ATO Interpretative Decision

ATO ID 2009/10 (Withdrawn)

Excise

• This ATO ID is withdrawn because of legislative changes to the definition of beer that took effect on 28 August 2009. These legislative changes apply in relation to beverages manufactured or produced on or after 28 Aug 2009.
  Despite the withdrawal of this ATOID it still continues to be a precedential view in respect of beverages manufactured or produced on or before 27 August 2009.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Does a beverage that contains less than 0.01 parts per million Alpha acid and less than 0.1 parts per million iso-Alpha acid meet the requirement in the definition of 'beer', in the Schedule to the Excise Tariff Act 1921 (Tariff Act), that the beverage contain hops or extracts thereof?

Decision

No. A beverage that contains less than 0.01 parts per million Alpha acid and less than 0.1 parts per million iso-Alpha acid does not meet the requirement that the beverage contain hops or extracts thereof.

Facts

An entity is a manufacturer of alcoholic beverages

The product is manufactured from the following:

•

water

•

malted cereal

•

other fermentable carbohydrates

•

yeast

•

sugar

•

food acids

•

flavour

•

preservative

It is stated that the beverage contains hops extract.

An aqueous extract is produced as a result of the yeast fermentation of the malted cereal and other fermentable carbohydrates. It does not have alcohol added to it from any other source. It does not contain any other bitters.

The aqueous extract is then subjected to a filtration process.

The aqueous extract is blended with sugar, food acids, flavour and a preservative.

The flavours used are all alcohol free.

The final strength of the beverage is 6% alcohol by volume.

The Alpha acids in the final product are measured at less than 0.01 parts per million Alpha acid and less than 0.1 parts per million iso-Alpha acid.

Reasons for Decision

Section 5 of the Excise Tariff Act states that duties of excise will be imposed on all goods manufactured or produced in Australia and specified in the Schedule to the Excise Tariff Act (the Schedule). Item 1 of the Schedule is beer.

Beer is defined in the Schedule as a brewed beverage which:

(a)

is the product of the yeast fermentation of an aqueous extract of malted or unmalted cereals, whether or not containing other sources of carbohydrates; and

(b)

contains hops, or extracts thereof, or other bitters; and

(c)

has not had added to it, at any time, any alcohol from any other source; and

(d)

contains more than 1.15% by volume of alcohol.

The second limb of the definition requires that the beverage must contain hops, or extracts thereof, or other bitters (bitterness requirement). Hops are by far the most common bitters used in beer. The main use of hops is to impart a bitter flavour and associated aroma to the beer. Hops may also improve the keeping qualities of the beer, as they are a natural preservative. Hops infuse beer in a similar manner that tea leaves infuse tea, with the bulk of the ingredient not being present in the finished drink, only the infused extract.

The bitterness of beer is commonly measured in the beer industry by reference to the amount of Alpha acids, which are bitter chemicals naturally present in hops. The product was tested using a test that has a Practical Quantitative Limit (PQL) of 0.01 parts per million for Alpha acid and 0.1 parts per million for iso-Alpha acid. The PQL is the lower limit at which the test can detect the presence of the relevant acids. Using this test, no Alpha acids or iso-Alpha acids were detected in the product.

Utilising a different test that detects trace elements, the Alpha acids measured in the final product were less than 0.01 parts per million Alpha acid and less than 0.1 parts per million iso-Alpha acid.

A beverage that contains such trace amounts of Alpha acid or iso-Alpha acid does not satisfy the bitterness requirement in the definition of 'beer' in the Schedule.

It may be argued that the bitterness requirement in the definition should be given a literal meaning that is satisfied if the beverage contains any amount of Alpha acids or iso-Alpha acids, no matter how small.

The effect of a literal reading of the bitterness requirement is that if a beverage contains trace amounts of Alpha acids and iso-Alpha acids, no matter how small the amount, the alcoholic beverage would be 'beer' (provided the other requirements are met). Such a construction would tend to drain the bitterness requirement of any real purpose or effect and is not a construction that would promote the purpose of the provision.

The Commissioner considers that the provision that beer contain hops, extracts thereof, or other bitters means the final beverage has hops, extracts thereof, or other bitters, in sufficient quantities, measurable by common industry testing methods, so as to satisfy the bitterness requirement, that is, give the beverage a bitter taste.

Based on available information, the bitterness of a product that contained less than 0.01 parts per million Alpha acid and less than 0.1 parts per million iso-Alpha acid would not be discernible to the taste.

Whilst the definition of 'beer' in the Schedule is exclusive, it is legitimate to consider the ordinary meanings of beer to help inform what is intended both by the definition as a whole, and its individual requirements.

The definition of 'beer' in the Schedule is very similar to the ordinary meaning of the term. For example, the Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW provides this definition:

Beer ... an alcoholic beverage made by brewing and fermentation from cereals, usu. malted barley, and flavoured with hops, etc., to give a bitter taste.

Other ordinary definitions of beer, and reference articles in relation to beer, are to similar effect. They refer to fermentation of cereals, and hops used as bitters. The similarity of ordinary meaning to the definition indicates the intention of the 'hops, extracts thereof, or other bitters' is that the beverages does contain sufficient hops or extracts or other bitters to produce a beverage that does have a bitter taste.

Construing the alcoholic beverages statutory regime as a whole, the apparent intention of Parliament is to provide different rates of duty for 'beer' as defined (and in effect as ordinarily understood), than many other alcoholic beverages.

As indicated above a beverage containing Alpha acids and iso-Alpha acids at levels less than 0.01 parts per million and less than 0.1 parts per million respectively would not have a discernable bitter taste. It is the Commissioner's view that the bitterness requirement should be purposively construed in context as requiring at least sufficient bitters to impart a bitter flavour.

That would be consistent with and supported by the ordinary and commercial meaning of beer, the commercial use of bitters by the beer industry and the apparent intention of Parliament.

Therefore, a beverage that contains less than 0.01 parts per million Alpha acid and less than 0.1 parts per million iso-Alpha acid is not considered to be 'beer' for the purposes of the Tariff Act.

Legislative References:
Excise Tariff Act 1921
   section 5
   The Schedule
   The Schedule Item 1

Other References:
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW

Keywords
Beer excise

Business Line:  Excise Centre of Expertise

Date of publication:  19 February 2009

ISSN: 1445-2782