ATO Interpretative Decision

ATO ID 2009/52 (Withdrawn)

Excise

Microbrewery - legally and economically independent
FOI status: may be released
  • This ATO ID is withdrawn from the database because it contains a view on the operation of paragraph 2AB(a) of the Excise Regulations 1925 which was repealed with effect from 4 August 2012. Despite its withdrawal the ATO ID continues to be a precedential view in respect of legally and economically independent breweries prior to 4 August 2012.
    This document has changed over time. View its history.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a brewery (Brewery Y) 'legally and economically independent', for the purposes of paragraph 2AB(a) of the Excise Regulations 1925 (Excise Regulations), of another brewery (Brewery X) when the entity (the brewer) that owns Brewery Y previously owned Brewery X but the ownership was not concurrent?

Decision

Yes. Brewery Y is 'legally and economically independent' of Brewery X, for the purposes of paragraph 2AB(a) of the Excise Regulations, because the brewer did not hold Brewery X and Y at the same time.

Facts

The brewer is a company. The company is not a subsidiary of another company and does not have any subsidiary companies.

The brewer sold Brewery X to an unrelated party.

The brewer surrendered its excise manufacturer's licence in respect of Brewery X.

After the sale of Brewery X, and in the same financial year as the sale of Brewery X, the brewer established Brewery Y at a different site and commenced brewing.

Reasons for Decision

Regulation 2AB of the Excise Regulations (Regulation 2AB) defines a 'microbrewery' as a brewery that includes the following characteristic:

(a)
it is legally and economically independent of any other brewery;...

Subregulation 2(1) of the Excise Regulations defines the term 'brewery', unless the contrary intention appears, as having the meaning given by section 77A of the Excise Act 1901 (Excise Act).

Section 77A of the Excise Act defines 'brewery' as:

brewery means a factory in respect of which a person is licensed to manufacture beer.

'Factory' is defined in section 4 of the Excise Act as 'the premises on which any person is licensed to manufacture excisable goods'.

Regulation 2AB was inserted by Excise Amendment Regulations 2000 (No. 7) and the explanatory statement to those regulations (Explanatory Statement) explains 'legally and economically independent' as follows:

... a brewery that is a subsidiary (within the meaning of Corporations Law) of another brewery, is not legally independent and therefore cannot be a microbrewery. Additionally a brewery cannot be an economically independent microbrewery if its operations are subsidised by another brewery.

The use of the word 'brewery' in this context in the Explanatory Statement is not consistent with the meaning of 'brewery' in the Excise Act. A brewery, which is a place, cannot be a subsidiary of another place. The explanation in the Explanatory Statement only makes sense if it is read as '... a brewery that is operated by an entity that is a subsidiary (within the meaning of Corporations Law) of another entity that operates a brewery...'.

As such, a brewery would not be considered to be legally independent of another brewery for the purposes of Regulation 2AB in the following circumstances:

a brewery is owned by an entity, which is not a body corporate, that holds another/other breweries, or
a brewery is owned by an entity, which is a body corporate, and is related to another/other breweries through a holding company.

Whether a brewery is economically independent is a question of fact, to be determined according to the circumstances of each case.

In this case, the brewer did not hold Brewery X and Y at the same time as they established Brewery Y after the sale of Brewery X. As such, Brewery Y cannot be legally or economically related to a brewery that the brewer did not hold at the time they established and commenced operations at Brewery Y.

Accordingly, Brewery Y is 'legally and economically independent' of Brewery X for the purposes of paragraph 2AB(a) of the Excise Regulations.

Date of decision:  26 June 2009

Legislative References:
Excise Act 1901
   section 4
   section 77A

Excise Regulations 1925
   Subregulation 2(1)
   Regulation 2AB
   paragraph 2AB(a)

Other References:
Explanatory Statement to the Excise Amendment Regulations 2000 (No. 7)

Keywords
Alcohol excise
Beer excise
Excise collections

Business Line:  Indirect Tax

Date of publication:  10 July 2009

ISSN: 1445-2782

history
  Date: Version:
  26 June 2009 Original statement
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