Excise guidelines for duty-free shops
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
8 ACCOUNTING FOR EXCISABLE GOODS
8.1 PURPOSE
This Chapter deals with:
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- accounting for ' excisable goods '
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- how to work out the amount of duty to pay
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- what to do if you have a dispute as to the duty
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- destruction of deteriorated stock
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- how to lodge duty-free operator returns, and
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- penalties that can apply to offences in relation to accounting for goods.
8.2 INTRODUCTION
In general terms, duty-free shops will not pay duty. However, excise duty will be payable when excisable goods are not taken overseas or are unable to be accounted for – for example, stock shortages.
This Chapter explains when and how to pay excise duty.
8.3 POLICY AND PRACTICE
8.3.1 ACCOUNTING FOR EXCISABLE GOODS
If you have, have had, or have been entrusted with possession, custody or control of any excisable goods [211] (subject to ' excise control' ), you have to be able to satisfactorily account for them.
If we ask you to account for excisable goods and you cannot satisfactorily do so, we may demand payment of an amount equal to the duty. Our demand will be given in writing. The amount you are required to pay is calculated using the rate of duty in force on the day the demand is made.
When requested to account for excisable goods, you must be able to show that:
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- the goods are still at your premises
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- the goods have otherwise been dealt with in accordance with the law (for example, moved under a movement permission or delivered to a ' relevant traveller ')
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- duty was not payable (for example, where a ' remission ' applied), or
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- duty has been paid.
Excisable goods will not have been accounted for satisfactorily just because they were:
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- given away for promotional purposes [212]
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- stolen from premises covered by a licence [213] , or
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- ' delivered into the Australian domestic market ' under the mistaken belief that they were not excisable. [214]
We may also demand payment from you if you have failed to keep excisable goods safely (for example, if you have a break-in and a theft occurs, you will be required to pay an amount equal to the excise duty that would have applied to the excisable goods that have been stolen).
Our decision to demand payment is a reviewable decision. [215]
In determining whether you have accounted for the excisable goods, we may allow you to offset any stock shortages and surpluses.
Example 8A
A duty-free shop is asked to account for their excisable alcohol products. They carry out a stocktake and there is a surplus of 50 one-litre bottles of Brand X gin at 40% by volume of alcohol and a shortage of 200 one-litre bottles of Brand Y gin at 40% by volume of alcohol.
We will allow the duty-free shop to offset the surplus and shortage. Therefore, there are 150 bottles that have not been accounted for.
A demand will be issued for an amount equal to the excise duty payable on the 150 bottles.
The duty-free shop corrects book stock to take up the surplus floor stock of 50 bottles and, when the demand is paid, write off the shortage of 200 bottles.
Example 8B
A duty-free shop is asked to account for their excisable alcohol products. They carry out a stocktake and there is a surplus of 25 one-litre bottles of Brand A Australian rum at 38% by volume of alcohol and a shortage of 10 one-litre bottles of Brand B Australian whisky at 38% by volume of alcohol.
We will allow the duty-free shop to offset the surplus and shortage. Therefore, there are no bottles that have not been accounted for but there is a surplus of 15 bottles.
The licence holder corrects book stock to take up the surplus floor stock of 25 bottles of rum and write-off the shortage of 10 bottles of whisky.
8.3.2 WORKING OUT THE AMOUNT OF DUTY
To work out how much duty you need to pay, you need to:
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- check whether your goods are excisable goods according to the Schedule to the Excise Tariff Act [216] and identify the correct duty rate
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- work out the quantity of excisable goods subject to duty in each tariff sub-item
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- multiply the quantity of excisable goods by the rate of duty on the excisable goods, and
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- add up the total for each sub-item to work out total duty to be paid.
(i) Classifying excisable goods
The Schedule to the Excise Tariff Act lists those goods that, if manufactured in Australia, are subject to excise. The Schedule also contains the rate of duty applicable to the goods. For excisable alcohol, an extract of the Schedule is as follows:
Table 1: Extract regarding excisable alcohol from the Schedule
* Rate of duty as at 4 August 2025. For current rates of duty, refer to Excise duty rates for alcohol .
(ii) Working out quantities of excisable goods
Duty for excisable alcohol products is levied on the alcohol by volume and not on the total volume of the product – that is, you do not pay duty on the water contained within the product.
Alcohol is measured in total litres of alcohol (LALs), which is calculated by measuring the total volume and multiplying it by the strength.
Example 8C
On 18 August 2025 following a stocktake, My Duty-Free Shop identified 2 cartons of Australian brandy and one carton of Australian gin missing. The brandy is classified under subitem 3.1 of the Schedule and the gin is an 'other excisable beverages exceeding 10% by volume of alcohol' classified under subitem 3.2.
The dutiable quantity of alcohol in the 2 cartons of brandy, each containing 12 × 700 ml bottles, at 37.2% alcohol by volume is:
2 cartons × 12 bottles × 0.7 litres = 16.8 litres × 37.2% = 6.24 LALs.
The dutiable quantity of alcohol in the one carton of gin, which contains 12 × 700 ml bottles at 40.0% alcohol by volume is:
1 carton × 12 bottles × 0.7 litres = 8.4 litres × 40% = 3.36 LALs.
Precision requirements for calculations and reporting
The acceptable level of precision for working out LALs is 2 decimal places.
When completing your ' duty-free operator return ', the dutiable quantity in LALs for goods classified to a particular tariff item or sub-item in the Schedule may be truncated to one decimal place. Truncation to one decimal place means that anything after the first decimal place is disregarded.
Example 8D
The dutiable total for missing goods identified by My Duty-Free Shop under sub-item 3.1 of the Schedule is 6.24 LALs, plus 3.36 LALs for goods under subitem 3.2.
On the duty-free operator return, My Duty-Free Shop reports the dutiable totals as:
Sub-item 3.1: 6.2 LALs
Sub-item 3.2: 3.3 LALs.
Excise duty is worked out on the basis of the truncated totals.
(iii) Calculating duty payable on excisable goods
The rates of duty are set in the table in the Schedule. The rates of duty on excisable alcohol is subject to change. They are indexed twice a year in accordance with increases in the CPI (in February and August). [217] For ease of reference, we provide tables with up-to-date duty rates, incorporating indexation changes, at Excise duty rates for alcohol .
The rate of duty you use is the rate contained in the working tariff for the sub-item.
Example 8E
On 18 August 2025, My Duty-Free Shop discovers a shortage of ' underbond ' brandy and underbond gin.
The brandy is classified to sub-item 3.1 of the Schedule. The gin is an 'other excisable beverages exceeding 10% by volume of alcohol', classified to sub-item 3.2.
The rate of duty that applies is the rate in force at the time the stocktake was conducted on 18 August 2025:Sub-item 3.1: $98.97 per litre of alcoholSub-item 3.2: $105.98 per litre of alcohol.
Example 8F
Continuing on from the previous examples in this Chapter, on 18 August 2025, My Duty-Free Shop discovers a shortage of 2 cartons, each containing 12 × 700ml bottles of brandy at 37.2% alcohol by volume, and one carton containing 12 × 700ml bottles of gin at 40.0% alcohol by volume.
The brandy is classified to sub-item 3.1 of the Schedule and has a duty rate of $98.97 per litre of alcohol (as at 4 August 2025).
Therefore, the duty payable is calculated as:2 cartons × 12 bottles × 0.7 litres each = 16.8 litres16.8 litres × 37.2% = 6.24 LALs6.24 LALs truncated to one decimal point = 6.2 LALs6.2 LALs × $98.97 = $613.614The duty of $613.614 is truncated to 2 decimal points = $613.61.
The gin is classified to sub-item 3.2 of the Schedule and has a duty rate of $105.98 per litre of alcohol (as at 4 August 2025).
Therefore, the duty payable is calculated as:1 carton × 12 bottles × 0.7 litres each = 8.4 litres8.4 litres × 40.0% = 3.36 LALs3.36 LALs truncated to one decimal point = 3.3 LALs3.3 LALs × $105.98= $349.734The duty of $349.734 is truncated to 2 decimal points = $349.73.
(iv) Calculating total duty payable
Duty payments are notified to us by including details on your duty-free operator return. Excisable goods classified to different items or sub-items in the Schedule must be shown separately on your duty-free operator return on what are referred to as 'lines'.
Example 8G
My Duty-Free Shop needs to report deliveries for the period ended 31 August 2025.
On their duty-free operator return, My Duty-Free Shop reports their duty liability as per Table 2 of this Guide.
Table 2: Duty liability reported by My Duty-Free Shop
Line Tariff item Quantity Units Duty rate Excise amount 1 3.1 6.2 LALs $98.97 $613.61 2 3.2 3.3 LALs $105.98 $349.73
The total excise amount was $963.34.
You may deposit with us the amount of duty demanded if you dispute [218] :
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- the amount of duty
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- the rate of duty, or
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- the liability of goods to duty (for example, whether the goods are excisable).
The deposit of this duty is to be made on a duty-free operator return. The duty-free operator return should be accompanied by a letter which sets out the details of the dispute.
The deposit you make will be the proper duty, unless you commence court action against us within 6 months after you make the deposit and that action is determined in your favour.
If any action is determined in your favour, any excess of the deposit over the proper duty will be refunded to you along with payment of interest, calculated at 5% per annum, unless we are of the opinion that any evasion under the Excise Act has been committed or attempted.
If the action is not commenced within 6 months or the court does not find in your favour, the amount deposited is taken to be the correct amount of duty.
However, if you have received a private ruling and subsequently lodge an objection that relates to the amount or rate of duty, or the liability of goods to duty, you cannot commence court action to recover your deposit on grounds that are, or could have been, in your objection [219]
8.4 PROCEDURES
8.4.1 DESTRUCTION OF DETERIORATED STOCK
If excisable goods under your control need to be destroyed for any reason (for example, old stock or damaged), there are special procedures that must be followed.
8.4.2 LODGING DUTY-FREE OPERATOR RETURNS AND PAYING EXCISE DUTY
You can find information on how to complete and lodge your duty-free operator return at Duty-free operator return . Alternatively, phone 1300 137 290 to obtain a paper copy of the duty-free operator return.
You can pay excise duties:
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- by electronic funds transfer, including direct credit and BPAY
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- in person at a post office
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- by credit card, or
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- by mail (cheque or money order).
If you pay the excise duty at a post office, you must use a payment advice. To obtain a payment advice booklet, phone us on 13 72 26 or 1800 815 886 – you will need your Australian business number (or Excise identification number) and client account number.
If you need more information on excise as it relates to duty-free shops, contact us via ATO Online Services or the other options listed on Contact us about excisable alcohol .
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.
8.5 PENALTIES THAT CAN APPLY IN RELATION TO ACCOUNTING FOR EXCISABLE GOODS
The following are the penalties that may apply after conviction for an offence.
If you move, alter or interfere with excisable goods 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 goods. [220]
Note: this includes moving underbond excisable goods from your premises to any other location or for export.
If you deliver excisable goods 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 goods. [221]
If you do not keep, retain and produce records in accordance with a ' direction under section 50 ' of the Excise Act, the penalty is a maximum of 30 penalty units.
If you evade payment of any duty which is payable, the maximum penalty is 5 times the amount of duty on the excisable goods or, where a court cannot determine the amount of that duty, the penalty is a maximum of 500 penalty units. [222]
False or misleading statements
If you make a false or misleading statement to us, the penalty is a maximum of 50 penalty units. [223]
8.6 TERMS USED
Deliver into the Australian domestic market
Deliver into the Australian domestic market [224] is the term we use in this Guide for when excisable goods 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. [225]
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.
A duty-free operator return is a document that you use if you operate a duty-free store that is:
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- on-airport – to report stocktake shortages or surpluses of excisable alcohol goods
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- outwards off-airport – to report missed or found dockets and stocktake shortages or surpluses of excisable alcohol goods, or
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- where you also hold a licence to store excisable alcohol goods at a site that is not a duty-free store – to report any shortages or surpluses of stock at your storage site.
Excisable goods are goods on which excise duty is imposed. Excise duty is imposed on goods that are listed in the Schedule, and manufactured or produced in Australia.
For operators of duty-free shops, this will include:
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- alcohol goods that are produced or manufactured in Australia and are subject to excise, and
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- imported alcohol goods that have undergone a process of manufacture or production in Australia – for example, high-strength imported whisky which has been reduced by adding water (in Australia) before it is bottled, constitutes manufacture or production for excise purposes. Vodka imported in bulk and repackaged in Australia, does not constitute manufacture for excise purposes.
This will not include:
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- other imported alcohol goods (because these goods are subject to customs duty)
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- wine (which is generally subject to wine equalisation tax), and
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- cigarettes and other tobacco goods as there is currently no licensed manufacture of tobacco in Australia.
Examples of excisable goods include Australian-made:
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- beer
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- spirits, and
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- pre-mixed drinks known as ready-to-drink beverages.
Section 7 of the Excise Act refers to the CEO as having 'general administration of this Act'. In this Guide, we will also refer to this general administration as excise control.
Goods are subject to excise control from the point of manufacture until they have been delivered into the Australian domestic market (referred also as to home consumption [226] ) or for export.
Goods subject to excise control cannot be moved, altered or interfered with except as authorised by the Excise Act.
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 .
A relevant traveller is:
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- for outwards duty-free shop purposes – a person who intends to make an international flight or international voyage, whether as a passenger on, or as a member of the crew (or the pilot or master) of an aircraft or ship [227]
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- for inwards duty-free shop purposes – a person who has arrived in Australia on an international flight, whether as a passenger on, or as a member of the crew (or the pilot) of, an aircraft and has not been questioned, for the purposes of the Customs Act 1901, by an officer of Customs, in respect of goods carried on that flight. [228]
A remission of excise duty extinguishes the liability for duty that was created at the point of manufacture, in prescribed circumstances.
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.
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.
Amendment history
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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
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| 7 January 2022 | Updated document | |
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Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
