Excise guidelines for duty-free shops

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6 MAKING DUTY-FREE SALES: OUTWARDS

6.1 PURPOSE

This Chapter deals with:

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making outwards duty-free sales

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conditions travellers must be made aware of

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what happens when goods are not exported

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exporting duty-free LAG products, and

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penalties that can apply to offences in relation to duty-free shops.

6.2 INTRODUCTION

In general terms, outwards 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 (for example, stock shortages).

This Chapter focuses on the rules that you need to follow when making duty-free sales from an outwards duty-free shop.

6.3 POLICY AND PRACTICE

6.3.1 OUTWARDS DUTY-FREE SHOPS – OFF-AIRPORT

Off-airport outward duty-free shops are usually located away from the airport. However, they could also be physically located at an airport, before the customs processing point.

You are not permitted to sell or deliver duty-free goods unless the purchaser is a ' relevant traveller ' able to show you a ticket or other approved document showing an ' international flight ' or ' international voyage '. ^[136]

You must follow specific procedures in the invoicing, packaging and sealing of goods. Sales made from outwards off-airport duty-free shops must use the sealed bag method of delivery.

The number or other identification of the traveller's ticket, or similar approved travel documentation, must be recorded on the sales invoice.

You must not deliver the goods to the traveller earlier than 60 days before the traveller is due to depart. ^[137]

Sales to 'relevant travellers'

Sealing goods

You must enclose goods purchased by a relevant traveller in a package ^[138] :

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sealed, so that the goods cannot be removed without the seal being broken

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with a copy of the sales invoice, and

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if that package is of a size that will be carried as hand baggage in the cabin of the aircraft or ship, transparent enough for the goods to be easily identifiable.

Invoice preparation

When you deliver goods from your shop for export by a relevant traveller you must prepare, in triplicate, an invoice, being one of a series of sequentially numbered invoices, specifying ^[139] :

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the name and usual residential address of the relevant traveller

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the following particulars of the intended relevant flight or voyage

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date of departure

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airport or wharf of departure

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in the case of a relevant flight – flight number or other designation of the flight

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in the case of a relevant voyage – name of the ship and the number or other destination of the voyage

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number or other identification of the traveller's ticket or similar approved travel document

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a precise description of the goods, including

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quantity, in figures, of each item of the goods

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the total number, in words, of items on the invoice

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the sale value, in figures, of each item or quantity of items, and

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the total sales value of those items and quantities of items.

You must prepare the invoices in a way that would make it impracticable to add other items to the description. For hand-prepared invoices, a line should be drawn from the last item to the far right of the page and then diagonally to the bottom left-hand corner and then across the page to the bottom right-hand column.

Distribution of invoices

In relation to distribution of invoices, you must ^[140] :

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place one copy of the sales invoice inside the tamper-proof sealed package with the goods

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securely attach a second copy of the sales invoice to the outside of the package in a waterproof envelope, and

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retain a third copy for your records.

Procedures to be followed at the airport

Goods carried in the cabin

When a relevant traveller takes packages in the cabin of the aircraft or ship (that is, taken by hand into the departure lounge on the way to the cabin of the aircraft or ship), you or your agent must ensure the traveller presents the sealed bag to Duty Free Security staff or an authorised agent near the Outwards Control Point who will ^[141] :

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ensure that the package is examined to ascertain whether the seal has been broken or tampered with, and

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if the package has not been tampered with, compare the invoice details to the physical goods and ensure that the attached invoice copy is removed.

This process is commonly referred to as 'plucking' the invoice or sales docket.

Goods checked in as hold baggage

When a relevant traveller does not take packages in the cabin of the aircraft or ship, (that is, they are checked in as hold baggage) you or your agent must, at the point of surrender of the goods ^[142] :

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ensure that the seal has not been broken or tampered with, and

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remove the docket from the outside of the sealed bag and present it to Duty Free Security staff or an authorised agent near the Outwards Control Point.

6.3.2 EXPORTING DUTY-FREE LIQUID, AEROSOL, GEL, CREAM OR PASTE PRODUCTS

The Department of Infrastructure, Transport, Regional Development, Communications, Sport and the Arts provides restrictions on the volume of LAG products that an international passenger can take on board a flight in carry-on luggage.

This means that any LAG products over 100 ml must be packed in baggage that is checked in and therefore transported in the hold of the plane. Failure to comply with these arrangements will result in the traveller having to surrender the items at the security screening point. Effectively, this affects all alcohol purchased by relevant travellers from duty-free stores.

This change in airport security impacts on outwards off-airport duty-free stores as the outwards on-airport and inwards duty-free stores operate either after the Customs barrier (outwards on-airport), or before it (inwards duty-free), in which case the security risk is not an issue.

Any LAG products sold to a relevant traveller by an outwards off-airport duty-free store must be sealed in a separate bag to other duty-free purchases. You must complete a sales invoice in the same manner as all other sales, although if the relevant traveller has other non–LAG duty-free purchases (that is, cigarettes), a separate docket must be completed for both bags.

The traveller must place the sealed bag containing LAG products into their luggage that is to be checked into the hold of the plane. They should remove the docket attached to the exterior of the sealed bag and, once inside the airport and past the Customs checkpoint, they must present it to Duty Free Security staff or an authorised agent.

Retrieved invoices or dockets

At monthly intervals, Duty Free Security will send to you a list of all dockets retrieved. You must then compare this list with your sales records and pay excise duty for those dockets which are not listed as retrieved.

This is done by completing a Duty-free operator return and sending it to us.

A ' duty-free operator return ' must be lodged 'within 21 working days of the shop after the end of a month'. ^[143] A return is required even if no stock shortages or missed dockets are identified. ^[144]

Missed dockets for LAG products should be treated in the same manner as missed dockets for other non–LAG products.

For more details, refer to Missed dockets later in this section.

Discrepancies at the airport

Certain details must be provided to us if a discrepancy is detected at the airport, such as ^[145] :

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a package is not sealed or has been tampered with

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the invoice enclosed in the bag does not correspond with the attached outside invoice

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there is no enclosed invoice or attached outside invoice

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the package contains goods that are not as specified in the enclosed or attached invoice, or

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the package does not contain the goods that are specified on the attached invoice.

These details are:

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the name of the relevant traveller

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particulars of the intended exportation of the goods by the relevant traveller on the relevant flight or voyage, such as

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date and time of departure

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relevant flight number and destination of the flight

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relevant voyage, name of the ship and number or destination of the voyage

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the nature of the discrepancy.

You should include shortages detected in this way on your next duty-free operator return and pay the appropriate excise duty.

Internet and phone sales

You or your staff (including the ' proprietor ' and the proprietor's servants and agents) can agree to sell duty-free goods through the internet or over the phone as long as ^[146] :

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the purchaser is a relevant traveller

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details of their intended travel have been given, and

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the agreement is subject to the condition that the sale takes place in the shop (that is, the relevant traveller must pick the goods up from the shop).

Prior to the delivery of goods, you must sight the ticket for the relevant flight, which must match with the details provided at the time the agreement was entered into. ^[147]

Conditions travellers must be made aware of

You must ensure that relevant travellers are made aware of any conditions of a permission with which the traveller is required to comply. ^[148]

Travellers must, when they take possession of the goods, sign an approved form acknowledging their obligations concerning the export of the goods. ^[149]

Obligations of the relevant traveller are as follows:

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They shall not remove, alter or otherwise interfere with an invoice attached outside the sealed package (except LAG products as required or authorised under the Excise Act). ^[150]

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They shall not break the seals or otherwise tamper with the integrity of the package. ^[151]

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When taking a sealed package into a departure area or checking in a sealed package as baggage, they shall present the package sealed and with the outside invoice attached, and permit examination of the package and removal of the invoice by the duty-free shop proprietor's agent. ^[152]

Sales to diplomats, consuls or the Royal Australian Navy

In some circumstances, we may grant you permission to make sales to persons or organisations who are not relevant travellers. This includes sales to diplomatic missions, consular posts and the Royal Australian Navy.

If you make sales to the Navy, diplomatic missions or consular posts you may be entitled to a ' remission ' of the excise duty. ^[153] You should retain relevant documentary orders as proof of this entitlement.

For more information, refer to Chapter 9 Remissions and exemptions.

Record keeping and reporting

Records that need to be kept

You must keep, and make available to us when requested, records as directed. ^[154]

These will typically include proof of export of goods that have been delivered to a relevant traveller. This may be the electronic record of invoice numbers of dockets removed and provided to you by Duty Free Security. ^[155]

You may also be required to notify us of all sales made to which your permission applies. ^[156]

Further records to keep may include:

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copy of the sales invoice

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copy of the travel documents attached to the sales invoice

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stock records for excisable products

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' underbond ' delivery notes for goods received from suppliers

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underbond delivery notes for goods removed

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copies of approved single movement permissions for movement in and out of premises covered by your licence

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copies of approved remissions

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orders for goods delivered as excise free goods in prescribed circumstances such as diplomatic and consular sales

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documentation relating to your physical stocktakes.

Reports that need to be prepared

Prior to departure

If we direct you to, you must provide the following sales information prior to the date of departure of the flight or voyage ^[157] :

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name of shop

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name of relevant traveller

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details in relation to relevant flight or voyage, as follows

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date and time of departure, and

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flight number or name of ship and voyage number

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full description of any item included in the sale with a sale value of $500 or more

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total number of items of the goods included in the sale

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total number of specially sealed packages in which the goods included in the sale are packed

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total number of the specially sealed packages

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that are able to be carried in the cabin of the aircraft or ship

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that are not able to be carried in the cabin of the aircraft or ship, and

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invoice numbers in respect of all invoices relating to the sale.

Proof of export

You must provide proof of export in the following manner:

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an electronic record must be made of the invoice numbers of all retrieved (plucked) invoices or sales dockets, and

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the electronic records must be created within 10 working days after the date of departure of the relevant traveller. ^[158]

Missed dockets

In relation to missed dockets, you must lodge a return within 21 working days after the end of the month stating ^[159] :

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the name of the duty-free shop

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the invoice number of each invoice

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which has been prepared as set out in Invoice preparation in this section

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with a date of the proposed departure that is in that month, and

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for which a copy has not been removed as set out in Procedures to be followed at the airport

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full invoice details as set out in Invoice preparation , and

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the amount of excise duty payable in respect of the goods to which the invoice relates.

This is done by completing a Duty-free operator return and sending it to us.

You must pay to us the sum of the amounts of excise duty payable, at the rate in force when the goods were delivered to the relevant traveller. ^[160]

A 'nil' return is still required even if no stock shortages or missed dockets are identified.

For more information, refer to Duty-free operator return and Excise duty rates for alcohol .

6.3.3 OUTWARDS DUTY-FREE SHOPS – ON-AIRPORT

On-airport outward duty-free shops are located after the Customs processing point.

Sale or delivery of duty-free goods is only permitted to a relevant traveller ^[161] who is able to show a ticket or other approved documentation, that shows an international flight or voyage. ^[162] There is no requirement for the duty-free goods sold at on-airport duty-free shops to be in sealed bags.

You must follow specific procedures in the invoicing of goods.

Sales to relevant travellers

Invoice preparation

When you make a sale to a relevant traveller you must prepare, in duplicate, an invoice, being one of a series of sequentially numbered invoices, specifying ^[163] :

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date of departure of the intended relevant flight or voyage

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flight number or other designation of the relevant flight

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a precise description of the goods, including

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quantity, in figures, of each item of the goods

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the sale value, in figures, of each item or quantity of items, and

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the total sales value of those items and quantities of items.

Aircraft crew (or the pilots) are also eligible to purchase goods from you when they comply with the definition of relevant traveller. For these travellers, in addition to the above, you must also record on the sales invoice ^[164] :

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the name and usual residential address of the relevant traveller, and

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the airport of departure.

You must prepare the invoices in a way that would make it impracticable to add other items to the description. ^[165]

Distribution of invoices

You must ^[166] :

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give one copy of the invoice to the relevant traveller, and

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retain one copy of the invoice for your records.

Internet and phone sales

You or your staff (including the proprietor and the proprietor's servants and agents) can agree to sell duty-free goods through the internet or over the phone as long as ^[167] :

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the purchaser is a relevant traveller

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details of their intended travel have been given, and

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the agreement is subject to the condition that the sale takes place in the shop, that is, the traveller picks the goods up in the shop.

Prior to handing the goods to the traveller, you must sight the ticket for the relevant flight, which must match with the details provided at the time the agreement was entered into. ^[168]

Record keeping and reporting

Records that need to be kept

You must keep, and make available to us when requested, records as directed. ^[169]

You may also be required to notify us of all sales made, to which your permission applies. ^[170]

These records may include:

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sales of excisable product

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stock records for excisable products

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underbond delivery notes for goods received from suppliers

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underbond delivery notes for goods removed

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copies of approved single movement permissions for movement in and out of premises covered by your licence

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copies of approved remissions, and

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documentation relating to your physical stocktakes.

Reports that need to be prepared

You are not required to provide any particular reports, however you may be directed to supply specific returns. If this is the case, you will receive a specific direction to do so.

6.3.4 WHEN THE TRAVELLER DOES NOT EXPORT GOODS

Responsibilities and duties of the traveller

If a traveller does not export the goods on the relevant flight or voyage, they must, by noon of the next working day after the scheduled departure time ^[171] :

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if they intend to export the goods on a subsequent flight or voyage, departing not more than 48 hours after the initial scheduled time, notify you of that intention, along with the flight or voyage numbers and date and intended time of departure

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if they no longer intend to travel, notify you no later than the close of business on the second working day after the initial scheduled departure time, and return the goods to your shop.

If, a traveller notifies you that they intends departing on a flight or voyage, but does not export the goods, they must ^[172] :

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notify you that the goods have not been exported, not later than noon on the next working day of the shop after the specified date of departure, and

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return the goods to your shop no later than the close of business of the second working day after the specified date of departure.

Your responsibilities and duties

Your responsibilities and duties include:

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taking returned goods back into stock (to be able to account for the sales invoice) ^[173] , or

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advising us of goods that were not exported via the Duty-free operator return that you are obliged to submit monthly ^[174] , and

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paying us the sum of the amounts of excise duty, specified in the return. ^[175]

For more information about how to calculate and pay excise duty, refer to Chapter 8 Accounting for excisable goods

6.3.5 PREVENTION OF COLLUSION

You or your staff must not collude with passengers to obtain duty-free goods. You must not enter into an arrangement with a traveller where goods delivered to the traveller under the permission are to ^[176] :

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be transferred to you upon return of the relevant traveller to Australia, or

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remain with you.

Any such collusion may result in the revocation of your permission or a court-imposed penalty, or both.

6.4 MORE INFORMATION

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

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ATO Online services

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phone 1300 137 290 , or

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write to us at

Australian Taxation Office

PO Box 3514

ALBURY NSW 2640

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

6.5 PENALTIES THAT CAN APPLY IN RELATION TO DUTY-FREE SHOPS

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 2 years in prison or the greater of 500 ' penalty units ' and 5 times the amount of duty on the excisable goods. ^[177]

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

If your movement of underbond excisable goods does not comply with the permission to move the underbond excisable products, the penalty is a maximum of 2 years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods. ^[178]

Deliver

If you ' deliver excisable goods into the Australian domestic market ' contrary to your permission, the penalty is a maximum of 2 years in prison or the greater of 500 penalty units and 5 times the amount of duty on the excisable goods. ^[179]

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 penalty units. ^[180]

False or misleading statements

If you make a false or misleading statement, or make 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. ^[181]

6.6 TERMS USED

Deliver into the Australian domestic market

Deliver into the Australian domestic market ^[182] is the term we use in this Guide for when excisable goods are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

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

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However, there are several cases where issues closely related to it are considered. ^[183]

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

Duty-free operator return

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

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

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

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

Excisable goods

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

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

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

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

This will not include:

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

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

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

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

Examples of excisable goods include Australian-made:

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beer

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spirits, and

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

Excise control

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

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market (referred also as to home consumption ^[184] ) or for export.

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

International flight

An international flight is defined as a flight, whether direct or indirect, by an aircraft between ^[185] :

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a place in Australia from which the aircraft takes off and a place outside Australia at which the aircraft lands or is intended to land ^[186] , or

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a place outside Australia from which the aircraft took off and a place in Australia at which the aircraft landed.

International voyage

An international voyage is defined as 'a voyage, whether direct or indirect, by a ship between a place in Australia and a place outside Australia'. ^[187]

Penalty units

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

Proprietor

In relation to a duty-free shop, a proprietor is the holder of the warehouse licence that relates to the outwards duty-free shop ^[188] or inwards duty-free shop. ^[189]

Relevant traveller

A relevant traveller is:

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for outwards duty-free shop purposes – a person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew (or the pilot or master) of an aircraft or ship ^[190]

•

for inwards duty-free shop purposes – a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew (or the pilot) of, an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight. ^[191]

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, refer to 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 premises covered by a storage licence, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us. The written instruction is incorporated into the licence conditions.

Underbond

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

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Amendment history

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References