In general terms, duty free shops will not pay duty. However, excise duty will be payable when excisable goods are not taken overseas or are unable to be accounted for e.g. stock shortages.

This chapter explains when and how to pay excise duty.

8.3 POLICY AND PRACTICE

8.3.1 DO I HAVE TO ACCOUNT FOR EXCISABLE GOODS?

Where you have or had possession, custody or control of any excisable goods [171] (subject to our control), you have to be able to satisfactorily account for them.

If we ask you to account for excisable goods, and you cannot satisfactorily do so, then you may be required to pay an amount equal to the duty. 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 excisable goods you must be able to show that:

the goods are still at your premises
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).

Excisable goods will not have been accounted for satisfactorily just because they were:

given away for promotional purposes [172]
stolen from licensed premises, [173] or
delivered into the Australian domestic market under the mistaken belief that they were not excisable. [174]

We may also demand payment from you if you have failed to keep excisable goods safely (for example, if you have a break-in and a theft occurs, you will be required to pay an amount equal to the excise duty that would have applied to the excisable goods that have been stolen).

Our decision to demand payment is a reviewable decision. [175]

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

In determining whether you have accounted for the excisable goods, we may allow you to offset any stock shortages and surpluses.

Example 8A

A duty free shop 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 duty free shop 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 duty free shop 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 8B

A duty free shop is asked to account for their excisable alcohol products. They carry out a stocktake and there is a surplus of 25 bottles of Brand A Australian rum at 38% by volume of alcohol, and a shortage of 10 bottles of Brand B Australian whisky at 38% by volume of alcohol.

We will allow the duty free shop to offset the surplus and shortage. Therefore, there are no bottles that have not been accounted for but there is a surplus of 15 bottles.

The licence holder corrects book stock to take up the surplus floor stock of 25 bottles of rum and write off the shortage of 10 bottles of whisky.

If you have a storage licence, with permission to sell duty free, and stock excisable alcoholic goods and tobacco products, you may only offset tobacco against tobacco and alcohol against alcohol. If you store both imported and excisable goods, you cannot offset one against the other.

8.3.2 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:

check whether your goods are excisable goods according to the Schedule to the Excise Tariff Act [176] and identify the correct duty rate
work out the quantity of excisable goods subject to duty, in each tariff subitem,
multiply the quantity of excisable goods by the rate of duty on the excisable goods, and
add up the total for each subitem to work out total duty to be paid.

(i) Classifying excisable goods

The Schedule to the Excise Tariff Act (Schedule) lists those goods that, if manufactured in Australia, are subject to excise. The Schedule also contains the rate of duty applicable to the goods. For excisable alcohol and tobacco products, an extract of the Schedule is as follows:

Tariff Item	Subitem	Description of Goods	Rate
3		Spirits; Other excisable beverages exceeding 10% by volume of alcohol
	3.1	Brandy	$74.50* per litre of alcohol
	3.2	Other excisable beverages exceeding 10% by volume of alcohol	$79.77* per litre of alcohol
5		Tobacco, cigars, cigarettes and snuff
	5.1	In stick form not exceeding in weight 0.8 grams per stick actual tobacco content	$0.47008* per stick
	5.5	Other	$587.62* per kilogram of tobacco content

* Rate of duty as at 3 March 2015. For the current rates of duty, refer to the Schedule under Excise Tariff Working Pages on our website at www.ato.gov.au

(ii) Working out quantities of excisable goods

Duty for excisable alcohol products is levied on the quantity of alcohol in the goods and not on the quantity of the goods themselves.

Alcohol quantity is measured in litres of alcohol, or Lals.

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.

Precision requirements for calculations and reporting

When calculating quantities of excisable alcohol products, the acceptable level of precision for working out volumes or litres of alcohol (Lals) is two decimal places.

When completing your excise return , the dutiable quantity in Lals for goods classified to a particular tariff item or subitem in the Schedule to the Excise Tariff Act may be truncated to one decimal place. Truncation to one decimal place means that anything after the first decimal place is disregarded.

Example 8C

The dutiable total for excisable alcohol products to be duty paid by My Duty Free Shop in March 2015 under subitem 3.1 in the Schedule to the Excise Tariff Act is 74.50 Lals and for excisable alcohol products to be duty paid under subitem 3.2 in the Schedule to the Excise Tariff Act is 79.77 Lals.

On the excise return, My Duty Free Shop reports the dutiable totals as:

Subitem 3.1 74.50 Lals

Subitem 3.2 79.77 Lals

Duty is worked out on the basis of the truncated totals.

When calculating the quantity of tobacco content in kilograms you should calculate to two decimal places.

(iii) Calculating duty payable on excisable goods

The rate of duty is set in the table in the Schedule to the Excise Tariff Act. The rates of duty on excisable alcohol and 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). [177] For ease of reference we provide a 'working tariff', incorporating indexation changes, on our website at www.ato.gov.au

The rate of duty you use is the rate contained in the working tariff for the subitem.

Example 8D

On 3 March 2015 My Duty Free Shop discovers a shortage of underbond brandy.

The brandy is classified to subitem 3.1 in the Schedule to the Excise Tariff Act.

The rate of duty that applies is the rate in force on 3 March 2015 - $74.50 per litre of alcohol.

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

Example 8E

Continuing on from Example 8D, My Duty Free Shop also discovers on 30 April 2015 that 10 bottles of brandy, each 700 ml and with a strength of 37%, are missing.

The brandy is classified to subitem 3.1 in the Schedule to the Excise Tariff Act and has a duty rate of $74.50 per litre of alcohol.

Therefore, the duty payable is 10 x 0.7 x 37% = 2.5 lals x $74.50 = $186.25

(iv) Calculating total duty payable

Duty payments are notified to us by including details on your excise return. Excisable goods classified to different items or subitems in the Schedule to the Excise Tariff Act must be shown separately on your excise return on what are referred to as lines.

Example 8F

My Duty Free Shop needs to report deliveries for the period ended 10 August 2008.

On their excise return, My Duty Free Shop reports their deliveries and duty liability as:

Line	Tariff item	Quantity	Units	Duty rate	Excise amount
1	3.1	56.7	Lals	$74.50	$4,224.15
2	3.2	84.6	Lals	$79.77	$6,748.54
TOTAL					$10,972.69

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

If you dispute: [178]

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.

The deposit of this duty is to be made on an excise return. The excise return should be accompanied by a letter which sets out the details of the dispute.

These disputes do not apply to changes brought about by a tariff proposal.

The deposit you made will be the proper duty unless you commence court 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% p.a.

Delivery of the goods and payment of interest 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.

8.4 PROCEDURES

8.4.1 DESTRUCTION OF DETERIORATED STOCK

If excisable goods under your control need to be destroyed for any reason (e.g. old stock or gone mouldy) there are special procedures that must be followed.

For more information see Chapter 9 : Remissions and exemptions .

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

More information on how to lodge your excise return (NAT 4285) is within this link.

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).

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, for further information, 1800 815 886 and supply us with your Australian Business Number (or Excise Identification Number) and client account number.

To obtain an excise return (NAT 4285):

visit our website at www.ato.gov.au , or
phone 1300 137 290.

For more information about completing your excise return refer to the Excise return instructions (NAT 15436).

8.4.3 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, your individual details) you must lodge a new excise return form as the amending excise return form does not cater for changes to this section. 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):

visit our website at www.ato.gov.au , or
phone 1300 137 290.

For more information about completing your Amending excise return refer to the: Amending excise return instructions (NAT 15772).

8.4.4 WHAT DO I DO IF I NEED MORE INFORMATION?

If you need more information on accounting for excisable goods contact us.

8.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO ACCOUNTING FOR EXCISABLE GOODS?

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 goods 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 goods [179]

Note: This includes moving underbond excisable goods from your premises to any other location or for export.

Deliver

If you deliver excisable goods 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 goods [180]

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.

Evade

If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units. [181]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units. [182]

8.6 TERMS USED

Deliver into the Australian domestic market [183]

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

Normally this will be by delivering the goods away from 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. [184]

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

Excisable goods

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

Excisable goods include:

tobacco
cigarettes
beer, and
spirits.

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 [185] is the document that you use to advise us the volume of excisable goods that have been delivered into the Australian domestic market.

Penalty units

A penalty unit is specified in section 4AA of the Crimes Act 1914. The current value of a penalty unit is on www.ato.gov.au at Penalties

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 9 - Remissions and exemptions.

Section 50 direction

This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, 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.

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.