ATO Interpretative Decision

ATO ID 2006/114

Excise

• This ATOID has been amended to reflect minor changes to the wording of Regulation 186. Date of amendment 1 July 2006.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is excise duty payable on ship's stores that are consumed during an aborted international voyage?

Decision

No. Excise duty is not payable on ship's stores that are consumed during an aborted international voyage.

Facts

A ship leaves port with the genuine intention of undertaking an overseas voyage.

The vessel has ship's stores on board. Some or all of the ship's stores are consumed during the voyage.

The ship is forced to return to an Australian port without making landfall overseas.

Reasons for Decision:

Section 160A of the Excise Act 1901 (Excise Act) provides that ship's stores will not be subject to duty except as prescribed by the regulations.

Therefore, goods taken on board a vessel will be free from excise duty if:

1.

The goods are properly regarded as ship's stores; and

2.

None of the exceptions specified in the regulations are applicable.

The tem 'ship's stores' is defined in subsection 160A(5) of the Excise Act as follows:

ship's stores means stores for the use of the passengers or crew of an overseas ship, or for the service of an overseas ship.

The term 'overseas ship' is defined in section 4 of the Excise Act as follows:

Overseas ship has the same meaning as ship has in Part VII of the Customs Act 1901.

The term 'ship' is defined in section 130C (of Part VII) of the Customs Act 1901 as follows:

ship does not include:

(a)

a ship that is not currently engaged in making international voyages; or

(b)

a ship that is currently engaged in making international voyages but is about to make a voyage other than an international voyage.

The expression 'international voyage' is also defined by section 130C of the Customs Act to mean, in relation to a ship:

...a voyage, whether direct or indirect, between a place in Australia and a place outside Australia.

It was stated in the High Court case of BP Australia Limited v. Bissaker (1987) 163 CLR 106; 71 ALR 449 that:

The words "whether direct or indirect" take account of the circumstance that a vessel may, for example, proceed to or from an Australian port to a foreign port via another Australian port. In this situation the fact that a foreign port is not the previous port of call or the immediate destination does not detract from the international character of the voyage.

It is reasonable to accept that where a vessel leaves port with the genuine intention of undertaking an overseas voyage, it is an overseas ship under the definition of 'ship' in the Customs Act, notwithstanding the fact that at some point, through misadventure or some other eventuality, it has to turn around. In such an instance, excisable goods provided to passengers and crew will be ship's stores and will be free from duty unless they are rendered excisable via the regulations to the Excise Act.

However, if the vessel never intended to make an international voyage it is never engaged in an international voyage and the goods were never classified as ship's stores. Excise duty would be payable in this circumstance.

Regulation 186 of the Excise Regulations 1925 sets out a number of circumstances where ship's stores are subject to duty.

Regulation 186 provides that:

1.

For the purpose of section 160A of the Act, ship's stores:

(a)

consisting of alcoholic beverages (other than beer) sold to a passenger or member of the crew otherwise than by the glass or nip

(b)

consisting of cigars sold to a passenger or to a member of the crew otherwise than by the individual packet, tin or box containing not more than 25 cigars

(c)

consisting of cigarettes sold to a passenger or to a member of the crew otherwise than by the individual packet containing not more than 25 cigarettes or the individual tin containing not more than 50 cigarettes

(d)

consisting of other tobacco products sold to a passenger or to a member of the crew otherwise than in a quantity that does not exceed 120 grams in weight; or

(e)

consisting of alcoholic beverages (including beer , cigarettes, cigars or other tobacco products sold to a person other than a passenger or a member of the crew are liable to Excise duty.

are liable to Excise duty.

Provided that the goods consumed on the vessel are dispensed to passengers or crew in acceptable quantities (for example, spirits by the nip and cigarettes by the individual packet) they will not be liable to excise duty even where the vessel is forced to return to an Australian port without making landfall overseas. The only exceptions are where there was never a genuine intention for the vessel to undertake an overseas journey (in which case the goods cannot be regarded as ship's stores) or where the stores are dispensed to people or in quantities that render them liable to excise duty under the regulations.

Legislative References:
Excise Act 1901
   section 160A

Case References:
BP Australia Limited v. Bissaker
   (1987) 163 CLR 106
    71 ALR 449

Keywords
Excise
Excise payments
Ship's stores

Siebel/TDMS Reference Number:  4938319

Business Line:  Indirect Tax

Date of publication:  28 April 2006

ISSN: 1445-2782