specify we can recover the amount through the courts as a debt due to the Commonwealth.[209] 7.3.5 WHEN ARE EXCISABLE TOBACCO PRODUCTS EXEMPT FROM EXCISE DUTY? Excisable tobacco products are exempt from duty if they are:
  • exported
  • sold for use as ship's or aircraft's stores[210]
  • with our approval, delivered as small samples,[211] or
  • subject to remission without application.[212]

What are ship's and aircraft's stores?

Ship's and aircraft's stores are goods for the use of passengers or crew on international journeys (e.g. cigarettes for sale to passengers on board a cruise liner). There are limits on the quantities of excisable tobacco products that are not liable to excise duty as ship's stores: [213]
  • cigarettes must be sold to passengers or crew in individual packets of not more than 25 sticks or individual tins of not more than 50 sticks
  • loose tobacco (e.g. pipe tobacco) must be sold in quantities of not more than 120 grams, or
  • Cigars must be sold in individual packets, tins, or boxes of not more than 25 cigars. 
If you supply ship's or aircraft's stores underbond, you must obtain a movement permission to move the goods from the licensed premises to the place of export.

Can I deliver samples without payment of duty?

Yes, you may be able to deliver small samples without payment of duty and without entry. You must apply to us for approval and your application must:
  • be in writing
  • specify who the sample is for
  • specify the quantity for approval, and
  • specify the purpose of the sample.
You do not include approved samples in your excise return; however, you must keep records of any samples you deliver.
To apply for approval, send your application to us by:
  • faxing (03) 9285 1168, or
  • posting to

    Australian Taxation Office

    GPO Box 4525

    MELBOURNE, VIC, 3001

When are excisable tobacco products subject to remission without application?

Excisable tobacco products are subject to remission without application (this effectively means they are exempt from duty) when they are for official use but not for trade by:[214]
  • parties that use tobacco for an approved medical, scientific, horticultural or agricultural purpose (the relevant approvals should be sought from us)[215]
  • the Governor-General or any member of the Governor-General's family
  • State Governors or any member of a State Governor's family
  • the Australian American Foundation (Australian-American Fulbright Commission)
  • the Government of another country, under an agreement between that Government and the Australian Government,
  • persons covered by a Status of Forces Agreement, and
  • the personnel of sea-going vessels of the Royal Australian Navy (RAN) or Australian Military Forces (AMF) (see below for more detail).

If you are not certain whether someone falls into one of these categories, you should contact us by phone on 1300 137 295.
Some restrictions apply to tobacco products for the RAN and AMF. Tobacco, cigars and cigarettes may be supplied free of duty when:
  • the goods are for consumption by the personnel of sea-going vessels of the RAN or the AMF when:
    • such vessels are in full commission, and
    • the products are consumed on such vessels.[216]
To supply tobacco products 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 and you do not have to include these products on your excise return.

7.4 PROCEDURES

7.4.1 HOW DO I APPLY FOR A REMISSION OR REFUND? An application for a remission or refund must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested.[217] For refund circumstance 1, 2, 3 or 4 in section 7.3.2 above, your application must be submitted within 14 days of the date on which the excise duty was paid. However, this time may be extended to within 12 months of payment depending on your circumstances. [218] To ensure the excisable tobacco products do not find their way into the Australian domestic market we may wish to inspect or supervise the disposal of the goods. If underbond goods must be destroyed off site, you must apply for a movement permission to move them from the licensed premises to the place of destruction.

You should contact us before moving or destroying any tobacco products subject to remission or refund. 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 4 - Movement permissions.
You can elect to have a refund credited to your excise account or paid directly into your bank account.

To apply for a remission, send us a completed Excise remission (NAT 4289). You can use the Excise remission instructions (NAT 15769) to help you complete this form.

To apply for a refund, send us a completed Excise refund (NAT 4288). You can use the Excise refund instructions (NAT 15771) to help you complete this form. Applications can also be made on company letterhead as long as all the relevant information is provided.
If you are not satisfied with our decision to refuse your refund or remission, you can request a review of our decision by lodging an objection within 60 days.

For more information about your review rights refer to chapter 8 - Reviews and objections.
7.4.2 HOW DO I APPLY FOR A DRAWBACK? To apply for a drawback of duty, send us a completed Excise drawback (NAT 4287)or an application on your business letterhead. You can use the Excise drawback instructions (NAT 15688) to help you complete NAT 4287. If we refuse to pay your drawback and you are not satisfied with our decision you can request a review of our decision by lodging an objection within 60 days.

For more information about your review rights refer to chapter 8 - Reviews and objections.
7.4.3 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on remissions, refunds, drawbacks and exemptions contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

7.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO REMISSIONS, REFUNDS, DRAWBACKS AND EXEMPTIONS?

The following are the penalties that may apply after conviction for an offence. Evade If you evade payment of any duty which is payable the maximum penalty is 5 times the amount of duty on the excisable tobacco products.[219] 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.[220]

7. 6 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. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.
Excise control Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export. Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act. Excise return An excise return[221] is the document that you use to advise us:
  • the volume of excisable tobacco products that you have delivered into the Australian domestic market during the period designated on your PSP, or
  • the volume of excisable tobacco products that you wish to deliver into the Australian domestic market following approval.
Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110. 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.

7.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 7.7.1 Excise Act 1901 Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods Section 58 - Entry for home consumption etc. Section 64 - Delivery of samples free of duty Section 78 - Remissions, rebates and refunds Section 79 - Drawbacks Section 80 - Recovery of overpayments of refunds, rebates, and drawbacks Section 120 - Offences Section 160A - Ship's stores and aircraft's stores 7.7.2 Excise Regulations 1925 Regulation 33 - Approval for uses and destruction of tobacco leaf Regulation 50 - Circumstances under which refunds, rebates and remissions are made Regulation 50A - Other circumstances under which refunds, rebates and remissions are made Regulation 51 - Requirements for remission, rebate or refund Regulation 52 - Application for remission, rebate or refund Regulation 53 - Period for making of application Regulation 55 - Tobacco products to have lost their identity Regulation 76 - Drawback of excise duty on goods Regulation 78A - Conditions relating to payment of drawback of duty Regulation 78B - Amount of claim for drawback of excise duty Regulation 186 - Interpretation Schedule 1 - Prescribed circumstances (regulation 50A) 7.7.3 Excise Tariff Act 1921 The Schedule 7.7.4 Crimes Act 1914 Section 4AA - Penalty units
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

08 - REVIEWS & OBJECTIONS

8.1 PURPOSE

8.2 INTRODUCTION

8.3 POLICY AND PRACTICE

8.3.1 WHAT ARE INFORMAL REVIEWS?

8.3.2 CAN I OBJECT AGAINST ANY DECISION?

8.3.3 WHEN CAN I SEEK AN EXTERNAL REVIEW?

8.4 PROCEDURES

8.4.1 HOW DO I REQUEST AN INFORMAL REVIEW?

8.4.2 HOW DO I LODGE AN OBJECTION?

8.4.3 HOW DO I REQUEST AN EXTERNAL REVIEW?

8.5 LEGISLATION (QUICK REFERENCE GUIDE)

8.1 PURPOSE

This chapter deals with:
  • the types of review you can ask for
  • what decisions you can object to
  • how to request an informal review
  • how to lodge an objection, and
  • how to request an external review.

8.2 INTRODUCTION

We will provide you with a clear explanation of any decision we make about your excise affairs. If you need more information about our decisions, contact us using the details we provide when we advise you of our decision. If you're not satisfied with a decision we've made, you can ask for it to be reviewed by: Where there is more than one review option, we will explain how these differ. For example, some reviews look at questions of law and others involve checking that we followed the correct process in reaching our decision. Which review option is best will depend on your situation.

8.3 POLICY AND PRACTICE

8.3.1 WHAT ARE INFORMAL REVIEWS? Under the Taxpayers' Charter, you can seek an informal (internal) review where you believe that we have made a mistake, not complied with the law, or interpreted or applied the law incorrectly. Your dissatisfaction with our decision may be treated as an informal review both prior to or after:
  • a notice of assessment issues, and/or
  • receiving notification of the decision in writing.
An informal review does not waive or defer your rights to object to the decision. However, if you choose to pursue an informal review, awaiting the outcome of the informal review may prejudice your right to object to the decision and, ultimately, your right for external review. For example, the time allowed to lodge an objection may have expired by the time an informal review is finalised.
This is particularly crucial if the original decision attracts only a 60-day objection period.
8.3.2 CAN I OBJECT AGAINST ANY DECISION? No, you can only lodge an objection against those decisions contained in sections 39Q and 162C of the Excise Act and regulation 247 of the Excise regulations. These include decisions:
  • made under the licensing provisions of the Excise Act[225] such as:
    • refusal to grant a licence
    • imposing and varying conditions on a licence, or
    • suspension, cancellation or refusal to renew a licence
  • to demand an amount in relation to goods not satisfactorily accounted for[226]
  • relating to a drawback, refund or remission of duty[227]
  • not to approve payment of drawback.[228]
However, if you informally ask us to review a decision we will try to resolve any problems as quickly as possible. If we have made a mistake, we want to fix it at the least cost to both of us. 8.3.3 WHEN CAN I SEEK AN EXTERNAL REVIEW? For decisions in relation to an objection, or where there is no right of objection, you may be able to apply to the Federal Court or Federal Magistrates Court under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act).

8.4 PROCEDURES

8.4.1 HOW DO I REQUEST AN INFORMAL REVIEW? To request an informal review, use the contact details we provide to contact the person or area of the Tax Office handling your case. The review will be conducted by a tax officer who was not involved in making the original decision. We will advise you of the outcome of our review within 28 days of receiving all the information we need. If we cannot finalise the review within 28 days, or we need more information from you, we will contact you within 14 days to obtain the information we need or negotiate an extended reply date. 8.4.2 HOW DO I LODGE AN OBJECTION? You can lodge an objection by completing an objection form or writing your own objection document. Your objection must:
  • be in writing
  • lodged within 60 days after you receive the notice of the decision, and
  • set out a full and detailed account of the grounds for the objection.[229]
If you are a registered user you can lodge your objection through the business portal at www.bp.ato.gov.au. You can also lodge your objection:
  • by faxing it to 1300 650 128, or
  • by posting it to

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
If you do not lodge your objection within 60 days we will not consider your objection, unless you provide the reasons for late lodgment. We will consider these reasons before continuing with the objection process. We will make a decision about your objection within 56 days of receiving it. If we need more information or we cannot make a decision within 56 days, we will contact you within 14 days to obtain the information we need or to negotiate an extended reply date. If we disallow your objection or if we will not consider your late objection, you can:
  • apply to the Administrative Appeals Tribunal (AAT) for a review of the decision, or
  • appeal against the decision to the Federal Court.

To obtain a copy of our objection forms and for more information about how to lodge an objection, refer to How to lodge an objection on our website at www.ato.gov.au
For more information about what to do if you believe your legal rights or the standards outlined in the Taxpayers' Charter have not been met, refer to If you are not satisfied (NAT 2556). 8.4.3 HOW DO I REQUEST AN EXTERNAL REVIEW? We suggest you obtain legal advice if you are considering using external review options. 8.4.4 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on reviews and objections contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168, or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
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.

8.5 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 8.5.1 Excise Act 1901 Section 39Q - Review of decisions Section 61A - Permission to remove goods that are subject to CEO's control Section 162C - Review of decisions 8.5.2 Excise Regulations 1925 Regulation 247 - Review of decisions 8.5.3 Taxation Administration Act 1953 Part IVC - Taxation objections, reviews and appeals
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

09 - OFFENCES

9.1 PURPOSE

9.2 INTRODUCTION

9.3 OFFENCES

9.4 PENALTIES

9.5 INFRINGEMENT NOTICES

9.6 APPLICATION OF THE CRIMINAL CODE

9.7 TERMS USED

9.8 LEGISLATION (QUICK REFERENCE GUIDE)

9.1 PURPOSE

This chapter deals with:
  • offences under the Excise Act
  • penalties
  • infringement notices, and
  • application of the Criminal Code.

9.2 INTRODUCTION

This chapter is a general discussion on offences. It is not meant as legal advice and you are encouraged to seek independent legal advice in relation to your own individual circumstances. 

There are a number of acts or omissions under the Excise Act that are offences.

A conviction for an offence may result in a penalty as provided for within the Excise Act. The penalty provided may be in the form of penalty units, a term of imprisonment or an amount of money calculated by a set formula.

9.3 OFFENCES

Certain acts or omissions are offences under the Excise Act for which penalties are prescribed.

For penalties to apply to an offence (except where an infringement notice has been issued), you must first be convicted of the offence in a court of law following prosecution.

Certain offences under the excise legislation are strict liability offences as defined in section 6.1 of the Criminal Code (Schedule to the Criminal Code Act 1995). Essentially, strict liability means that the offence consists of the physical act or omission only. It is not necessary for the court to find that you knowingly committed, or were reckless or negligent in relation to, the act or omission.

Some sections of the Excise Act prescribe the following two levels of offence for similar conduct:

  • a higher penalty applies to an act or omission intentionally or recklessly committed, that is there is a fault element, and
  • a lower penalty applies to the same act or omission on a strict liability basis, that is there is a no fault element.
Example Section 26 of the Excise Act prescribes that licensed manufacturers are to manufacture in accordance with the Act and their licence.
  1. A licensed manufacturer must not intentionally manufacture excisable goods knowing, or being reckless as to whether, the manufacture contravenes this Act or the manufacturer licence. Penalty: 2 years imprisonment or 500 penalty units.
  2. A licensed manufacturer must not manufacture excisable goods in contravention of this Act or the manufacturer licence. Penalty: 100 penalty units.
  3. Strict liability applies to sub-section (2).

9.4 PENALTIES

The Excise Act contains many provisions that include a penalty at the foot of the section or subsection. This means that if you are convicted of an offence against the particular provision then you can receive a penalty not exceeding the penalty mentioned.[230] The penalty listed is thus the maximum penalty but the courts can impose a lesser penalty.
Example: A person manufactures excisable tobacco products without a manufacturer licence. This is a contravention of subsection 25(2) which says that a person shall not manufacture excisable goods without a manufacturer licence. The penalty at the foot of subsection 25(2) is 100 penalty units. We bring a court action against the person and the court convicts the person. The penalty cannot exceed 100 penalty units but it can be less.
As indicated above certain offences provide for alternative penalties, for example subsection 33(1) provides for a penalty of 2 years imprisonment or 500 penalty units.For some offences if a person is convicted of that offence then the courts can impose both penalties.[231]
Where an offence also causes goods to be forfeited,[232] conviction by the courts results in the forfeited goods being condemned. [233] This means they are no longer your property and we can dispose of the goods as we see fit.

9.5 INFRINGEMENT NOTICES

We may issue an infringement notice[234] as an alternative to prosecution for unlawfully possessing, or unlawfully selling excisable goods.[235] An infringement notice imposes a penalty of 20 penalty units. To issue an infringement notice, we must have a reasonable belief that you have committed the offence. Notices must be issued within 12 months of the commission of the offence.[236] In the event of non-payment, prosecution action may be brought against the person who committed the alleged offence. You cannot be prosecuted for the same offence where an infringement notice has been issued unless the infringement notice is withdrawn. We can withdraw an infringement notice and if we do so after you have paid the penalty we must refund that to you.

9.6 APPLICATION OF THE CRIMINAL CODE

Chapter 2 of the Criminal Code applies to offences against the Excise Act. However, Parts 2.5 and 2.6, which are in Chapter 2, do not apply.[237] In some courts, Excise prosecutions are able to be treated as criminal matters while in other courts they are treated as civil matters. This, obviously, has an effect on issues such as the burden and standard of proof required.
You are encouraged to seek independent legal advice in relation to your own individual circumstances.  

9.7 TERMS USED

Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110.

9.8 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 9.8.1 Excise Act 1901 Section 5 - Penalty at foot of sections Section 6B - Application of the Criminal Code Section 25 - Only licensed manufacturers to manufacture excisable goods Section 26 - Licensed manufacturers to manufacture in accordance with Act and licence Section 33 - Only licensed dealers to deal in tobacco leaf etc. Section 116 - Forfeiture Section 117 - Unlawful possession of excisable goods Section 117B - Unlawfully selling excisable goods Section 127A - Alternative penalties Section 129A - Purpose and effect of this Part (Part XA - penalty instead of prosecution) Section 129B - When an infringement notice may be issued Section 129C - Matters to be included in an infringement notice Section 129D - Due date for penalty Section 129E - Effect of payment of penalty Section 129F - Withdrawal of infringement notice Section 151 - Conviction to operate as a condemnation 9.8.2 Crimes Act 1914 Section 4AA - Penalty units Section 4D - Penalties 9.8.3 Criminal Code Act 1995 Section 6.1 - Strict liability Chapter 2 - General principles of criminal responsibility
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953. The law does not provide for legally binding rulings on tobacco excise legislation. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au

FOOTNOTES




[1] Commonwealth of Australia Constitution Act section 90.
[2]  Ha & Anor v. State Of New South Wales & Ors; Walter Hammond & Associates Pty Limited v. State Of New South Wales & Ors 97 ATC 4674.
[3] Ha & Anor v. State Of New South Wales & Ors; Walter Hammond & Associates Pty Limited V State Of New South Wales & Ors 97 ATC 4674 at page 4684 per Brennan CJ, McHugh, Gummow and Kirby JJ.
[4] Gazette No. S144 of 4 June 1991
[5] See the prefatory notes to the Schedule to the Excise Tariff Act 1921
[6] For an explanation of customs and excise tariff proposals, see http://parlinfoweb.aph.gov.au
[7] Excise Act 1901 section 28
[8] Excise Act 1901 section 33
[9] Excise Act 1901 section 44
[10] Excise Act 1901 section 25
[11] Excise Act 1901 subsection 4(1) (definition of 'storage licence') and Part IV
[12] Excise Act 1901 section 61A
[13] Excise Act 1901 section 7 and Excise Tariff Act 1921 section 1A
[14] Excise Act 1901 section 31
[15] Excise Act 1901 section 68 excludes the curing process from being manufacture and the Schedule to the Excise Tariff Act defines 'tobacco' as being tobacco leaf subjected to any process other than curing the leaf as stripped from the plant.
[16] Excise Act 1901 section 36
[17] Note that the buyer or seller as applicable requires an appropriate licence
[18] Excise Act 1901 section 4 - The term 'licensed manufacturer' is defined to be 'a person or partnership who holds a manufacturer licence'.
[19] Excise Act 1901 section 24
[20] Excise Act 1901 section 39D
[21] Federal Commissioner of Taxation v. Jax Tyres Pty Ltd (1984) 58 ALR 138; (1984) 5 FCR 257; (1984) 16 ATR 97; 85 ATC 4001; M.P. Metals Pty Ltd v. Federal Commissioner of Taxation [1967-1968] 117 CLR 631; (1968) 40 ALJR 538; (1968) 14 ATD 407; Commissioner of Taxation v. Softex Industries Pty Ltd (2001) 107 FCR 111; (2001) 191 ALR 724: (2001) 46 ATR 512; 2001 ATC 4184; [2001] FCA 397Re Searls Ltd (1933) 33 SR (NSW) 7
[22] Excise Act 1901 section 68
[23] Customs Act 1901 section 105B
[24] Excise Act 1901 section 44
[25] Customs (Prohibited Imports) Regulations 1956 regulation 4D
[26] Excise Act 1901 section 27
[27] Excise Act 1901 section 51
[28] Excise Act 1901 subsection 4(1) definition of 'storage licence'. 
[29] Excise Act 1901 sections 30, 35 & 53
[30] Excise Act 1901 section 77AA
[31] Excise Act 1901 section 60
[32] Excise Act 1901 section 62
[33] Excise Act 1901 sections 44 & 61A
[34] Excise Act 1901 section 44
[35] Excise Act 1901 section 44 and Excise Regulations 1925 regulation 33
[36] Excise Act 1901 section 75
[37] Excise Act 1901 sections 26, 29 & 34
[38] Excise Regulations 1925 subregulation 33(1)
[39] Excise Act 1901 section 58 and section 61C
[40] Excise Act 1901 section 54
[41] Excise Act 1901 section 49
[42] Excise Act 1901 section 52
[43] Excise Act 1901 section 76
[44] Excise Act 1901 section 77
[45] Excise Act 1901 section 58 and section 61C
[46] Excise Act 1901 section 54
[47] Excise Act 1901 subsection 86(2)
[48] Excise Act 1901 section 87
[49] Crimes Act 1914 section 6
[50] Criminal Code Act 1995 sections 11.1, 11.2, and 11.5
[51] Excise Act 1901 section 87AA
[52] Excise Act 1901 section 91
[53] Excise Act 1901 section 46
[54] Excise Act 1901 section 106
[55] Excise Act 1901 section 50
[56] The record book created by the Tax Office is available from the Tobacco Industry Group (TIG) - phone 1300 137 295 or online at the Tax Office website www.ato.gov.au
[57] Excise Act 1901 section 39E
[58] Excise Act 1901 section 39O
[59] Excise Act 1901 section 39
[60] Excise Act 1901 sections 25, 28, 33 & 117
[61] Excise Act 1901 section 6A
[62] Excise Act 1901 section 28
[63] Excise Act 1901 section 28
[64] Excise Act 1901 section 29
[65] Excise Act 1901 section 31
[66] Excise Act 1901 section 31
[67] Excise Act 1901 section 33
[68] Excise Act 1901 section 33
[69] Excise Act 1901 section 34
[70] Excise Act 1901 section 36
[71] Excise Act 1901 section 25
[72] Excise Act 1901 section 26
[73] Excise Act 1901 section 27
[74] Excise Act 1901 section 30
[75] Excise Act 1901 section 30
[76] Excise Act 1901 section 35
[77] Excise Act 1901 section 35
[78] Excise Act 1901 section 117
[79] Excise Act 1901 section 120
[81] Excise Act 1901 section 51
[82] Excise Act 1901 section 117I
[83] Excise Act 1901 section 76
[84] Excise Act 1901 section 49
[85] Excise Act 1901 section 52
[86] Excise Act 1901 section 92
[87] Excise Act 1901 section 92
[88] The term used in Excise Act 1901 section 58 is 'entry for home consumption'.
[89] prefatory notes to the Schedule to the Excise Tariff Act 1921
[90] Excise Act 1901 sections 39B and 39C
[91] Excise Act 1901 paragraphs 39B(e) and 39B(f)
[92] Excise Act 1901 paragraph 39B(f)
[93] Excise Act 1901 subsection 39A(2)(f); Income Tax Assessment Act 1997 section 995-1; Income Tax Assessment Act 1936 subsection 318(1)
[94] Income Tax Assessment Act 1997 section 995-1 for definition of Relative for this purpose
[95] Income Tax Assessment Act 1936 subsection 318(1)
[96] Income Tax Assessment Act 1936 subsection 318(7)
[97] Income Tax Assessment Act 1936 subsection 318(2)
[98] Income Tax Assessment Act 1936 subsection 318(3)
[99] Income Tax Assessment Act 1936 subsection 318(4)
[100] Excise Act 1901 paragraph 39A(2)(fa)
[102] Excise Act 1901 paragraph 39A(2)(i)
[103] Excise Act 1901 paragraph 39A(2)(ia)
[104] Note this does not indicate that a licence would be granted to produce or manufacture for personal use as other factors may result in refusal to grant a licence.
[105] Excise Act 1901 paragraph 39A(2)(j)
[106] Excise Act 1901 paragraph 39A(2)(k)
[107] Excise Tariff Act 1921 section 5
[108] Excise Act 1901 paragraph 39A(2)(l)
[109] Martino v Australian Taxation Office [2002] AATA 1242
[110] Excise Act 1901 paragraph 39G(1)(k)
[112] Excise Act 1901 subsection 39D(1)
[113] Excise Act 1901 subsection 39D(3)
[114] Excise Act 1901 section 39Q
[115] Excise Act 1901 sections 16 to 22
[116] Excise Act 1901 section 39Q
[117] Excise Act 1901 subsection 39F(4)
[118] Excise Act 1901 section 120
[119] prefatory notes to the Schedule to the Excise Tariff Act 1921
[120] Note that this is different to the consideration for granting a licence. In granting a licence we can take into account any misleading statement, or if you knowingly made a false statement, in your application. For suspension or cancellation we can consider any statement you make to us in relation to excise matters.
[121] Excise Act 1901 subsection 39L(4)
[122] Excise Act 1901 subsection 39L(3)
[123] Excise Act 1901 subsections 39G(1) and 39L(1)
[124] Excise Act 1901 section 26
[125] Excise Act 1901 section 39K
[126] Excise Act 1901 subsection 39K(6)
[127] Excise Act 1901 subsection 39N(2)
[128] Excise Act 1901 section 39M
[129] Excise Act 1901 section 39Q
[130] Excise Act 1901 subsections 39J(2) and 39L(5)
[131] Excise Act 1901 section 39P
[132] Excise Act 1901 subsection 39K(2)
[133] Excise Act 1901 subsection 39K(2)
[134] Excise Act 1901 subsection 39K(2)
[135] Excise Act 1901 subsection 39K(2)
[136] Excise Act 1901 subsection 39K(1)
[137] Excise Act 1901 subsection 39K(1)
[138] Excise Act 1901 subsection 39K(3)
[139] Excise Act 1901 subsection 39M(1)
[140] Excise Act 1901 subsection 39M(2)
[141] Excise Act 1901 subsection 39M(2)
[142] prefatory notes to the Schedule to the Excise Tariff Act 1921
[143] Excise Act 1901 sections 44 and 61A
[144] This does not mean movements within the bounds of your licensed premises, rather movements from licensed premises to another place.
[145] Excise Act 1901 section 44
[146] Excise Act 1901 section 75 - this includes waste such as stalks and clippings arising from the manufacture of tobacco products
[147] Excise Act 1901 sections 16 to 22
[148] Excise Act 1901 section 60 for excisable goods and section 77AA for tobacco leaf
[149] While there is no specific provision in the Excise Act which allows permissions to be cancelled (unlike licences), in accordance with subsection 33(3) of the Acts Interpretations Act 1901 the power to grant the permission provides the power to cancel the permission
[150] Excise Act 1901 section 117D
[151] Excise Act 1901 section 117D
[152] Excise Act 1901 section 117A
[153] Excise Act 1901 subsection 44(4)
[154] Excise Act 1901 subsection 44(4)
[155] Excise Act 1901 section 61A
[156] prefatory notes to the Schedule to the Excise Tariff Act 1921
[157] Excise Tariff Act 1921 subsection 5(1) 
[158] Excise Act 1901 section 61
[159] Excise Act 1901 section 61C
[160] Excise Act 1901 paragraph 58(1)(a)
[161] Excise Act 1901 section 61C
[162] Excise Act 1901 section 58
[163] Excise Tariff Act 1921 section 6A
[164] Excise Act 1901 section 59
[165] For an explanation of customs and excise tariff proposals, see www.parlinfoweb.aph.gov.au.
[166] Excise Act 1901 subsections 59A(1) & (2)
[167] Excise Act 1901 subsection 59A(5)
[168] This allocation considers your normal delivery activity over a period of time. This period will take into account any aberrations and will be long enough to allow a representative average to be calculated.
[169] Excise Act 1901 subsection 59A(8)
[170] Excise Act 1901 subsection 61C(5)
[171] Excise Act 1901 section 154
[172] Excise Act 1901 section 77AA
[173] Excise Act 1901 section 60
[174] For tobacco leaf, the amount is calculated by assuming the leaf had been manufactured into an equivalent amount of excisable tobacco product.
[175] ATO Interpretative Decision ATOID 2004/61; but see 'How do I deliver samples?' in chapter 7 - Remissions, refunds, drawbacks and exemptions
[176] ATO Interpretative Decision ATOID 2001/595
[177] ATO Interpretative Decision ATOID 2004/50
[178] Excise Act 1901 section 162C
[179] ATO Interpretative Decision ATOID 2005/226
[180] The settlement period usually specified in a PSP is seven days with lodgment of your excise return required by 4:00 pm on the first working day after the end of your settlement period.
[181] You may be required to lodge a return even if you do not deliver any excisable tobacco products during the period.
[182] ATO Interpretative Decision ATOID 2004/114
[183] ATO Interpretative Decision ATOID 2004/113
[184] Excise Act 1901 section 61
[185] Excise Act 1901 section 61C
[186] Excise Act 1901 paragraph 120(1)(iv)
[187] Excise Act 1901 section 120
[188] Note the legislation uses the term 'delivered for home consumption' (see for example sections 61 and 61C)
[189] See R v. Lyons (1906) 3 CLR 770; Collector of Customs (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279; Carmody v. F C Lovelock Pty Ltd (1970) 123 CLR 1
[190] The term used in Excise Act 1901 section 58 is 'entry for home consumption'.
[191] prefatory notes to the Schedule to the Excise Tariff Act 1921
[192] Excise Act 1901 section 78
[193] Excise Regulations 1925 paragraph 50(1)(a)
[194] Excise Regulations 1925 paragraph 50(1)(b)
[195] Excise Regulations 1925 paragraph 50(1)(ta)
[196] Excise Regulations 1925 paragraph 50(1)(a)
[197] Excise Regulations 1925 paragraph 50(1)(b)
[198] Excise Regulations 1925 paragraph 50(1)(c)
[199] Excise Regulations 1925 paragraph 50(1)(d)
[200] Minister of State does not include State Ministers
[201] Excise Regulations 1925 paragraph 50(1)(db)
[202] Excise Regulations 1925 paragraph 50(1)(h) and regulation 55
[203] Excise Regulations 1925 paragraph 55(1)(b)
[204] Excise Regulations 1925 paragraph 50(1)(tb)
[205] Excise Act 1901 section 79 and Excise Regulations 1925 subregulation 76(2)
[206] Excise Regulations 1925 subregulation 78A(1)
[207] Excise Regulations 1925 subregulation 78A(4)
[208] Excise Regulations 1925 regulation 78B
[209] Excise Act 1901 section 80
[210] Excise Act 1901 section 160A
[211] Excise Act 1901 section 64
[212] Excise Regulations 1925 regulation 50A
[213] Excise Regulations 1925 regulation 186
[214] Excise Regulations 1925 regulation 50A and Schedule 1
[215] Excise Regulations 1925 subregulation 33(1)
[216] Excise Regulations 1925 Schedule 1, item 6
[217] Excise Regulations 1925 regulation 51 and 52
[218] Excise Regulations 1925 regulation 53
[219] Excise Act 1901 section 120(1)(iv)
[220] Excise Act 1901 section 120
[221] The term used in Excise Act 1901 section 58 is 'entry for home consumption'.
[222] For example, a decision not to issue a movement permission under Excise Act 1901 section 61A
[223] Objections are governed by Part IVC of the Taxation Administration Act 1953 (TAA)
[224] These are conducted in the Administrative Appeals Tribunal or the Federal Court.
[225] Excise Act 1901 section 39Q
[226] Excise Act 1901 paragraph 162C(1)(e)
[227] Excise Act 1901 paragraph 162C(1)(ea) and (faaa)
[228] Excise Regulations 1925 regulation 247
[229] Taxation Administration Act 1953 section 14ZU
[230] Excise Act 1901 section 5 and Crimes Act 1914 section 4D
[231] Excise Act 1901 section 127A
[232] Excise Act 1901 section 116
[233] Excise Act 1901 section 151
[234] Excise Act 1901 Part XA
[235] Excise Act 1901 subsection 117(2) and 117B(2)
[236] Excise Act 1901 section 129B
[237] Excise Act 1901 section 6B
SAV/TOBACCO
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