Excise guidelines for the tobacco industry
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
6 PAYMENT OF DUTY
6.1 PURPOSE
This Chapter deals with:
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- when duty is payable
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- when duty is payable under your licence
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- when duty is not payable
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- how to work out the amount of duty you're liable to pay, including tariff proposals and quotas
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- what to do if you have a dispute as to the duty
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- whether you have to account for tobacco leaf and ' excisable tobacco goods '
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- how to get a 7-day recurring tobacco excise period
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- what your licence will include
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- how to lodge ' excise returns ' and pay excise duty
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- what to do if you have made an error on your excise return, and
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- penalties that can apply to offences in relation to payment of duty.
6.2 INTRODUCTION
Excise duty is imposed at the time excisable tobacco goods are manufactured. [178] However, the duty is not required to be physically 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 goods are deemed ' entered and delivered for home consumption ' (Australian domestic market) when they are manufactured. [179]
The liability for duty, imposed at the time of manufacture, can be acquitted by:
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- payment of the duty
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- ' remission ', or
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- use in the manufacture of other excisable goods.
6.3 POLICY AND PRACTICE
The liability for duty becomes payable when the excisable tobacco goods are entered and delivered into home consumption. As excisable tobacco goods are taken to be entered and delivered into home consumption at the time the goods are manufactured, the liability to pay duty arises at the point in time tobacco leaf is manufactured into an excisable tobacco good.
6.3.2 WHEN DUTY IS PAYABLE UNDER LICENCE CONDITIONS
Under a tobacco manufacturer licence, the duty is paid weekly on all tobacco goods manufactured during that week.
A licence allows you to manufacture, enter and deliver specified goods for home consumption, subject to various conditions. In particular, you must report all the goods you have manufactured that week and pay the duty on a recurring 7-day basis.
When applying for your licence, it may cover any recurring 7-day reporting period (tobacco excise period). You may specify in your application the 7-day period you wish to use, for example, Wednesday to Tuesday. The application must be made on the approved form.
A manufacturer licence and tobacco excise period is given in writing and includes:
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- your name as the holder of the licence
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- the kind of goods to which the licence applies
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- the place from which the goods may be manufactured
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- the start date of the licence and tobacco excise period, and
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- any special requirements during the tobacco excise period.
In considering your application for a licence, we will take into account various factors including compliance with all laws administered by us and the protection of the revenue. This includes whether you have complied with the requirements of any previous licences and permissions you have been given. If we refuse to give a licence, we will issue you a notice in writing setting out the reasons for the refusal.
A decision we make in relation to the period of a licence or any condition for a licence is a reviewable decision. [180]
If you have a licence with a 7-day tobacco excise period for excisable tobacco goods you must:
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- lodge an excise return, on the due date specified in your licence. The return details the goods you have manufactured during the tobacco excise period, and
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- pay the duty, on the first business day following the end of the 7-day period, on the goods you have manufactured within the tobacco excise period. [181]
If we determine a different tobacco excise period, we will advise you in writing that your licence will be amended from the day specified in the notice. We will give you the amended licence stating the new 7-day tobacco excise period.
If you advise us in writing that you wish to change the 7-day period of your tobacco excise period, we may, in writing, amend your current licence stating the new preferred period. We will notify you of the day the change comes into effect.
Example 6A
Crown Tobacco Company (CTC) is licensed to manufacture excisable tobacco goods. The 7-day tobacco excise period is specified on their licence. CTC as the licensed manufacturer must pay the excise duty on all tobacco goods produced by them from the time of manufacture.
The tobacco excise period is for the period Monday to Sunday. Therefore, CTC is able to manufacture excisable tobacco goods 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 (that is, Monday, unless it is a public holiday in which case it will be due on Tuesday) CTC must lodge an excise return for any excisable tobacco goods manufactured during the period and pay the excise duty owing on those goods.
We will send CTC written confirmation, after the excise return has been processed.
6.3.3 WHEN DUTY IS NOT PAYABLE
There are circumstances in which no duty will be payable. These include where:
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- cured tobacco leaf is exported
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- a remission circumstance applies, or
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- within the 7-day tobacco excise period any manufactured tobacco goods on which the duty has yet to be paid is used in the manufacture of other excisable tobacco goods.
6.3.4 WORKING OUT THE AMOUNT OF DUTY
To work out how much duty you need to pay, you will need to know the:
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- tariff classification of the excisable tobacco goods
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- quantity of the excisable tobacco goods you manufacture (that is deemed entered and delivered for home consumption), and
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- rate of duty on the excisable tobacco goods.
Classification of excisable tobacco goods
The Schedule 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 excisable tobacco goods the relevant part of the table is as follows:
Figure 2: Extract of the table in the Schedule to the Excise Tariff Act
* For the current rates of duty, refer to Excise duty rates for tobacco
Tobacco, cigars and cigarettes are all classified to item 5 but only cigars and cigarettes are in stick form so, if the individual sticks do not exceed 0.8 grams in weight of tobacco (that is, not including filters or paper), they are classified to subitem 5.1. Products such as cigars and cigarettes with more than 0.8 grams of tobacco, pipe tobacco, ready rubbed tobacco, molasses tobacco and snuff are classified to subitem 5.5.
Where the manufacture of tobacco goods uses ingredients from other tobacco goods on which duty may have been paid (for example, imported tobacco leaf on which customs duty has been paid), the goods are classified to sub-item 5.8 and the amount of duty payable on the 'blended tobacco goods' is worked out under section 6AAC of the Excise Tariff Act.
Although snuff is listed in the Schedule, there is currently a permanent ban on its supply, along with chewing tobacco, under the Trade Practices Act 1974 - Consumer Protection Notice No. 10 of 1991 - Permanent Ban on Goods.
Quantity of excisable tobacco goods
Duty for excisable tobacco goods is levied on the quantity of the products themselves.
Tobacco quantity is measured in sticks (for example, cigarettes) or kilograms of tobacco content which includes anything (including moisture and other additives) added to the tobacco leaf during manufacturing or processing. This includes such things as molasses added to tobacco for use in a hookah pipe. The molasses would be included when determining the quantity of tobacco. [182]
When calculating the quantity of tobacco content in kilograms you should calculate to 2 decimal places.
Rate of duty on excisable tobacco goods
The rate of duty is set in the table in the Schedule. The rates of duty on excisable tobacco goods are subject to change. They are indexed twice a year in March and September [183] in accordance with increases in the average weekly ordinary time earnings figures published bi-annually by the Australian Bureau of Statistics. They can also be subject to other changes resulting from government policy.
The rate of duty you use is the rate contained in the working tariff for the subitem. It will also depend on the 7-day tobacco excise period on your licence. The rate applicable is at the time you manufacture the tobacco goods, as they are deemed to be entered for home consumption, and delivered for home consumption at that time. [184]
Example 6B
When goods are manufactured during the tobacco excise period, the rate of duty that applies is the rate in force at the time the goods are taken to be entered and delivered for home consumption.
On 10 September 2025, a manufacturer produces one million cigarettes under its licence.
The cigarettes are classified to subitem 5.1 of the excise tariff.
The rate of duty that applies is the rate in force on 10 September 2025, that is, $1.49832 per stick, even though the duty will not be paid until the end of the tobacco excise period.
Example 6C
1 million cigarettes are manufactured on 10 September 2025 under an excise manufacturer licence.
The cigarettes are classified to subitem 5.1 of the excise tariff and have a duty rate of $1.49832 per stick.
Therefore, the duty payable is 1 million sticks × $1.49832 = $1,498,320.00.
If you have manufactured cigarettes classified to subitem 5.1 and pouch tobacco classified to subitem 5.5, you need to add more than one line onto the excise return and then calculate the total duty liability for both lines.
If the rate changes during my 7-day tobacco excise period
If the rates of duty change within your tobacco excise period, you may lodge 2 excise returns or, alternatively, include separate lines for the same product on one return, that is:
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- one return or line for goods manufactured under the old rates, and
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- one return or line for goods manufactured under the new rates.
Example 6D
The rate of duty for tobacco in stick form not exceeding 0.8 g per stick actual tobacco content increased on and from 1 September 2025 (a Monday) from $1.40312 to $1.49832 per stick.
Sovereign Tobacco holds an excise manufacturer licence specifying a weekly tobacco excise period commencing Wednesday.
Sovereign Tobacco manufactures one million cigarettes daily at its factory premises that is covered by the licence.
In its excise return for Wednesday 3 September, Sovereign Tobacco uses separate line entries for product manufactured at the old rate and at the new rate:
| Line | Tariff item | Quantity | Units | Duty rate | Excise amount |
| 1 | 5.1 | 5,000,000 | stick | $1.40312 | $7,015,600.00 |
| 2 | 5.1 | 2,000,000 | stick | $1.49832 | $2,996,640.00 |
In addition to average weekly ordinary time earnings increases, as described above, the applicable rate of excise duty can also be affected by:
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- changes to the Excise Tariff Act (including tariff proposals), or
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- quotas.
Changes to the Excise Tariff Act
Where the Government decides to change the rate of excise applying to excisable goods, or to apply excise to new goods or stop applying excise to certain goods, it notifies its intention to do this with a tariff proposal.
Tariff proposals are a means of changing the Excise Tariff.
Changes to the Excise Tariff can be notified in parliament or, if the parliament is not sitting, by notice in the Gazette.
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. [185]
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 until the amending Act receives royal assent, but we will protect the revenue by collecting amounts in line with the proposal.
If an amending Act validating the changes outlined within the tariff proposal is not passed within the prescribed periods, any additional amounts paid will be refunded to you.
The Commissioner has the discretion to declare that a period is a declared period during which quotas can be imposed. During a declared period, the Commissioner has the discretion to make a quota order that specifies the amount of excisable goods that a person may enter for home consumption (or manufacture in the case of tobacco goods) at the prevailing rate of duty. If a person exceeds their quota amount during a declared period, the duty rate applicable to the excess is the rate in force on the day after the end of the declared period. [186] If the excise rate increases, they become liable to pay the increased rate for the goods that are in excess of their quota amount (excess goods).
Where we believe that persons are anticipating an increase in the rate of duty, and as a result the clearances of excisable tobacco goods in a particular period are likely to be greater than usual, we will publish a notice in the Gazette. This notice will state that a particular period is a 'declared period'. [187] Refer to Law Administration Practice Statement PS LA 2012/3 Determining and applying quotas under the Excise Act 1901.
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. [188]
Once we have established your quota, we will give you a written quota order that specifies the maximum level (which can be nil) [189] of excisable tobacco goods that you can enter and deliver into home consumption (manufacture) at the applicable excise rate in force during the declared period.
If, at any time during the declared period, you exceed your quota you are required to pay the duty on the excess goods at the existing rate.
At the end of the declared period we will reconcile your deliveries with your quota. If you manufactured more than your quota, 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.
You may deposit with us the amount of duty demanded if you dispute the [190] :
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- amount of duty
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- rate of duty, or
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- liability of goods to duty (for example, whether the goods are excisable).
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. You have 6 months after making the deposit to commence court action. If that action is decided in your favour, we are obliged to refund you the deposit along with interest of 5% per annum unless we are of the opinion that any evasion under the Excise Act has been committed or attempted. If the action is not commenced within 6 months or the court does not find in your favour the amount deposited is taken to be the correct amount of duty.
However, if you have received a private ruling and subsequently lodge an objection that relates to the amount or rate of duty, or the liability of goods to duty, you cannot commence court action to recover your deposit on grounds that are, or could have been, in your objection. [191]
Generally, duty disputes under section 154 of the Excise Act only applies to goods that are delivered under pre-payment as entitlement to delivery of the goods is dependent on the deposit being paid and a proper entry being made. [192] However, section 154 also applies to all manufactured tobacco goods when the amount of duty demanded is paid within the tobacco excise period as a proper entry is deemed to have occurred at the time of manufacture.
Manufacture of the goods and payment of interest do not apply in cases where we are of the opinion that any evasion under the Excise Act has been committed or attempted.
6.3.6 ACCOUNTING FOR TOBACCO LEAF AND EXCISABLE TOBACCO GOODS
Where you have had or, have been entrusted with possession, custody or control of any tobacco leaf [193] or excisable tobacco goods [194] (subject to our control) you have to be able to satisfactorily account for them when requested.
If we ask you to account for tobacco leaf or excisable tobacco goods, and you cannot satisfactorily do so, we may demand payment of an amount equal to the excise duty which would have been payable. In the case of tobacco leaf, the amount payable is equal to the excise duty if it had been manufactured into excisable goods classified to sub-item 5.5 of the Schedule. [195]
The amount you are required to pay is calculated using the rate in force on the day the demand is made. A payment of duty (or an amount equal to the duty) does not prevent the us from pursuing other liabilities arising under the Excise Act for the same goods. [196]
When requested to account for goods you must be able to show that:
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- for tobacco leaf, the goods are still under ' excise control '
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- duty has been paid
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- duty was not payable (for example, where a remission applied), or
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- the goods have otherwise been dealt with in accordance with the law (for example, tobacco leaf was moved pursuant to the conditions of a movement permission).
Goods will not have been accounted for satisfactorily if they were:
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- given away for promotional purposes [197]
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- stolen from premises covered by a licence [198] , or
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- delivered into the Australian domestic market under the mistaken belief that they were not excisable. [199]
We may also demand payment from you if you have failed to keep excisable tobacco 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 duty that would have applied to the excisable tobacco products that have been stolen). [200]
Our decision to demand payment is a reviewable decision. [201]
In determining whether you have accounted for the excisable tobacco goods, we may allow you to offset any stock shortages and surpluses.
Example 6E
A licensed manufacturer of tobacco goods is asked to account for the excisable tobacco goods that they manufactured. As part of the audit, they carry out a stocktake of what is in the warehouse. There is a surplus of 4,000 sticks of Brand X and a shortage of 10,000 sticks of Brand Y compared to their book stock.
We will allow the manufacturer to offset the surplus and shortage and correct the book stock. 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 6,000 sticks.
6.4 PROCEDURES
6.4.1 OBTAINING A TOBACCO EXCISE PERIOD
If you apply for a manufacturer licence, you can use your application form to indicate when you want your recurring 7-day period (tobacco excise period) for the licence to start and end. You do not need to complete a separate application.
If we approve your licence, we will notify you in writing within 28 days of receiving your completed application.
6.4.2 WHAT IS INCLUDED IN A LICENCE
Your licence in relation to excisable tobacco goods will include:
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- permission to manufacture excisable tobacco goods and deliver the products into home consumption
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- conditions, such as
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- tobacco excise period - the period specified on which goods can be manufactured before an excise return and payment must be lodged [202]
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- the type of goods that may be manufactured
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- quantity limits (if any)
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- when you must pay the duty
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- how you must pay - permitted methods (for example, electronic funds transfer, cheque, at a Post Office)
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- when and how to lodge your excise return [203]
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- record-keeping requirements, and
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- a schedule listing the premises at which you may manufacture tobacco goods or store tobacco leaf.
Example 6F
A licence specifies a tobacco excise period starting on Saturday and ending on Friday. It states that excise returns must be lodged by 4:00 pm on the first business day after the end of the tobacco excise period. It also says that the duty on tobacco goods manufactured during the tobacco excise 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 4:00 pm on Monday for all goods manufactured during the tobacco excise period.
When a public holiday falls on a Monday, the excise return is due for lodgment and duty is to be paid by 4:00 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 manufacture occurs, lodgment is due on the next business day in the state where the return is prepared. [204]
The TAA provides us with the power to allow the payment of a tax-related liability (including excise duty) and lodgment of an approved form (including an excise return) to be deferred in certain circumstances. Law Administration Practice Statement PS LA 2011/14 General debt collection powers and principles and Law Administration Practice Statement PS LA 2011/15 Lodgment obligations, due dates and deferrals provide details of when we can exercise this power, with the main requirement being that the circumstance that led to the request to defer payment or lodgment is outside the control of the entity required to pay the liability and lodge the return.
Circumstances that are accepted as outside the control of a licence holder include natural disaster, serious illness or legal impediment, while an example of a circumstance that would not satisfy the requirements of PS LA 2011/14 or PS LA 2011/15 would be a licence holder closing down their operations for Christmas holidays (other than acknowledged public holidays).
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- Complete and submit your excise return in accordance with the timeframes in the licence.
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- Pay the duty to us in accordance with the timeframes in the licence.
6.4.4 LODGING EXCISE RETURNS AND PAYING EXCISE DUTY
To lodge your excise return:
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- lodge online ATO Online Services , or
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- post it to
Excise Returns Processing Unit
PO Box 3007
PENRITH NSW 2740
You can pay excise duties:
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- by electronic funds transfer, including direct credit and BPAY
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- using a credit card
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- in person at a Post Office, or
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- by mail (cheque or money order).
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 day and time stated on your licence. This means that we must receive the funds by that time.
Failure to pay on time will result in a liability to pay the general interest charge on the amount of excise duty unpaid [205] and may result in the cancellation of your licence.
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- see Excise return , or
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- phone 1300 137 290 .
6.4.5 MAKING AN ERROR ON AN 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 and any general interest charge 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 such as tariff item, volume or rate of duty.
If you wish to change other information in your original excise return (for example, client details or the tobacco excise 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.
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- see Excise amendment , or
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- phone 1300 137 290 .
If you need more information on payment of duty, 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 electronic requests within 28 business days and finalise private rulings within 28 days. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.
6.5 PENALTIES THAT CAN APPLY IN RELATION TO PAYMENT OF DUTY
The following are the penalties that may apply after conviction for an offence. In some cases these penalties can be in addition to the duty that is payable on the excisable tobacco goods as they have been delivered into home consumption. [206]
If you move, alter or interfere with excisable tobacco 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 tobacco goods. [207]
If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable tobacco goods, or where a court cannot determine the amount of that duty the penalty is a maximum of 500 penalty units. [208]
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. [209]
6.6 TERMS USED
Deliver into home consumption [210] is the term used in this Guide and certain parts of the Excise Act to describe when excisable tobacco goods are released into the Australian domestic market for consumption. The term used in the legislation is 'deliver for home consumption' or 'deliver into home consumption'.
Normally, this will be by delivering the goods away from premises covered by your licence but includes consuming or using those goods yourself, or selling goods to your staff at that premises.
The term 'home consumption' is not defined in the Excise Act. However, there are several cases [211] where issues closely related to it are considered, with the most appropriate one being Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation [2008] FCA 1951. In this case, held in the Victorian Federal Court, one of the questions Sunberg J dealt with was 'whether the residual oils were "delivered for home consumption" by Caltex for the purposes of ss 61, 61C and 59 of the Excise Act'.
On this particular issue, the Court found:
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- the taxpayer's liability for excise duty depended on whether it could be said that the taxpayer 'delivered' the residual oils for, or into, home consumption as that concept appears in the Excise Act
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- the taxpayer delivered the residual oils for home consumption based on the finding that the Excise Act does not refer to delivery to a person but adopts the more ample language of delivery for or into home consumption
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- the language of the Excise Act is sufficiently broad to apply to the consumption by a manufacturer at its own premises. The Court refuted the contention that 'delivery' required the physical removal of goods from one place to another, stating that in that scenario it would give the concept of delivery for home consumption a restricted meaning not warranted either by the breadth of the language used, or the purpose of the legislation.
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- The conclusion drawn from these findings and those in Collector of Customs (NSW) v Southern Shipping Co Ltd [1962] HCA 20 is that 'home consumption' refers to the destination of goods as being within Australia (as opposed to export) and that the goods did not need to be physically delivered from a premises but would include goods consumed within the premises.
Tobacco goods are no longer subject to excise control from the point of manufacture when they have been deemed entered and delivered into home consumption. Duty is payable by the manufacturer at the time the goods are manufactured.
Tobacco seed, plant and leaf are subject to excise control and cannot be moved, altered or interfered with except as authorised by the Excise Act.
An excise return [212] is the document that you use to advise us the volume of excisable tobacco goods that you have manufactured during the 7-day tobacco excise period designated on your licence.
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.
This Guide deals with both controlled tobacco products (tobacco seed, plant and leaf) and excisable tobacco goods.
The term excisable tobacco goods include:
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- pouch tobacco
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- cigars
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- cigarettes
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- shisha or molasses tobacco, and
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- snuff.
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 .
A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.
Amendment history
| Part | Comment |
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| Throughout | Content checked for technical accuracy and currency.
Updated in line with current ATO style and accessibility requirements. |
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References
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