Excise guidelines for the tobacco industry

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07 - REMISSIONS, REFUNDS, DRAWBACKS & EXEMPTIONS.

7.1 PURPOSE

7.2 INTRODUCTION

7.3 POLICY AND PRACTICE

7.3.1 WHEN CAN I APPLY FOR A REMISSION OF EXCISE DUTY?

7.3.2 WHEN CAN I APPLY FOR A REFUND OF EXCISE DUTY?

7.3.3 WHEN CAN I APPLY FOR A DRAWBACK OF EXCISE DUTY?

7.3.4 WHAT HAPPENS IF I AM OVERPAID A REFUND OR DRAWBACK?

7.3.5 WHEN ARE EXCISABLE TOBACCO PRODUCTS EXEMPT FROM EXCISE DUTY?

7.4 PROCEDURES

7.4.1 HOW DO I APPLY FOR A REMISSION OR REFUND?

7.4.2 HOW DO I APPLY FOR A DRAWBACK?

7.4.3 WHAT DO I DO IF I NEED MORE INFORMATION?

7.5 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO REMISSIONS, REFUNDS, DRAWBACKS AND EXEMPTIONS?

7.6 TERMS USED

7.7 LEGISLATION (QUICK REFERENCE GUIDE)

7.1 PURPOSE

This chapter deals with:
  • when you can apply for a remission, refund or drawback
  • what happens if you are overpaid a refund or drawback
  • when tobacco products are exempt from excise duty
  • who can access tobacco products free of excise duty
  • how to apply for a remission, refund or drawback, and
  • 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. A refund is the repayment of duty that has already been 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. [192]

7.3 POLICY AND PRACTICE

7.3.1 WHEN CAN I APPLY FOR A REMISSION OF EXCISE DUTY? You can apply for a remission of excise duty payable on your excisable tobacco products if the following circumstances apply while the goods are subject to excise control :
  1. Where the tobacco products have deteriorated or been damaged, pillaged, lost or destroyed, or become unfit for human consumption [193]
    In an Excise context, 'pillaged' means stolen. While a remission of excise duty is available for goods that have been pillaged, this does not prevent us from requiring an amount equal to the duty be paid by a person who has had possession, custody or control of the excisable tobacco products. Each case needs to be assessed on its own merit. However, where the person who had possession of the excisable tobacco products at the time they were pillaged was not liable to pay the duty then one person might be entitled to a remission of the duty but another person might be required to pay an amount equal to the duty.

    For more information about payment of duty see chapter 6 - Payment of duty .
    Where excisable tobacco products have deteriorated, been damaged or destroyed, or become unfit for human consumption, while they were subject to excise control, they may be subject to a remission.
    Example Cigarettes become stale, at the manufacturer's premises, after remaining unsold and the manufacturer wants to destroy them. The manufacturer applies for a remission of duty on the cigarettes. On receiving approval, the manufacturer destroys the unsaleable stock and retains records of the destruction (e.g. date, volume and type of goods destroyed).
    However, if excisable tobacco products are lost then the same circumstances will apply as described above for goods that are pillaged.
  2. Where the goods are not worth the amount of excise duty payable on the goods. [194]

    Example The goods have become unsaleable, due to changed packaging requirements, and they cannot be sold (but are not unfit for human consumption).
  3. The excisable tobacco products are for sale to diplomatic or consular missions and the goods are to be delivered under your PSP. [195]

    Example A manufacturer receives an order from a diplomatic mission for cigarettes, for official use. The manufacturer delivers the cigarettes, into the Australian domestic market (to the diplomatic mission), under the terms of their PSP. (The terms of the PSP may require the manufacturer to submit an Excise remission (NAT 4289) to us, after delivery of the cigarettes.)
7.3.2 WHEN CAN I APPLY FOR A REFUND OF EXCISE DUTY? You can apply for a refund of excise duty paid on excisable tobacco products if the following circumstances apply:
  1. Duty has been paid on excisable tobacco products, however it is later found that, while the goods were subject to excise control (i.e. while they were at the licensed site), they deteriorated or had been damaged, pillaged, lost or destroyed, or become unfit for human consumption. [196]

    Example 1 A manufacturer delivers cigarettes into the Australian domestic market and pays duty under their PSP. After the product has gone into the market, it is found to be unfit for human consumption due to a fault in the packaging. It is evident that the product became unfit for consumption while the goods were still subject to excise control. The manufacturer applies for a refund of duty on the cigarettes. Example 2 A storage licence holder who does not have a PSP pays the excise duty on tobacco products in accordance with a pre-payment return. They receive a delivery authority.  Before the tobacco products are removed from the licensed premises they are destroyed by fire. As the tobacco products were still subject to excise control when they were destroyed, the licence holder can apply for a refund of duty on the tobacco products.
  2. Duty-paid tobacco products, while the goods are subject to excise control, are not worth the amount of excise duty paid. [197]

    Example A storage licence holder who does not have a PSP pays the excise duty on tobacco products in accordance with a pre-payment return. They receive a delivery authority.  Before the tobacco products are removed from the licensed premises they become unsaleable, due to changed packaging requirements, and they cannot be sold (but are not unfit for human consumption). As the tobacco products were still subject to excise control when they became unsaleable, the licence holder can apply for a refund of duty on the tobacco products.
  3. Duty has been paid through manifest error of fact or patent misconception of the law. [198] This circumstance applies to an error that is evident, obvious or apparent and also in situations where duty has been paid for goods entering the Australian domestic market that are not in fact excisable. In both cases a refund of the duty paid would be payable.
    Example 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.


  4. Duty-paid goods have been taken up as ship's stores or aircraft's stores. [199] Ship's stores on overseas ships and aircraft's stores on international flights are not subject to excise duty. Where duty has been paid and the excisable tobacco products are subsequently re-directed for use on ships or aircraft travelling overseas, this refund circumstance may apply.
  5. Under a directive by a Minister of State, [200] duty-paid goods are withdrawn from circulation on grounds of public health or safety and returned to the manufacturer. [201]

  6. Duty paid tobacco products are returned, or are deemed to have been returned, to the manufacturer of those goods and the returned tobacco is destroyed or mixed with other tobacco products of a similar kind, i.e. loose tobacco with loose tobacco, cigarettes or cigars with tobacco that is to be used in the manufacture of cigarettes or cigars, snuff with other snuff. [202]
    Goods do not need to be returned to the place of manufacture. It is sufficient if goods are returned to storage premises licensed to the manufacturer or to premises licensed to an entity having contractual storage and distribution arrangements with the manufacturer.

    A refund will not be allowed for returned goods under this circumstance unless a notice of intention to destroy or mix the goods has been given at least seven days before that event. [203]
    Example Cigarettes have gone stale at retailers' 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. Note: refund circumstance 1 does not apply because the goods have gone stale after they passed out of excise control. 


  7. Duty has been paid on excisable tobacco products and they are sold to a diplomatic or consular mission. [204]
7.3.3 WHEN CAN I APPLY FOR A DRAWBACK OF EXCISE DUTY? You can apply for a drawback if you export tobacco products that have had excise duty paid on them. [205] We will only pay a drawback if: [206]
  • 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. [207] )
  • before exportation of the excisable tobacco products on which duty has been paid, the goods are available for inspection by us, and
  • you have not claimed a refund of excise duty in relation to the exported excisable tobacco products
  • the  excisable tobacco products will not be returned to Australia after they have been exported
  • you keep records showing:
    • that duty was paid on the tobacco products (for example invoice), and
    • the tobacco products were exported (for example, an export declaration number or bill of lading)
  • you lodge a drawback claim in the approved form no later than 12 months after the tobacco products were exported, and
  • 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. [208]
Example A cigarette distributor purchases a quantity of duty-paid cigarettes. The distributor notifies us that they intend to export the cigarettes.  They then export them to Fiji. The cigarette distributor applies for a drawback of the duty component of the cigarettes. To support the application, the company provides the Tax Office 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 WHAT HAPPENS IF I AM OVERPAID A REFUND OR DRAWBACK? If we overpay you by way of a refund or drawback then you must pay the overpaid amount back. We can require 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. [209] 7.3.5 WHEN ARE EXCISABLE TOBACCO PRODUCTS EXEMPT FROM EXCISE DUTY? Excisable tobacco products are exempt from duty if they are:
  • exported
  • sold for use as ship's or aircraft's stores [210]
  • with our approval, delivered as small samples, [211] or
  • subject to remission without application. [212]

What are ship's and aircraft's stores?

Ship's and aircraft's stores are goods for the use of passengers or crew on international journeys (e.g. cigarettes for sale to passengers on board a cruise liner). There are limits on the quantities of excisable tobacco products that are not liable to excise duty as ship's stores: [213]
  • cigarettes must be sold to passengers or crew in individual packets of not more than 25 sticks or individual tins of not more than 50 sticks
  • loose tobacco (e.g. pipe tobacco) must be sold in quantities of not more than 120 grams, or
  • Cigars must be sold in individual packets, tins, or boxes of not more than 25 cigars. 
If you supply ship's or aircraft's stores underbond , you must obtain a movement permission to move the goods from the licensed premises to the place of export.

Can I deliver samples without payment of duty?

Yes, 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:
  • be in writing
  • specify who the sample is for
  • specify the quantity for approval, and
  • specify the purpose of the sample.
You do not include approved samples in your excise return ; however, you must keep records of any samples you deliver.
To apply for approval, send your application to us by:
  • faxing (03) 9285 1168 , or
  • posting to

    Australian Taxation Office

    GPO Box 4525

    MELBOURNE, VIC, 3001

When are excisable tobacco products subject to remission without application?

Excisable tobacco products are subject to remission without application (this effectively means they are exempt from duty) when they are for official use but not for trade by: [214]
  • parties that use tobacco for an approved medical, scientific, horticultural or agricultural purpose (the relevant approvals should be sought from us) [215]
  • the Governor-General or any member of the Governor-General's family
  • State Governors or any member of a State Governor's family
  • the Australian American Foundation (Australian-American Fulbright Commission)
  • the Government of another country, under an agreement between that Government and the Australian Government,
  • persons covered by a Status of Forces Agreement, and
  • the personnel of sea-going vessels of the Royal Australian Navy (RAN) or Australian Military Forces (AMF) (see below for more detail).

If you are not certain whether someone falls into one of these categories, you should contact us by phone on 1300 137 295 .
Some restrictions apply to tobacco products 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:
    • such vessels are in full commission, and
    • the products are consumed on such vessels. [216]
To supply tobacco products 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.
You do not have to apply for a remission and you do not have to include these products on your excise return.

7.4 PROCEDURES

7.4.1 HOW DO I APPLY FOR A REMISSION OR REFUND? An application for a remission or refund must be submitted in writing. Records to substantiate your claims must be maintained and produced when requested. [217] For refund circumstance 1, 2, 3 or 4 in section 7.3.2 above, your application must be submitted within 14 days of the date on which the excise duty was paid. However, this time may be extended to within 12 months of payment depending on your circumstances. [218] To ensure the excisable tobacco products do not find their way into the Australian domestic market we may wish to inspect or supervise the disposal of the goods. If underbond goods must be destroyed off site, you must apply for a movement permission to move them from the licensed premises to the place of destruction.

You should contact us before moving or destroying any tobacco products subject to remission or refund. We will provide you with direction and advise if the goods are to be inspected or the destruction supervised.

For more information about movement permissions refer to chapter 4 - Movement permissions .
You can elect to have a refund credited to your excise account or paid directly into your bank account.

To apply for a remission, send us a completed Excise remission (NAT 4289). You can use the Excise remission instructions (NAT 15769) to help you complete this form.

To apply for a refund, send us a completed Excise refund (NAT 4288). You can use the Excise refund instructions (NAT 15771) to help you complete this form. Applications can also be made on company letterhead as long as all the relevant information is provided.
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.

For more information about your review rights refer to chapter 8 - Reviews and objections .
7.4.2 HOW DO I APPLY FOR A DRAWBACK? To apply for a drawback of duty, send us a completed Excise drawback (NAT 4287)or an application on your business letterhead. You can use the Excise drawback instructions (NAT 15688) to help you complete NAT 4287. 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.

For more information about your review rights refer to chapter 8 - Reviews and objections .
7.4.3 WHAT DO I DO IF I NEED MORE INFORMATION? If you need more information on remissions, refunds, drawbacks and exemptions contact us as follows:
  • phone 1300 137 295
  • fax (03) 9285 1168 , or
  • write to us at

    Australian Taxation Office

    PO Box 3001

    PENRITH, NSW, 2740
We will ordinarily respond to written information requests 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 WHAT PENALTIES CAN APPLY TO OFFENCES IN RELATION TO REMISSIONS, REFUNDS, DRAWBACKS AND EXEMPTIONS?

The following are the penalties that may apply after conviction for an offence. Evade If you evade payment of any duty which is payable the maximum penalty is 5 times the amount of duty on the excisable tobacco products. [219] 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, a penalty not exceeding the sum of 50 penalty units and twice the amount of duty payable on those goods. [220]

7. 6 TERMS USED

Excisable tobacco products 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 to the Excise Tariff. As these guidelines deal with tobacco products, we have used the term excisable tobacco products. Excisable tobacco products include:
  • tobacco
  • cigars
  • cigarettes, and
  • snuff.
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 [221] is the document that you use to advise us:
  • the volume of excisable tobacco products that you have delivered into the Australian domestic market during the period designated on your PSP, or
  • the volume of excisable tobacco products that you wish to deliver into the Australian domestic market following approval.
Penalty units A penalty unit is specified in section 4AA of the Crimes Act 1914 and, at the time of writing, is $110. 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 excise 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.

7.7 LEGISLATION (quick reference guide)

In this chapter we have referred to the following legislation: 7.7.1 Excise Act 1901 Section 24 - Excisable goods and goods liable to duties of Customs may be used in manufacturing excisable goods Section 58 - Entry for home consumption etc. Section 64 - Delivery of samples free of duty Section 78 - Remissions, rebates and refunds Section 79 - Drawbacks Section 80 - Recovery of overpayments of refunds, rebates, and drawbacks Section 120 - Offences Section 160A - Ship's stores and aircraft's stores 7.7.2 Excise Regulations 1925 Regulation 33 - Approval for uses and destruction of tobacco leaf Regulation 50 - Circumstances under which refunds, rebates and remissions are made Regulation 50A - Other circumstances under which refunds, rebates and remissions are made Regulation 51 - Requirements for remission, rebate or refund Regulation 52 - Application for remission, rebate or refund Regulation 53 - Period for making of application Regulation 55 - Tobacco products to have lost their identity Regulation 76 - Drawback of excise duty on goods Regulation 78A - Conditions relating to payment of drawback of duty Regulation 78B - Amount of claim for drawback of excise duty Regulation 186 - Interpretation Schedule 1 - Prescribed circumstances ( regulation 50A ) 7.7.3 Excise Tariff Act 1921 The Schedule 7.7.4 Crimes Act 1914 Section 4AA - Penalty units
OUR COMMITMENT TO YOU The information in this publication is current at August 2008. This publication is an expression of the Commissioner's opinion on the operation of tobacco excise legislation. This publication is not legally or administratively binding on the Commissioner and is not a 'public ruling' for the purposes of Section 105-60 or Division 358 of Schedule 1 to the Taxation Administration Act 1953 . The law does not provide for legally binding rulings on tobacco excise legislation. If you feel this publication does not fully cover your circumstances, please seek help from the Tax Office or a professional adviser. Since we regularly revise our publications to take account of any changes to the law, you should make sure this edition is the latest. The easiest way to do this is by checking for a more recent version on our website at www.ato.gov.au
Excise guidelines for the tobacco industry
  Date: Version:
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  1 September 2014 Updated document
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