Excise guidelines for the alcohol industry

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

13 CONCESSIONAL SPIRIT

13.1 PURPOSE

This Chapter deals with how excise law applies to concessional spirit and discusses:

•

what is concessional spirit

•

what is undenatured spirit

•

what is denatured spirit

•

the concessional spirit distribution network

•

requirements for concessional spirit manufacturers

•

requirements for concessional spirit suppliers

•

requirements for concessional spirit end users

•

how concessional spirit is classified

•

spirit used in fortifying Australian wine or grape must

•

spirit used for industrial, manufacturing, scientific, medical, veterinary or educational purposes

•

spirit denatured to a formula approved by the Commissioner

•

recycling or redistillation of concessional spirit

•

tolerances on quantities delivered or received

•

how to apply for a permit

•

how to amend or renew a permit, and

•

how to apply for a denaturing formula to be approved.

13.2 INTRODUCTION

13.2.1 CONCESSIONAL SPIRIT

Concessional spirit is spirit that may be ' delivered into the Australian domestic market ' at a free rate of duty when:

•

used for specific purposes, that is, spirit used

–

in fortifying Australian wine or Australian grape must

–

for an industrial, manufacturing, scientific, medical, veterinary or educational purpose, or

•

denatured in accordance with a formula determined by the Commissioner.

Use in the manufacture of excisable beverages or fuel is not a use that qualifies for a free rate of duty.

Concessional spirit is generally very high strength spirit. It is usually supplied at a strength of approximately 96% alcohol by volume. It may be distilled from various feedstock. Spirit distilled from different raw materials will retain some of its own specific characteristics but will generally be of a neutral nature due to the high strength at which it is distilled.

Undenatured spirit

Undenatured spirit is drinkable and may be supplied for approved purposes, for example, for the manufacture of foodstuffs, internal medicines, vaccines etc.

For more information about using undenatured spirit, refer to Section 13.4.3 Spirit denatured to a formula determined by the Commissioner.

Denatured spirit

Denatured spirit is spirit processed by adding approved substances (denaturant) to make it unfit for human consumption.

For more information about using denatured spirit, refer to Section 13.4.3 Spirit denatured to a formula determined by the Commissioner.

13.3 POLICY AND PRACTICE

13.3.1 CLASSIFYING CONCESSIONAL SPIRIT

The following table lists the subitems of the Schedule to the Excise Tariff Act (Schedule) under which concessional spirit is classified. If you are a manufacturer or concessional spirit supplier, you will need to know this in order to complete your excise return.

You can find the current excise rates of duty, along with those applicable pre 3 February 2025 at our tariff working page Excise duty rates for alcohol .

Essentially this means:

•

subitem 3.5 – allows for the fortification of Australian wine or grape must provided the purchaser or user holds a concessional spirit permit

•

subitem 3.6 – members of the class of persons specified (health care practitioners, veterinary practitioners, medical institutions, government-related entities, educational institutions) may take delivery of a volume of spirit necessary to meet their industrial, manufacturing, scientific, medical, veterinary or educational needs without holding a concessional spirit permit

•

subitem 3.7 – allows for the sale of spirit for other specified purposes but requires the purchaser to hold a concessional spirit permit

•

subitem 3.8 – allows for the sale of denatured spirit to be sold without the need for the purchaser to hold a concessional spirit permit provided it is denatured to an approved formula.

13.3.2 CONCESSIONAL SPIRIT DISTRIBUTION NETWORK

This network is made up of:

•

spirit manufacturers

•

licensed suppliers, and

•

end-users holding an appropriate excise permit.

Licences required

The following examples indicate the type of excise licences that may be required:

Requirements of a concessional spirit manufacturer

An excise manufacturer licence allows you to:

•

manufacture concessional spirit

•

store concessional spirit, and

•

sell concessional spirit.

You can use imported spirit in the manufacture of concessional spirit ^[391] , subject to the following conditions:

•

you must hold a customs warehouse licence issued under the Customs Act and an excise manufacturer licence issued under the Excise Act

•

the imported spirit must undergo a process of manufacture in Australia ^[392] , and

•

the spirit manufactured must be for use for a purpose listed in Section 13.3.1 Classifying concessional spirit.

You must keep records, as directed, for the period directed and make them available to us on request.

You must:

•

lodge an ' excise return ' to enter concessional spirit delivered into the Australian domestic market, or

•

hold an ' underbond ' movement permission to deliver the spirit to another premises covered by a licence or specified place.

In the case of imported spirit, you must hold a customs warehouse licence to store the imported goods underbond in premises covered by a licence under section 79 of the Customs Act, until such time as the imported spirit undergoes a process of manufacture in Australia at which time the resulting excisable product is subject to excise control.

For more information about:

•

underbond movements, see Chapter 5 Movement permissions.

•

excise returns, see Chapter 6 Payment of duty.

Requirements of a concessional spirit supplier

Concessional spirit suppliers distribute concessional spirit to end-users, particularly by repackaging bulk spirit into smaller retail packs to suit client needs.

You need to be licensed as the resale of concessional spirit is not an approved purpose under the concessional spirit scheme. You may be licensed as a manufacturer or storage premises depending on the activities you undertake.

Before supplying spirit, you must establish the bona fides of each end user of concessional spirit where the spirit is classified to subitems 3.5, 3.6 or 3.7 of the Schedule.

The following documentation is considered sufficient:

•

a current concessional spirits permit – for a concessional spirits permit holder (subitems 3.5 and 3.7 of the Schedule) copy of fax allowed

•

registration certificate or registration number as a practitioner, or Therapeutic Goods Act 1989 (TGA) exemption certificate, for a purchaser in the following exempt classes*

–

medical practitioners (pharmacists, doctors, chiropractors, dentists, osteopaths, physiotherapists, registered nurses) or other health care practitioners registered under state or territory law

–

acupuncturists, herbalists, homeopaths and naturopaths that are registered under the National Health Act 1953 or hold a TGA exemption certificate, and

–

veterinary practitioners registered under state or territory law

•

official letterhead or purchase order for the following exempt classes*

–

medical institutions

–

educational institutions, and

–

government agencies.

Medical institution, education institution and government-related entities are defined in the relevant legislative determinations. ^[393]

*For subitem 3.6 of the Schedule

You must keep records, as directed, for the period directed and make them available to us on request. ^[394]

The records for concessional spirit suppliers would be details of:

•

quantity and alcoholic strength of all spirits received or produced

•

your individual sales or distribution records showing, where applicable, the

–

name and address of your customer

–

evidence that your customer is in an approved class of professional people or institution or is a permit holder

–

cumulative sales you have made to customers subject to annual limits

–

quantity and alcoholic strength of spirits you have sold or distributed, and

–

levels and alcoholic strength of your stock on hand

•

details of all spirit from the time of receipt, through break bulk to final repackaging (for suppliers who repack spirit received in bulk containers), and

•

details of all losses or gains relating to repacking operations plus the final number and size of the repackaged product.

We recommend you conduct monthly stocktakes and maintain a running balance of spirits on hand.

You must:

•

lodge an excise return to enter concessional spirit delivered into the Australian domestic market, or

•

hold an underbond movement permission to deliver the spirit to another premises covered by a licence or specified place.

For more information about:

•

underbond movements see Chapter 5 Movement permissions

•

excise returns see Chapter 6 Payment of duty.

Resellers who act as agents or brokers will not need a manufacturer or storage licence as long as they do not physically take possession of spirit. However, they require a periodic settlement permission that allows the delivery of the concessional spirit from premises covered by a licence to an approved end-user.

Requirements of a concessional spirit end-user

To be eligible to receive concessional spirit (other than denatured spirit) as an end-user, you must:

•

hold a current permit ^[395] , or

•

be included in an eligible class of persons determined by the Commissioner.

You must keep your records of receipts and usage and make them available to us on request.

Permits are valid for a period of one year from the date of initial issue. On renewal, permits may be valid for up to 5 years from the date on which they are renewed. The permit shows the maximum quantity of spirit that may be delivered each year.

There is no charge for a concessional spirits permit.

We have the right to require a security ^[396] or request a fresh security when we consider it to be necessary to protect the revenue or ensure compliance with your excise obligations. ^[397] Securities cannot be requested for denatured spirit that you have received that has been classified to subitem 3.8 of the Schedule.

If we require a security, we calculate the amount on the estimated average monthly excise that would apply to the goods if excise duty was payable. We use the rate at subitem 3.10 of the Schedule.

If you are a permit holder, you should carry out regular stocktakes and keep a record of stock on hand. You are not required to maintain any prescribed recording system, however, you should keep records sufficient to satisfactorily account for your use of the spirit in accordance with an approved purpose. ^[398]

You are also responsible for the control and safe keeping of concessional spirit once the spirit has been received into your stock. We don't normally insist on any particular security arrangements other than normal good commercial practice. However, concessional spirits should be stored securely.

Requirements of a concessional spirit supplier and a concessional spirit end user

You must comply with the requirements mentioned above for a concessional spirit supplier and a concessional spirit end-user. You must include all quantities of spirit, delivered from your underbond stock for your concessional spirit approved purposes, on your excise returns.

13.4 CONCESSIONAL SPIRIT USE

13.4.1 SPIRIT USED IN FORTIFYING AUSTRALIAN WINE OR GRAPE MUST

Wine fortification

Wine fortification means increasing the level of alcohol by adding spirit to:

•

wine during or after fermentation, or

•

grape must during or after fermentation.

Fortification is also taken to include circumstances where brandy is mixed with sugar and used to sweeten sparkling wine (commonly known as expedition liqueur).

If you use spirit to fortify Australian wine or Australian grape must, you must have a concessional spirit permit.

ATO approval required to fortify

You must obtain our permission to use spirit that you have produced (to produce spirit you require an excise manufacturer licence) or intend to purchase free of duty for use in fortifying Australian wine or Australian grape must. If we grant approval, we will issue to you a concessional spirit permit.

Keeping records

You should keep and make available to us when requested, all documents ^[399] :

•

recording any receipt of fortifying spirit

•

relating to storage and use of fortifying spirit

•

supplier delivery documents (consignment note, delivery docket and so on), and

•

working documents, such as operations and cellar notes.

An audit trail that traces the fortifying spirit as it moves in and out of bulk vessels allows you to account for the excisable goods to our satisfaction. Bulk vessels include vats, intermediate bulk containers and drums.

The transactions under this heading include:

•

receipt of fortifying spirit

•

movements between vessels

•

movements out to fortification.

For each vessel, we recommend:

•

product identification details, for example, type

•

date, quantity in (litres) and temperature, strength, litres of alcohol (litres × strength)

•

date, quantity out (litres) and temperature, strength, litres of alcohol (litres × strength)

•

fortification number

•

running balance

•

losses and gains.

Your records need to include the following details for each fortification:

•

date and fortification identification number

•

details of the wine or grape must, including

–

litres of wine or kilograms of grape must

–

Baum é (sugar content) of unfermented juice

–

Baum é of fermented wine, and

–

alcoholic strength of wine

•

details of spirits used including

–

litres used

–

alcoholic strength

–

litres of alcohol (LALs) used

•

details of fortified wine, including

–

litres of fortified wine produced

–

alcoholic strength of fortified wine, and

–

Baum é content of fortified wine.

You do not need to create additional records, as the necessary details should be part of your normal commercial documentation.

Accounting for your use

You may be asked to account to us for the use of fortifying spirit accessed free of duty under subitem 3.5 of the Schedule. ^[400] You should be able to do so if you have accurately retained the records described above.

If you cannot account satisfactorily for the use of spirit, we can demand payment of an amount equal to the excise you would have been liable to pay if the spirits had not been given concessional (excise-free) treatment. This applies, regardless of whether you have a concessional spirits permit or an excise licence.

You should phone us on 1300 137 290 to advise of any:

•

significant spillage

•

theft of spirits from your premises or in transit from your supplier

•

excessive losses.

For information on taxes that may apply to fortified wine, refer to Chapter 14 Wine.

13.4.2 SPIRIT USED FOR INDUSTRIAL, MANUFACTURING, SCIENTIFIC, MEDICAL, VETERINARY OR EDUCATIONAL PURPOSES

Approval can be granted for a wide variety of industrial, manufacturing, scientific, medical, veterinary or educational purposes. These include the following:

•

fortification of imported wines

•

manufacture of

–

medicines

–

vaccines

–

printing inks

–

foodstuffs

•

sterilisation of equipment, and

•

preservation of specimens.

The resale of spirits and the manufacture of excisable beverages or fuel, using spirits, are not approved purposes.

Refer to Appendix A at the end of this Chapter for a list of activities that have previously been approved.

Classifying this spirit

Spirit used for these purposes is classified to one of the following sub-items of the Schedule.

Receiving spirit without a permit

The Excise (Concessional Spirits – Class of Persons) Determination 2024 provides for following 'class of persons':

•

health care practitioners

•

veterinary practitioners

•

medical institutions

•

government-related entities

•

education institutions.

Members of the class of persons specified may take delivery of a volume of spirit necessary to meet their industrial, manufacturing, scientific, medical, veterinary or educational needs without applying for a permit up to the following limits per calendar year:

•

health care practitioners – 200 litres

•

veterinary practitioners – 200 litres

•

medical institutions – 1000 litres

•

government-related entities – 1000 litres

•

education institutions – 1000 litres.

Note: in the case of institutions, it refers to the institution as a whole.

If members of a class of persons requires access to a quantity of spirit in excess of the yearly limit, they will be required to apply for a concessional spirit permit.

Health care practitioner is given a very broad definition under the determination ^[401] and means a person who:

•

is a health practitioner as defined in section 3 of the Therapeutic Goods Act 1989 , or

•

belongs to a class of persons specified in column 2 of item 4 in Schedule 8 to the Therapeutic Goods Regulations 1990.

If you receive spirit under this arrangement, you may only use the spirit for industrial, manufacturing, scientific, medical, veterinary or educational purposes.

The spirit supplied may be undenatured or denatured using a formula that is not on our approved list. ^[402] To receive this type of concessional spirit, you must self-assess:

•

whether you are entitled to receive spirit under any of the determinations, and

•

that you can comply with the terms of the determination.

You must also provide identification to the supplier to show you are eligible under a determination.

Your supplier:

•

needs to be satisfied you fit into a class of persons identified in the determinations, and

•

will retain appropriate evidence of this, such as Therapeutic Goods Administration (TGA) approvals or Australian Medical Association registration.

For more information about concessional spirits, see Excise on concessional spirits .

Permit requirements

You will need to apply for a permit to access concessional spirit if you are not covered by the determination, or you are covered by the determination but require spirit in excess of the yearly limit.

Spirit received with a permit generally does not have any denaturant added to it unless you specifically request it or we impose it as a condition of the permit.

We have published guidelines that must be taken into account when deciding whether to give an approval. ^[403]

We may give approval, subject to conditions ^[404] including limits on quantity, for use of concessional spirit for the manufacture of non-beverage products, such as:

•

foodstuffs

•

vinegar

•

essences and flavours

•

internal medicines, or

•

mouthwashes.

We do not give approval for concessional spirit to be used:

•

in the manufacture of excisable beverages, or

•

as fuel in internal combustion engines.

For more information about the excise treatment of:

•

spirit used in the manufacture of excisable beverages, refer to Chapter 12 Spirits and other excisable beverages.

•

fuel used in internal combustion engines, refer to Excise guidelines for the fuel industry .

Additional requirements for essences

If you are using spirit to manufacture an essence, you must be able to show that the essence:

•

is a concentrated flavour, and

•

is for culinary purposes, for example, in baking or as an additive to chocolate, or will be used in small proportions to flavour non-alcoholic or non-excisable alcoholic beverages, for example, soft drinks, cordials etc, and

•

will not be used as a direct substitute for the original spirit.

Essences may also be used in the manufacture of products subject to the wine equalisation tax (WET), provided the requirements of the A New Tax System (Wine Equalisation Tax) Act 1999 are met.

In considering an application for spirit for use in manufacturing an essence, we will look at whether the product is:

•

marketed in packaging that resembles packaging for an alcoholic beverage

•

packaged in 6 packs or similar multiple packaging types

•

required by state legislation to be sold through licensed liquor outlets or is subject to state liquor licensing laws

•

marketed with instructions about how it can be used as an alcoholic beverage

•

packaged for retail sale in sizes greater than 50ml (or 100 ml for vanilla essence), irrespective of who in the marketing chain does the packaging, or

•

sold in package sizes greater than 50ml, with no demonstrated culinary use.

Keeping records

If you receive concessional spirit classifiable to subitem 3.6 or subitem 3.7 of the Schedule to the Excise Tariff Act, you must keep sufficient records to account satisfactorily for your use. ^[405] You do not need to create additional records, as the necessary details should be part of your normal commercial documentation. If the spirit is used:

•

as an input into manufacture, your manufacturing records should be sufficient to track and quantify spirit usage

•

as a consumable, your dispensing records should be sufficient to track and quantify spirit usage.

This would include:

•

all documents

–

recording any receipt of concessional spirit

–

relating to storage and use of concessional spirit

•

supplier delivery documents (consignment note, delivery docket and so on), and

•

working documents, such as operations notes.

An audit trail that traces the concessional spirit as it moves in and out of bulk vessels, awaiting use for an approved purpose, allows you to account for the excisable goods to our satisfaction. Bulk vessels include vats, intermediate bulk containers and drums.

The transactions under this heading include:

•

receipt of fortifying spirit

•

movements between vessels

•

movements out to fortification.

For each vessel, we recommend:

•

product identification details, for example, type

•

date, quantity in (litres) and temperature, strength, litres of alcohol (litres × strength)

•

date, quantity out (litres) and temperature, strength, litres of alcohol (litres × strength)

•

approved purpose and any reference number, for example, stores requisition number

•

running balance

•

losses and gains.

If you cannot satisfactorily account for use of the spirit, we may issue a demand for payment. The demand would be for an amount equal to the duty that would have been payable on the spirit if:

•

there had been no approval or determination (as the case requires), and

•

the spirit had been entered for home consumption on the day on which we made the demand.

Special record-keeping requirements for pharmacists supplying ships

If you are a pharmacist who supplies spirit to a ship as first aid supplies, we accept that you have satisfactorily accounted for your use of spirit, if:

•

you supply no more than 3 litres of undenatured ethanol to a particular ship per year

•

the ship's agent or ship's provedore supplies you with an order signed by the ship's captain and quoting Marine Orders, Part 10 (Order No. 13 of 2001)

•

the order documentation contains the

–

name of the ship and Lloyds number

–

voyage number and date, and

–

captain's name

•

you record the details of the order in your register and provide the agent with a delivery advice

•

the agent signs for receipt of the spirit

•

the agent delivers the spirit to the captain on board the ship

•

the captain signs the delivery advice for receipt of the spirit

•

the agent returns the signed delivery advice to you, and

•

you retain the signed delivery advice.

13.4.3 SPIRIT DENATURED TO A FORMULA DETERMINED BY THE COMMISSIONER

Spirit is denatured so that it may be used for a specified purpose while reducing the risk that it will be used to manufacture excisable beverages or fuel.

An entity denaturing spirit needs to have a manufacturer licence.

Classifying spirit denatured to an approved formula

Spirit denatured to an approved formula is classified to subitem 3.8 of the Schedule to the Excise Tariff Act. This spirit is no longer subject to ' excise control ' from the time it is delivered into the Australian domestic market, at a free rate of duty, by the supplier. No permit is required.

Denatured spirit must not be used in the manufacture of fuel without an appropriate excise manufacturer licence. Ethanol denatured for use as fuel for internal combustion engines is subject to excise duty and is classified to subitem 10.20 of the Schedule.

For more information about fuel ethanol, see Excise guidelines for the fuel industry .

Our considerations when approving denaturing formulas

We take into account the following factors when deciding if spirit is sufficiently denatured.

Formulas used to denature spirit

The formulas determined by the Commissioner are contained in Excise (Denatured spirits) Determination 2016 (No. 3) . An Explanatory Statement ^[406] contains details of the background, purpose and operation of the determination.

The formulas are based on a minimum percentage of an approved denaturing chemical added to spirit at an alcoholic strength of 100%. If the spirit is less than 100% ethanol, the minimum concentration is to be adjusted relative to the alcohol content.

---

Example 13A

According to the formula, alcohol may be denatured by the addition of 1% by volume n-propanol.

Spirit consisting of 80% ethanol may be denatured according to the formula by the addition of 0.8% by volume n-propanol.

---

For more information about what constitutes excise manufacture, see Chapter 2 Licensing: Applications.

Keeping records

You should keep the following records and make them available to us when requested:

•

all documents

–

recording any receipt or manufacture of spirit

–

relating to storage, use or denaturing of spirit

•

supplier delivery documents (consignment note, delivery docket and so on), and

•

working documents, such as operations notes.

Spirit denaturing operations – raw materials

An audit trail commencing with raw material allows us to check stated production against known material usage.

For each denaturing substance, we recommend recording:

•

date

•

opening stock

•

quantity received

•

supplier name

•

quantity used

•

running balance.

Denaturing record

Generally, the denaturing substance is added to the spirit within your bulk storage vessels. As such, you may simply include in your bulk storage register a record of:

•

date

•

the quantity of spirit to be denatured (litres, strength, LALs)

•

description of the denaturing substance

•

the quantity of denaturing substance added

•

the resultant quantity of denatured spirit (litres, strength, LALs)

•

description of the denatured spirit, for example, type

•

losses and gains.

Denaturer operations – bulk storage

An audit trail that traces underbond excisable product as it moves in and out of bulk vessels allows you to account for the excisable goods to our satisfaction. Bulk vessels include vats, tanks, casks, intermediate bulk containers and drums. The transactions under this heading include:

•

movements between vessels

•

movements out to packaging

•

movements returned from packaging, for example, decants, drainings

•

underbond movements in or out

•

manufacture, for example, mixing with denaturants.

For each vessel, we recommend:

•

product identification details, for example, type

•

date, quantity in (litres) and temperature, strength, litres of alcohol (litres × strength)

•

date, quantity out (litres) and temperature, strength, litres of alcohol (litres × strength)

•

excise clearance type, for example, excise return, remission, underbond removal, or to packaging

•

running balance

•

losses and gains.

Periodic stocktakes are as much about your good governance as they are about an excise obligation. We recommend regular bulk vessel stocktakes to:

•

establish the accuracy of stock records

•

detect omissions or errors in stock records, and

•

identify security issues such as theft, plant and equipment problems.

We recommend that you perform a full survey (volume and strength) of any bulk vessels if there has been no activity within the last 3 months.

As part of the stock reconciliation process, stock records are adjusted to reflect the stocktake results. While bulk losses are not normally subject to call up of duty, you must keep adequate records to account for these losses.

Denaturer operations – packaging

An audit trail that traces underbond excisable product from the bulk vessels through the packaging process and into packaged stock allows you to account for the excisable goods to our satisfaction.

For each packaging run, we recommend:

•

date of packaging

•

product identification details, for example, ethanol with 5% methanol

•

packaging unit size, for example, 500ml bottle

•

total quantity available for packaging (LALs)

•

actual alcoholic strength

•

total number of units packaged

•

average fill per package

•

product captured and returned to bulk storage, for example, drainings, flushings (LALs)

•

samples taken from the packaging line (LALs).

The calculation of packaging efficiency is as much about your good governance as it is about an excise obligation. The packaging efficiency calculation is:

% efficiency = (LALs packaged × 100) ÷ Net LALs available for packaging


Where

Net LALs available for packaging is calculated as:

•

Total quantity available for packaging (LALs)

–

less product captured and returned to bulk storage (LALs)

–

less samples taken from the packaging line (LALs)

LALs packaged is calculated as:

•

Total number of units packaged × Packaging unit size × Label strength

---

Example 13B

A packaging run of ethanol with 5% methanol on 1 October 2024 recorded:

•

500ml bottles, 95.0% label strength

•

actual alcoholic strength 95.0% (a.v.)

•

total quantity available for packaging 2,000 LALs

•

total number of units packaged 4,080 bottles

•

average fill per package 501.0ml

•

product captured and returned to bulk storage 13.7 litres at 95%a.v. = 13.0 LALs

•

samples taken from the packaging line (LALs) 6 bottles = 2.8 LALs

•

LALs packaged = 4080 × 500ml × 95%a.v. = 1,938 LALs

•

Net LALs available for packaging = 2,000 less 13 less 2.8 = 1,984.2 LALs

% efficiency = (LALs packaged × 100) ÷ Net LALs available for packaging
% efficiency = (1938.0 LALs × 100) ÷ 1,984.2 LALs
% efficiency = 97.7%


---

If packaging efficiency falls below historical performance, you should investigate.

Denaturer operations – packaged storage

An audit trail that traces underbond excisable product as it moves in and out of your packaged storage area allows you to account for the excisable goods to our satisfaction.

For each product line, we recommend:

•

product identification details, for example, type

•

packaging unit size, for example, 500ml bottle

•

label strength

•

date, unit quantity in

•

date, unit quantity out

•

excise clearance type, for example, excise return, remission, underbond removal

•

running balance

•

losses and gains.

Periodic stocktakes are as much about your good governance as they are about an excise obligation. We recommend regular stocktakes to:

•

establish the accuracy of stock records

•

detect omissions or errors in stock records, and

•

identify security issues such as theft, plant and equipment problems.

As part of the stock reconciliation process, stock records are adjusted to reflect the stocktake results. In some circumstances stocktake gains may be offset against unaccounted shortages when calculating duty payable on packaged stock losses.

For more offsetting stock shortages against stock surpluses, refer to Section 6.3.8 Accounting for excisable alcohol products.

You do not need to create additional records, as the necessary details should be part of your normal commercial documentation.

13.4.5 RECYCLING OR REDISTILLATION OF CONCESSIONAL SPIRIT

You must not remove all or part of a denaturing substance from spirit classified to subitem 3.8 of the Schedule to the Excise Tariff Act without our permission. ^[407]

We may give permission, for example, where denatured spirit is used and re-used as a solvent in an industrial or manufacturing process.

13.4.6 TOLERANCES ON QUANTITIES DELIVERED OR RECEIVED

It may be inconvenient to apply for minor adjustments to the approved quantities shown on permits. To simplify your administration and reduce your compliance costs, we allow a tolerance on maximum quantities delivered.

All clients may receive a maximum of 105% of the quantity of spirit approved on their current permit without requiring an adjustment. For example, a permit for 200 litres will allow the delivery of up to 210 litres without further approval.

The concessional spirit manufacturer or supplier must enter the full amount delivered on the delivery documents and maintain a cumulative total of the quantities delivered to the client. The manufacturer or supplier must ensure that the extended limit is not exceeded.

13.5 PROCEDURES

13.5.1 APPLYING FOR A PERMIT

To obtain a permit to receive concessional spirits, you must complete an Application for approval to use spirits .

We will consider your application and advise you of our decision within 28 days of receiving all necessary information. We may decline to issue you with a permit, for example, if you are not using the spirit for an approved purpose as part of a business or you have a history of poor compliance with other laws we administer. We may also place a condition on your permit if we consider it necessary to do so.

To contact us, phone 1300 137 290 .

Our staff will:

•

discuss your particular circumstances with you

•

give you advice about the appropriate permit

•

explain how to apply

•

explain your ongoing obligations as a permit holder, and

•

provide you with a permit application form.

There is no charge for a permit to receive concessional spirit.

Lodging an application

You need to complete the relevant form to apply for a permit to receive concessional spirit.

You can lodge your completed application form and supporting documents via:

•

ATO Online Services , or

•

write to us at

Australian Taxation Office
PO Box 3514
ALBURY NSW 2640

You must not possess or have custody or control of concessional spirit before your permit has been granted. ^[408]

We will process your application within 28 days of the date we receive all required information.

13.5.2 APPLYING TO AMEND OR RENEW A PERMIT

You will need to apply to amend your permit if you:

•

want to increase the amount of spirit that you are allowed to receive

•

want to add to, or change details of, your nominated supplier (or suppliers)

•

change your end use, or

•

move premises.

You will be notified when your permit is about to expire and invited to renew it. Renewal of a permit is not automatic and you must apply to renew your permit before it expires.

You should apply to amend or renew current permits in writing by email or by telephoning us on 1300 137 290 .

13.5.3 APPLYING FOR A DENATURING FORMULA TO BE APPROVED

Applications for approval of formulas (for the purposes of subitem 3.8 of the Schedule) must be made in writing to us and contain the following information:

•

details of the formula

•

specifications for the denaturants used, and

•

technical specifications for the effects of the denaturant in terms of smell, taste and toxicity in a quantity of alcohol at a strength of 5% by volume.

We will advise you of the outcome of your application in writing.

Approved formulas specify the minimum quantity of denaturant that must be used and are set out in Excise (Denatured spirits) Determination 2016 (No. 3) .

13.5.4 MORE INFORMATION

If you need more information on concessional spirit, 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 electronic requests within 28 business days. We will ordinarily finalise private rulings within 28 days of receiving all necessary information. If we cannot respond within 28 days, we will contact you within 14 days to obtain more information or negotiate an extended response date.

13.6 PENALTIES THAT CAN APPLY IN RELATION TO CONCESSIONAL SPIRIT

The following are the penalties that may apply after conviction for an offence.

Manufacture

If you manufacture excisable alcohol products without a manufacturer licence, the penalty is 2 years in prison or the greater of 500 ' penalty units ' and 5 times the amount of duty that would have been payable if the goods had been entered for home consumption on the penalty day. ^[409]

If you manufacture excisable alcohol products contrary to the Excise Act or any conditions specified in your licence the penalty is a maximum of 2 years in prison or 500 penalty units. ^[410]

If you manufacture excisable alcohol products at premises that are not covered by your licence, the penalty is 2 years in prison or the greater of 500 penalty units and 5 times the amount of duty that would have been payable if the goods had been entered for home consumption on the penalty day. ^[411]

If you abstract a denaturing substance from spirit that has been delivered into the Australian domestic market, without permission, the penalty is a maximum of 50 penalty units. ^[412]

Move, alter or interfere

If you move underbond excisable alcohol products without approval, 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 alcohol products. ^[413]

Note: this includes moving underbond excisable alcohol products from your premises to any other location or for export.

If your movement of underbond excisable alcohol products does not comply with the permission to move the underbond excisable alcohol products, 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 alcohol products. ^[414]

If you move, alter or interfere with excisable alcohol products 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 alcohol products. ^[415]

Deliver

If you deliver excisable alcohol products into the Australian domestic market contrary to your 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 alcohol products. ^[416]

Records

If you do not keep, retain and produce records in accordance with ' section 50 ' of the Excise Act, the penalty is a maximum of 30 penalty units.

Directions

If you do not comply with a direction in regard to what parts of the factory can be used for various matters, the penalty is a maximum of 10 penalty units. ^[417]

False or misleading statements

If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units.

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. ^[418]

Evade

If you evade the payment of any duty that is payable, the maximum penalty is 5 times the amount of duty evaded or where a court cannot determine the amount of that duty the penalty is a maximum of 500 units. ^[419]

Facilities etc.

If you do not provide all reasonable facilities for enabling us to exercise our powers under the Excise Act, the penalty is a maximum of 10 penalty units. ^[420]

If you do not provide sufficient lighting, correct weights and scales, and all labour necessary for weighing material received into and all excisable alcohol products manufactured in your factory, and for taking stock of all material and excisable alcohol products contained in your factory, the maximum penalty is 10 penalty units. ^[421]

If we mark or seal excisable alcohol products or fasten, lock or seal any plant in your factory and you alter, break or erase the mark, seal, fastening or lock, the maximum penalty is 50 penalty units. ^[422]

13.7 TERMS USED

Deliver into the Australian domestic market

'Deliver into the Australian domestic market' ^[423] is the term we use in this manual for when excisable alcohol products are released into domestic consumption. The term used in the legislation is 'deliver for home consumption'.

Normally, this will be by delivering the goods away from premises covered by a licence but includes using those goods yourself (for example, sales to staff).

The term 'home consumption' is not defined in the Excise Act and there is no definitive case law that looks at the issue in question. However there are several cases where issues closely related to it are considered. ^[424]

The conclusion drawn from those cases is that 'home consumption' refers to the destination of goods as being within Australia as opposed to exporting them.

Excisable alcohol products

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, or an Excise Tariff alteration, and manufactured in Australia.

As this Guide deals with alcohol products, we have used the term excisable alcohol products.

Excisable alcohol products include:

•

beer

•

spirits

•

premixed drinks known as ready-to-drink (RTD) beverages

•

brewed beverages that are not beer, and

•

spirit for non-beverage use, including denatured spirit.

Excise control

Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market or for export.

Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.

Excise return

An excise return ^[425] is the document that you use to advise us the volume of excisable alcohol products that you:

•

have delivered into the Australian domestic market during the period designated on your PSP, or

•

wish to deliver into the Australian domestic market following approval.

Penalty units

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 .

Section 50 direction

This is a written instruction issued under section 50 of the Excise Act to a licensed manufacturer, or proprietor of premises covered by a storage licence, to keep specified records, furnish specified returns, retain records for a specified period and produce those records on demand by us. The written instruction is incorporated into the licence conditions.

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 the Commissioner's 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.

13.8 LEGISLATION (quick reference guide)

In this Chapter, we have referred to the following legislation:

•

Excise Act 1901

–

section 16 – right to require security

–

section 20 – new sureties

–

section 24 – excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods

–

section 25 – only licensed manufacturers to manufacture excisable goods

–

section 26 – licensed manufacturers to manufacture in accordance with Act and licence

–

section 27 – licensed manufacturers to manufacture only at licensed premises

–

section 49 – facilities to officers

–

section 50 – record keeping

–

section 51 – collector may give directions

–

section 52 – weights and scales

–

section 58 – entry for home consumption etc.

–

section 61 – control of excisable goods

–

section 61A – permission to remove goods that are subject to CEO's control

–

section 61C – permission to deliver certain goods for home consumption without entry

–

section 77FD – spirit for fortifying Australian wine or Australian grape must

–

section 77FE – spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose – class determinations

–

section 77FF – spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose – specific approvals

–

section 77FH – when an amount is payable on spirit covered by section 77FD, 77FE or 77FF

–

section 77FJ – person must not abstract denaturing substances in spirit classified to subitem 3.8

–

section 92 – seals etc. not to be broken

–

section 117 – unlawful possession of excisable goods

–

section 117A – unlawfully moving excisable goods

–

section 120 – offences

•

Excise Tariff Act 1921

–

The Schedule

•

Crimes Act 1914

–

4AA – penalty units

---

Amendment history

APPENDIX A

Non-exhaustive list of activities that have previously been approved for concessional spirit permits:

•

cake manufacture

•

cosmetics

•

essences

•

extraction of flavour

•

foodstuff manufacture

•

fortification of Australian wine or Australian grape must

•

mouth washes

•

perfumes

•

preservation of specimens

•

printing inks

•

refrigeration

•

sterilisation of factory equipment

•

tinctures

•

titration or lab work

•

vaccines.

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