ATO Interpretative Decision

ATO ID 2006/90 (Withdrawn)

Excise

• This ATO ID is withdrawn due to legislative amendment contained in Excise Tariff Amendment (2009 Measures No. 1) Act 2009 which increased the excise rate of other excisable beverages not exceeding 10% by volume of alcohol to be the same rate as other excisable beverages exceeding 10% by volume of alcohol. This law took effect on 27 April 2008.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Are 'other excisable beverages' with an alcoholic strength greater than 10% by volume at the time of payment of excise duty under an ad hoc entry, but which are subsequently diluted by the end consumer to an alcoholic strength that does not exceed 10% by volume prior to drinking, able to be classified to Item 2 of the Schedule to the Excise Tariff Act 1921 (the Schedule)?

Decision

No. 'Other excisable beverages' with an alcoholic strength greater than 10% by volume at the time of payment of excise duty under an ad hoc entry, but which are subsequently diluted by the end consumer to an alcoholic strength that does not exceed 10% by volume prior to drinking, cannot be classified to Item 2 of the Schedule.

Facts

A client manufactures an other excisable beverage (as defined in the Schedule) in a concentrated form. The alcohol content of the beverage is greater than 10% by volume.

The concentrates are bottled and are entered into home consumption in this form.

The labels on the bottles include mixing instructions, which when followed, result in the mixed product having an alcoholic strength that does not exceed 10% by volume prior to consumption by the end user.

The client holds an excise manufacturer's licence. The licence conditions require the client to enter goods on an ad hoc basis and pay duty at the time of entry (the Tax Office will not pass an entry unless the entry is accompanied by the requisite duty).

Reasons for Decision

Excise is imposed by section 5 of the Excise Tariff Act on goods dutiable under that Act that are manufactured or produced in Australia (excisable goods).

Excisable goods are entered, and duty is paid on those goods under subsection 54(1) of the Excise Act 1901, which states:

The licensed manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, shall pay to the Collector, in accordance with this Act, the Excise duty on those goods.

Section 59 of the Excise Act provides that the rate of duty payable on excisable goods is the rate in force when the goods are delivered into home consumption under subsection 61C(2) of the Excise Act or the rate in force when payment is made, whichever is earlier. Section 61C of the Excise Act relates to the delivery of good without entry pursuant to a permission granted by the Commissioner. As, under the terms of the client's licence, the client is required to enter goods on an ad hoc basis, subsection 61C(2) of the Excise Act is not relevant. Therefore, the rate that is in force when the payment of duty is made will be applicable to the client's situation.

The Schedule sets out different rates of excise duty depending on whether or not the particular other excisable beverage has an alcoholic strength exceeding 10% by volume. Item 2 of the Schedule pertains to other excisable beverages that have an alcoholic strength that does not exceed 10%.

The process of entering goods is set out in section 58 of the Excise Act. That is, an entry is made (lodged) by the owner or manufacturer and passed by an officer for either entry into home consumption or removal to an approved place. The client pays duty at the time of entry as the Tax Office will not pass an entry unless the entry is accompanied by the requisite duty.

As stated earlier, the effect of section 59 of the Excise Act is that in the absence of a weekly settlement permission under section 61C of the Excise Act, the rate of excise duty payable must be determined at the time that payment is made.

In this instance, the client pays excise duty at the time of entry. As the client cannot deliver the beverage into home consumption until the entry is passed, payment of the duty must occur prior to the goods becoming available to customers who dilute the beverage to an alcoholic strength not exceeding 10% by volume. Therefore, the rate of excise duty must be determined when the beverage is still at an alcoholic strength exceeding 10% under subitem 3.2 of the Schedule.

Accordingly, other excisable beverages that have an alcoholic strength of greater than 10% by volume at the time of payment of excise duty under an ad hoc entry, but which are subsequently diluted by the end consumer to an alcoholic strength that does not exceed 10% by volume prior to drinking, cannot be classified to Item 2 of the Schedule.

Amendment History

Legislative References:
Excise Act 1901
   subsection 54(1)
   section 58
   section 59
   subsection 61C(2)

Keywords
Alcohol excise
Delivered for home consumption
Excise
Excise Alcohol Industry Group
Excise collections
Spirit excise

Siebel/TDMS Reference Number:  3476682

Business Line:  Indirect Tax

Date of publication:  31 March 2006

ISSN: 1445-2782