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.
7 REMISSIONS, REFUNDS, DRAWBACKS AND EXEMPTIONS
7.1 PURPOSE
This Chapter deals with:
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- when you can apply for a ' remission ', refund or drawback
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- what happens if you are overpaid a refund or drawback
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- when ' tobacco ' goods are exempt from excise duty
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- how to apply for a refund or drawback, and
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- penalties that can apply to offences in relation to remissions, refunds, drawbacks and exemptions.
7.2 INTRODUCTION
A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture. In other words, no excise duty will ever be paid on goods subject to remission.
A refund is the return of excise duty that you have already paid.
A drawback is a repayment of duty already paid. It is similar to a refund, but applies where duty-paid goods are exported.
In some circumstances, the duty you pay on goods may be subject to a complete or partial refund or drawback. [213]
7.3 POLICY AND PRACTICE
7.3.1 APPLYING FOR A REMISSION OF EXCISE DUTY
As ' excisable tobacco goods ' are deemed entered and ' delivered into home consumption ' at the point of manufacture, they are no longer subject to ' excise control ' and there are no circumstances under clause 1 of Schedule 1 to the Excise Regulation in which an application for remission can be made. Generally, the circumstances will relate to an application for a refund of the duty paid.
When excisable tobacco goods are subject to remission without application
Excisable tobacco goods are subject to remission without application prior to the duty being paid at the end of the 7-day excise tobacco period (effectively meaning they are exempt from duty) when they are for official use but not for trade by [214] :
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- parties that use tobacco for an approved medical, scientific, horticultural or agricultural purpose (the relevant approvals should be sought from us) [215]
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- the Governor-General or any member of the Governor-General's family [216]
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- state Governors or any member of a state Governor's family
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- the Australian American Foundation [217]
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- the government of another country, under an agreement between that government and the Australian Government [218]
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- persons covered by a Status of Forces agreement [219] , and
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- the personnel of sea-going vessels of the Royal Australian Navy (RAN) or Australian Military Forces (AMF). [220]
Example 7A
Tobacco plants are grown and used by an approved educational facility for scientific purposes. The facility has a producer and manufacturer licence to grow and manufacture the tobacco goods, and an automatic remission of duty on all tobacco goods it uses. As part of the conditions of the licence, the facility must also destroy, with approval, all tobacco not used in their experiments and retains records of the destruction – for example, date, volume and type of goods destroyed.
Example 7B
A manufacturer receives an order from the Australian Defence Force for supply of cigarettes to US defence personnel undertaking joint military training exercises in the Northern Territory. A remission of the excise payable can be applied to tobacco goods and will be reflected in the sale price.
Some restrictions apply to tobacco goods for the RAN and AMF. Tobacco, cigars and cigarettes may be supplied free of duty when the goods are for consumption by the personnel of sea-going vessels of the RAN or the AMF when [221] :
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- such vessels are in full commission, and
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- the goods are consumed on such vessels.
To supply tobacco goods under these circumstances, you must first ensure the receiver meets the relevant criteria. For example, you should only accept orders stating that the goods are for official use on the official stationery or official order of eligible people or organisations. You must keep a copy of this documentation.
7.3.2 APPLYING FOR A REFUND OF EXCISE DUTY
You can apply for a refund of excise duty paid on excisable tobacco goods if the following circumstances apply.
Duty has been paid through manifest error of fact or patent misconception of the law
You can apply for a refund of duty paid where there has been an error that is evident, obvious or apparent and also in situations where duty has been paid in error for goods entering home consumption that are not excisable. [222] In both cases, a refund of the duty paid would be payable.
Your application must be submitted within 12 months of the date on which the excise duty was paid. [223]
Example 7C
A tobacco manufacturer calculates the excise on pouch tobacco on the basis that the packages contain 50 grams whereas they only contain 30 grams. Excess duty is paid through an obvious error of fact.
The manufacturer applies for a refund of the duty overpaid through manifest error of fact.
Duty-paid goods have been taken up as ship's or aircraft's stores
Ship's stores on overseas ships and aircraft's stores on international flights [224] are not subject to excise duty. [225] Where duty has been paid and the excisable tobacco goods are subsequently re-directed for use on ships or aircraft travelling overseas, this refund circumstance may apply.
The refund application must be submitted within 12 months of the date on which the excise duty was paid. [226]
Duty-paid goods are returned to licensed premises, or to a person authorised to receive goods on behalf of the manufacturer, and the tobacco is then destroyed or mixed with other tobacco goods of a similar kind
A refund circumstance arises when duty-paid tobacco goods are returned to a premises covered by an excise licence or to a person authorised by the manufacturer of the goods to receive goods on behalf of the manufacturer, then the returned tobacco is destroyed or mixed with other tobacco goods of a similar kind – that is, loose tobacco with loose tobacco, or cigarettes or cigars with tobacco that is to be used in the manufacture of cigarettes or cigars. [227]
Refunds for tobacco goods returned to the manufacturer for remixing or destruction are exclusively claimed by the manufacturer who paid the excise duty on manufacturing the tobacco goods.
The historical experience has been that manufacturers replace returned tobacco goods or provide equivalent compensation by credit note on a 'like-for-like' basis –. that is, they also compensate the party returning their goods in respect of duty paid by that other party. This is done in the context of agreement and understanding between them in those circumstances that only the manufacturer can and will claim the relevant duty refund.
When calculating the amount of refund for tobacco goods returned to the manufacturer, we recognise that due to the nature of these returns (that is, usually stale products that may have been duty-paid at different times), it is sometimes unrealistic to expect you to identify the actual rate of duty paid on each product when the goods were originally manufactured and delivered into home consumption.
Therefore, when making claims in relation to returned tobacco goods pursuant to table item 7 in subclause 1(1) of Schedule 1 to the Excise Regulation, a tobacco manufacturer may use the rate in force 6 months prior to the refund claim or, where they have evidence of the excise duty paid on the returned goods, the claim can be calculated using that information.
There are no time limitations for lodgment of a refund application under this refund circumstance.
Example 7D
Cigarettes have gone stale at the retailer's premises. The manufacturer's sales representative arranges for the return of the cigarettes to the manufacturer's distribution premises, with a refund or credit to the retailer.
The manufacturer notifies us at least 7 days before they destroy the cigarettes that they intend to destroy them. The manufacturer applies for a refund of duty on the returned cigarettes.
Duty has been paid on excisable tobacco goods and they are sold to a diplomatic or consular mission
You can apply for a refund of duty paid where they are sold to a diplomatic or consular mission. [229] There are no time limitations for lodgment of a refund application.
7.3.3 APPLYING FOR A DRAWBACK OF EXCISE DUTY
You can apply for a drawback if you export tobacco goods that have had excise duty paid on them. [230]
We will only pay a drawback if [231] :
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- Prior to the exportation, you advise us that you intend to claim a drawback. (We can exempt you from this requirement, in writing, either on all claims for drawback or any particular claim. [232] )
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- Before exportation of the excisable tobacco goods on which duty has been paid, the goods are available for inspection by us.
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- You have not claimed a refund of excise duty in relation to the exported excisable tobacco goods.
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- The excisable tobacco goods have not and are not intended to be returned to Australia after they have been exported.
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- You keep records showing
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- that duty was paid on the tobacco goods (for example, an invoice), and
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- the tobacco goods were exported (for example, an export declaration number or bill of lading and evidence, such as payment by the buyer).
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- You lodge a drawback claim in the approved form no later than 12 months after the tobacco goods were exported.
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- The amount of the claim is at least $50.
The amount of the drawback will not exceed the amount of excise duty that was paid. [233]
Example 7E
A cigarette distributor purchases a quantity of excise duty-paid cigarettes. They notify us that they intend to export the cigarettes, make them available for inspection by us, and then export them to Fiji.
The cigarette distributor applies for a drawback of the excise duty component of the cigarettes. To support the application, the company provides us with copies of invoices of purchase and the bills of lading, which will include details of the export declaration notice (EDN) number.
7.3.4 IF YOU ARE OVERPAID A REFUND OR DRAWBACK
If we overpay you by way of a refund or drawback, you must pay the overpaid amount back. We can demand that you pay back the amount and, if you do not repay the amount within the time we specify, we can recover the amount through the courts as a debt due to the Commonwealth. [234]
7.3.5 WHEN EXCISABLE TOBACCO GOODS ARE EXEMPT FROM EXCISE DUTY
Excisable tobacco goods are exempt from duty if they are:
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- exported
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- sold for use as ship's or aircraft's stores [235]
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- with our approval, delivered as small samples [236] , or
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- subject to remission without application. [237]
Ship's and aircraft's stores are goods for the use of passengers or crew on international journeys – for example, cigarettes for sale to passengers on board a cruise liner.
There are limits on the quantities of excisable tobacco goods that are exempt from duty as ship's stores [238] :
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- cigarettes must be sold to passengers or crew in individual packets or tins of not more than 50 sticks
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- loose tobacco (for example, pipe or cigarette tobacco) must be sold in quantities of not more than 120 grams
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- cigars must be sold in individual packets, tins or boxes of not more than 25 cigars.
In the normal course of events, such goods can be supplied to a ship or aircraft without an entry and without duty being paid, the authority for doing this being an approval granted under section 129 of the Customs Act.
Delivering samples without payment of duty
You may be able to deliver small samples without payment of duty and without entry. You must apply to us for approval and your application must:
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- be in writing
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- specify who the sample is for
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- specify the quantity for approval, and
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- specify the purpose of the sample.
If you need more information on samples, contact us on 1300 137 290 .
To apply for approval, send your application to us:
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- ATO Online Services
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- by post to
- Australian Taxation Office
PO Box 3514
ALBURY NSW 2640
7.4 PROCEDURES
An application for a refund must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested. [239]
Your application must be submitted within 12 months of payment for the following circumstances [240] :
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- Duty has been paid through manifest error of fact or patent misconception of the law
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- Duty-paid goods have been taken up as ship's or aircraft's stores .
To ensure the excisable tobacco goods that are to be destroyed do not find their way into the Australian domestic market, we may wish to inspect or supervise the disposal of the goods. If excisable tobacco goods or tobacco leaf must be destroyed off site, you must submit an application and it must be approved by us prior to moving them to the place of destruction. For tobacco leaf, the approval will also include a movement permission. [241]
You can elect to have a refund credited to your excise account or paid directly into your bank account.
If you are not satisfied with our decision to refuse your refund or remission, you can request a review of our decision by lodging an objection within 60 days.
The easiest way to claim your excise refund or drawback is by using ATO Online services . Alternatively, you can apply for a drawback of duty by sending us a completed Excise refund or drawback form. Help to complete the form is available at Excise refund or drawback . Applications can also be made on company letterhead as long as all the relevant information is provided.
Records to substantiate your claims must be maintained and produced when requested. [242]
Your drawback application must be received no later than 12 months after the day on which the goods were exported. [243]
If we refuse to pay your drawback and you are not satisfied with our decision, you can request a review of our decision by lodging an objection within 60 days.
If you need more information on remissions, refunds, drawbacks and exemptions, 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 15 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.
7.5 PENALTIES THAT CAN APPLY IN RELATION TO REMISSIONS, REFUNDS, DRAWBACKS AND EXEMPTIONS
The following are the penalties that may apply after conviction for an offence.
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 '. [244]
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, the maximum penalty is a penalty not exceeding the sum of 50 penalty units and twice the amount of duty payable on those goods. [245]
7.6 TERMS USED
Deliver into home consumption [246] 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 [247] 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.
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 [248] 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.
Tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant. [249] Tobacco includes any thing (including moisture) added to the tobacco leaf during manufacturing or processing. [250]
This means that until tobacco leaf is subjected to processes after curing it is not excisable. However tobacco seed and plant is a controlled substance and as such you need to hold an excise producer or dealer licence to be in possession of these goods.
The species of the Nicotiana genus that are generally used for smoking, chewing or snuff are considered to produce tobacco leaf. Those species are currently Nicotiana tabacum, Nicotiana rusticum and Nicotiana sylvestris.
Amendment history
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References
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