ATO Interpretative Decision

ATO ID 2002/637

Excise

• The current ATO position on this issue is addressed in 'Excise Guidelines for the Tobacco Industry' at Chapter 2 (requirement for a licence) and Chapter 3 (criteria for the granting of a licence).
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Will the Australian Taxation Office (ATO) issue excise licences under section 39A of the Excise Act 1901 (EA) to persons who grow tobacco and process tobacco for smoking where the tobacco is to be grown and processed for the person's own personal use?

Decision

While applications for excise licences issued under section 39A of the EA are always considered on their merits, it is unlikely that the ATO would issue such licences in circumstances where the applicant proposes to grow tobacco at a domestic residence for personal consumption.

Facts

Advice was sought from the ATO as to whether it would issue excise licences to a person who wishes to grow tobacco in the garden of his personal residence for personal consumption.

The applicant proposed to grow, cure and chop the tobacco at his residence for his own consumption. In order to do this without breaching the EA the person would require a producer licence and a manufacturer licence.

The applicant indicated that he expected that he would not be required to pay excise duty in circumstances where he grew, processed and smoked the tobacco himself.

Reasons for Decision

Duty is imposed on leaf tobacco at the rate set out in the Schedule to the Excise Tariff Act 1921. The ATO has no power to grant an exemption from the statutory liability of entities to pay excise duty on excisable tobacco.

In the event that a person who grows tobacco for private use is willing to pay the duty on the tobacco he or she produces domestically, he or she may apply under section 39 of the EA for:

(a)

a producer licence to grow the tobacco; and

(b)

a manufacturer licence to cut the cured tobacco and prepare it for smoking.

The Collector may, under section 39A of the Excise Act, refuse to issue the relevant licences if, for example:

•

the applicant is not a 'fit and proper person';

•

the physical security of the premises is not adequate;

•

the applicant would not be able to keep proper books of account to enable the ATO to adequately audit the books and records;

•

refusal is necessary to protect the revenue.

The following considerations would arise in determining whether to grant excise licences in these circumstances:

•

The security of arrangements at domestic premises are not usually of an adequate standard to protect against theft or accidental loss of the tobacco, and the cost of arranging security to the necessary standard is not justified where it is proposed to grow a very small amount of tobacco for personal use.

•

The EA provides a right of access to ATO offices 'at all times' to check the stock of tobacco leaf of a producer or dealer, to examine and take account of the goods and crops, and to take samples of material and partly manufactured excisable goods. For this reason licences are usually issued in respect of premises which are not used as a domestic residence.

•

The comprehensive regulatory scheme contained in the EA is designed to prevent erosion of the excise revenue. The licensing of individual domestic residences for tobacco production is contrary to the scheme of the EA as supervising tobacco production in a large number of small sites is not viable with regard to the monitoring and auditing functions which are necessary for the protection of the excise revenue.

While each application for an excise licence is determined on its merits it is likely that, having regard to section 39A of the EA and the intention of the legislation, the Collector would refuse to issue excise licences to an applicant who proposes to grow tobacco at a domestic residence for personal consumption.

Keywords
Tobacco growing
Licensed tobacco producer
Tobacco plant
Tobacco leaf

Business Line:  Excise

Date of publication:  6 June 2002

ISSN: 1445-2782