Excise guidelines for duty-free shops

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1 INTRODUCTION

1.1 PURPOSE

This Chapter deals with:

what excise is
an overview of excise legislation relevant to duty-free shops
who administers excise
when you are involved in the excise system, and
what you need to know before you set up a duty-free shop.

It provides a general introduction to excise as it relates to duty-free shops. Further detail on the matters discussed is contained in later chapters.

1.2 WHAT EXCISE IS

The Commonwealth of Australia Constitution Act (the Constitution) provides that only the Commonwealth can impose duties of excise. [1]

In Ha v New South Wales [2] ( Ha ), the High Court explained a duty of excise as follows [3] :

... duties of excise are taxes on the production, manufacture, sale or distribution of goods, whether of foreign or domestic origin. Duties of excise are inland taxes in contradistinction from duties of customs which are taxes on the importation of goods.

Excise imposed by the Excise Tariff Act 1921 is imposed on goods dutiable under the Schedule to that Act and manufactured or produced in Australia of specified goods. It can be seen that this clearly fits the definition of duty of excise as described by the High Court in the Ha case.

1.3 OVERVIEW OF EXCISE LEGISLATION

The principal legislative framework for the excise system is contained in the:

Excise Tariff Act 1921 (Excise Tariff Act)
Excise Act 1901 (Excise Act), and
Excise Regulation 2015 (Excise Regulation).

The Excise Tariff Act imposes excise on certain goods manufactured or produced in Australia [4] and the Excise Act sets out the administration of excise duties. The imposition of excise duties is in a separate Act to their administration because the Constitution provides that laws imposing taxation (such as excise) shall only deal with the imposition of tax.

To change the Excise Tariff Act, an amending act must be passed through parliament. However, there are parliamentary procedures which allow for the changes to the Excise Tariff Act to apply immediately, pending amendment of the Act through parliament. These procedures are known as tariff proposals.

For more information on tariff proposals, see Section 1.3.1 Excise Tariff Act 1921.

1.3.1 EXCISE TARIFF ACT 1921

There are 3 key provisions in the Excise Tariff Act that operate to:

impose excise duty
identify ' excisable goods ' and the applicable duty rates (the Schedule), and
index the duty rate.

Imposition of excise duty

Section 5 of the Excise Tariff Act imposes excise duty on goods that are listed in the Schedule and manufactured or produced in Australia. Excise duty is imposed at the time of manufacture or production of the relevant goods. The Schedule lists the various goods that are subject to excise and the rate of duty applicable. It is sometimes referred to as the excise tariff.

The Schedule of excisable goods and the duty rates

The Schedule is a table that lists the goods 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 3 broad groups:

spirits and alcoholic beverages (other than wine)
cigarettes and other tobacco goods, and
fuel and oils.

Within those 3 broad groups, the Schedule provides 8 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 an extract from the alcohol products section of the table as of 4 August 2025.

Figure 1: Extract of the table in the Schedule
Item Subitem Description of Goods Rate of Duty
2 Other excisable beverages not exceeding 10% by volume of alcohol $105.98* per litre of alcohol
3 Spirits; Other excisable beverages exceeding 10% by volume of alcohol
3.1 Brandy $98.97* per litre of alcohol
3.2 Other excisable beverages exceeding 10% by volume of alcohol $105.98* per litre of alcohol
3.10 Spirits not elsewhere included $105.98* per litre of alcohol

*Rate of duty as at 4 August 2025, for the current rates of duty, refer to Excise duty rates (referred to in this Guide as the Tariff working page or working tariff).

Indexation of the duty rate

The rates of excise duty are set in the Schedule. However, section 6A of the Excise Tariff Act provides that the rates of duty for spirits, alcoholic beverages and fuel may increase every 6 months (generally on 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.

Similarly, section 6AA of the Excise Tariff Act provides that the rates of duty for cigarettes and other tobacco goods may increase every 6 months (generally 1 March and 1 September) by reference to the estimate of the full-time adult average weekly ordinary time earnings for persons in Australia (AWOTE amount). The AWOTE amount is published biannually 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 publish up-to-date duty rates at Excise duty rates for alcohol .

Indexation increases also apply to rates set under a tariff proposal.

Tariff proposals

Tariff proposals [5] are a means of changing the excise tariff so that the change is effective from the time it is proposed rather than after the enactment of an excise tariff amendment Act. Rates may be adjusted up or down or products may be added or removed under a tariff proposal.

Changes to the excise tariff can be notified in the Parliament or, if the Parliament is not sitting, by notice in the Commonwealth 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. [6]

You cannot commence proceedings against us for any action taken to collect the amount set by the tariff proposal during the periods specified in section 114 of the Excise Act unless it is sanctioned by a Supreme Court of a state or territory. [7]

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, any additional amounts will be refunded to you.

1.3.2 EXCISE ACT 1901

All excisable goods are subject to our control

Under section 61 of the Excise Act, all excisable goods are subject to the CEO's control until they are delivered for home consumption or exported to a place outside Australia. Excisable goods subject to the CEO's control are called ' underbond ' goods.

The CEO is the Commissioner of Taxation.

Goods are delivered for home consumption when they are released into the Australian market in an authorised manner, whether through the lodgment and passing of an entry or under a periodic settlement permission.

Manufacture, storage and movement of excisable goods

Before you can manufacture excisable goods, you need a manufacturer licence granted under the Excise Act. [8]

Before you can 'store' excisable goods that you did not manufacture, you need a storage licence granted under the Excise Act. [9]

Before you can remove excisable goods from premises covered by a licence, on which duty has not been paid, you need permission granted under the Excise Act. [10]

There are several types of movement permission that we can issue. These include:

a 'one-off' permission to move goods specified in the permission to another place specified in the permission
an ongoing permission to move goods of a kind specified in the permission to another place specified in the permission (and such a permission remains in place until revoked)
an ongoing permission to move goods of a kind specified in the permission to any other place covered by a licence to manufacture or store goods of that kind
permission to deliver goods for export.

Generally, we will not grant permission to move underbond excisable alcohol products on which duty has not been paid to a place that is not covered by either a manufacturer licence or a storage licence.

Before you can sell excisable goods to ' relevant travellers ', you need a permission granted under the Excise Act. [11]

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.

For more information about movement permissions, refer to Chapter 6 Making duty-free sales: Outwards and Chapter 7 Making duty-free sales: Inwards.

Payment of duty on excisable goods

In general terms, goods purchased at duty-free shops and exported are not liable for excise. However, payment of duty will be required when excisable goods are not taken overseas or are unable to be accounted for (for example, stock shortages).

The Excise Act in conjunction with the Excise Regulation 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 goods.

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

1.3.3 EXCISE REGULATION 2015

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

rules for duty-free shops, and
' remission '.

For more information about rules for duty-free shops, refer to Chapter 6 Making duty-free sales: Outwards and Chapter 7 Making duty-free sales: Inwards.

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

1.4 ADMINISTRATION OF EXCISE

The Commissioner of Taxation has the general administration of the Excise Act and the Excise Tariff Act. [12] This means you deal with the Australian Taxation Office (ATO) when you are involved in the underbond movement and storage of Australian manufactured spirits and beer.

As excise is only levied on products manufactured in Australia, imported alcohol and tobacco goods 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 alcohol and tobacco goods. The Australian Border Force (ABF) within the Department of Home Affairs is responsible for administration of the Customs Act and Customs Tariff Act.

You must have a ' warehouse licence ', under the Customs Act, before you will be granted a storage licence, with permission to sell duty free, under the Excise Act.

Although cigarettes and other tobacco goods are listed in the Schedule to the Excise Tariff Act, there are currently no licenced manufacturers of tobacco in Australia. All legitimate tobacco goods are imported, subject to Customs duty and administered by the Department of Home Affairs.

Table 1: Who you need to deal with
Type of product ABF ATO
Australian manufactured alcohol products No Yes
Imported alcohol and tobacco goods Yes No

1.5 INVOLVEMENT IN THE EXCISE SYSTEM

You are involved in the excise system if you:

operate a duty-free shop
own, move or store excisable goods on which duty has not been paid, or
manufacture excisable goods.

1.6 KNOWLEDGE REQUIRED BEFORE SETTING UP A DUTY-FREE SHOP

1.6.1 WHAT A DUTY-FREE SHOP IS

A duty-free shop is premises covered by a storage licence that authorises the licence holder to store goods on which duty has not been paid and has a permission to sell those goods to relevant travellers.

Understanding who is a relevant traveller is fundamental to the operation of a duty-free shop.

A relevant traveller is 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 [13] , or
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, by an officer of Customs, in respect of goods carried on that flight. [14]

There are 2 types of duty-free shops:

outwards (off-airport and on-airport), and
inwards (on-airport).

About outwards off-airport duty-free shops

Outwards off-airport duty-free shops sell to relevant travellers who are departing from Australia. They can be located away from the airport or at the airport, but before the Customs processing point.

Duty-free goods can only be sold to relevant travellers. Goods will be placed in a sealed bag [15] and a copy of the sales invoice is placed on the outside of the bag. [16] Relevant travellers must present any sealed bags for inspection, and removal of the outside invoice, by the ' proprietor ' of the duty-free shop, or a servant or agent of the proprietor, either:

when surrendering them, to airline or shipping staff, for carriage other than in the cabin of an aircraft or ship, or
in the departure area. [17]

Duty-free operators must ensure that invoices are retrieved from the outside of the sealed bags. [18] This is done by Duty Free Security Co. Ltd (Duty Free Security), who are collection agents (docket pluckers) authorised by the duty-free shop.

For more information about the requirements for outward duty-free sales, refer to Chapter 6 Making duty-free sales: outwards.

Changes to airport security arrangements on 31 March 2007 imposed restrictions on passengers carrying any liquid, aerosol, gel, cream or paste (LAG) products on board aircraft as hand luggage.

For information about how we administer the export of LAG duty-free products, as a result of these security changes, refer to 'Exporting duty-free liquid, aerosol, gel, cream or paste products' in Chapter 6 Making duty-free sales: Outwards.

When an invoice is not retrieved, there is no proof that the goods have left Australia and the duty-free shop is liable to pay us an amount equal to the rate of excise duty that was payable on the goods when they were delivered to the relevant traveller. [19]

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

About outwards on-airport duty-free shops

Outwards on-airport duty-free shops are located after the customs barrier in the departure lounges at international airports. Goods sold in these shops are not required to be placed in sealed bags.

About inwards duty-free shops

Inwards duty-free shops are located at international airports between the disembarkation point and Customs and Immigration processing.

After the goods are sold to arriving passengers, they are presented at the inwards Customs processing point.

There are limits on the quantities of dutiable goods that can be sold. These are linked to Customs Act limits for arriving passengers.

For more information about these limits, contact the ABF or see abf.gov.au

1.6.2 WHAT IS NEEDED BEFORE SETTING UP A DUTY-FREE SHOP

You need:

a customs warehouse licence [20]
an excise storage licence [21] , and
a permission to sell duty free. [22]

You may also need permission to move goods underbond if your suppliers don't have one.

You will also need permission to sell duty-free goods from ABF if you wish to sell imported goods duty free to relevant travellers.

Customs warehouse licence

You need a customs warehouse licence issued by ABF, before you can be granted a permission to sell excisable goods to relevant travellers. [23]

A proprietor of a duty-free shop is the holder of a Customs warehouse licence. [24] Proprietor has the same meaning in the Excise Act as it has in the Customs Act. [25]

For more information about customs warehouse licences, contact the ABF or see abf.gov.au

Excise storage licence

You also require a licence to store excisable goods. This licence is issued by us.

For information about how to obtain an excise storage licence, see Chapter 2 Licensing: Applications.

Licence conditions

Excise storage licences that cover duty-free shops include conditions. [26] These can include limits on the amount of excisable products each shop can receive over a calendar year. The quantity you can receive will be determined according to the bona fide business requirements of your duty-free shop.

As part of the application process, we may ask you to nominate and justify, via a business plan, the quantity of excisable products (on which duty has not been paid) you require over the annual period.

Permission to sell duty free

Before you can sell excisable goods on which duty has not been paid, you need a permission to sell duty free. We will also issue you with this permission. [27]

Underbond movement permission

Excisable goods, on which duty has not been paid, cannot be moved unless there is a movement permission. This permission can be held by you or your supplier.

For information on movement permissions, refer to Chapter 5 Movement permissions.

1.7 MORE INFORMATION

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

ATO Online Services
phone 1300 137 290 , or
write to us at
Australian Taxation Office
PO Box 3514
ALBURY NSW 2640

We will ordinarily respond to 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.

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

1.8 TERMS USED

Excisable goods

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

For operators of duty-free , this will include:

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

other imported alcohol goods (because these goods are subject to customs duty)
wine (which is generally subject to wine equalisation tax), and
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:

beer
spirits, and
pre-mixed drinks known as ready-to-drink beverages.

International flight

An international flight is defined as:

a flight, whether direct or indirect, by an aircraft between 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, [28] or
a flight, whether direct or indirect, by an aircraft between a place outside Australia from which the aircraft took off and a place in Australia at which the aircraft landed. [29]

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'. [30]

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 [31] or inwards duty-free shop. [32]

Relevant traveller

A relevant traveller is:

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 [33]
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. [34]

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.

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.

Warehouse licence

'Warehouse licence [35] ' has the same meaning as it has in the Customs Act 1901 which states, '"Warehouse" means a place that a person or partnership is licensed under section 79 to use for warehousing goods'. [36]


Amendment history

1 October 2025
Part Comment
Throughout Content checked for technical accuracy and currency.

Updated in line with current ATO style and accessibility requirements.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

References

Excise guidelines for duty-free shops
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