New excise and customs reforms streamline business operations

The Excise and Customs Legislation Amendment (Streamlining Administration) Act 2024 commenced on 1 July 2024, with the aim of cutting red tape for businesses dealing with excise and excise equivalent goods (EEG) (“goods”). Like many attempts at tax and regulatory change, the full suite of proposed reforms were not implemented, but there have been some significant improvements.

The Act amends the existing excise and customs laws by removing some compliance measures, making it easier to do business with both suppliers and customers.

While these changes affect businesses nationally, the areas most impacted include the alcohol and petroleum industries, as well as manufacturers and importers, who can expect to see potential benefits and operational efficiencies.

At the time of writing, not all measures have been implemented by the Australian Tax Office (ATO) or Australian Border Force (ABF), but as they are now law, we expect to see relevant administrative changes shortly.

While we welcome these changes, further reforms would provide even greater benefits for businesses.

What the key measures of the Excise and Customs Legislation Amendment (Streamlining Administration) Act 2024 mean

There are several benefits to the Act, including:

More flexible general movement permissions

The rules have been simplified for moving goods duty-free under bond. You no longer need to apply for a specific movement permission for each point of origin and destination; rather a general movement permission will allow you to move goods between any premises that are licensed to hold the same kind of goods. This will save you time and paperwork, allowing you to adapt rapidly to market changes. If you apply for a new licence, you will automatically receive a general movement permission for your licenced locations. To obtain a general movement permission to move goods to other licenced third parties, you will need to apply for a general movement permission

Streamlined enterprise level licences

The licensing process for businesses that manufacture, or store goods has changed. Previously, businesses needed a separate licence for each premises, which required them to keep track of multiple licences and quote them to their suppliers or customers. Now, businesses can apply for a single licence covering multiple premises, simplifying the process and reducing the administrative burden. Existing licence holders can also add more premises to their current licence

No more licence renewals

You no longer have to renew your licence to manufacture or store goods in an excise warehouse, an EEG warehouse, or a dual-licensed premises. Your licence will only expire if the ATO, ABF, or you cancel it. This saves you from paying the $4,000 annual renewal fee for dual-licensed premises or EEG warehouses and from having to keep track of expiry dates. However, general customs warehouse licences that are not dual-licensed, nor EEG warehouses, still have expiry terms and renewal fees

A new public register of licensed entities

The new law requires the ATO to publish a register of excise or customs warehouse licence holders on its website and update it periodically. This will help businesses find a licence holder quickly if they need to move goods urgently or deal with unexpected circumstances such as finding an alternative provider for a production run. When combined with general movement permissions, this is a great win for business.

Removal of licence from onshore oil producers

The new law removes the need for onshore crude oil or condensate producers to have an excise licence. This simplifies the administration for a small number of manufacturers who are unlikely to have paid excise in any event.

Reforms proposed but not adopted

Several proposed reforms were mooted by the Federal Government and industry, but not all of them were implemented. We look forward to the following measures being reconsidered the next time incremental reform of excise and customs law is considered.

1. Having a single Commonwealth Government revenue collection agency: Similar to His Majesty’s Customs & Excise in the UK, rather than dealing separately with the ATO for excise and the ABF for EEG for what could be the same question/issue, a single agency could administer both regimes. It is anticipated that the interaction between businesses and government will be simplified, requiring only a single point of contact for any given issue (for instance, obtaining a single tariff classification for excisable goods and EEGs).
2. Misalignment of refund and remission entitlements for excisable and EEGs: Set out in different legislation, mirror refund and remission provisions would have assisted businesses in determining their refund or remission entitlement, rather than having two different sets of rules that can result in materially different outcomes.
3. Weekly excise returns aligned with Business Activity Statement (BAS) obligations: For large excise payers, the obligation to lodge and pay weekly excise returns is an administrative burden. This burden could have been improved by aligning excise reporting and payment obligations with Goods and Services Tax (GST) and Wine Equalisation Tax (WET) reporting obligations in monthly BASs or, by including excise as an item reportable and payable as part of a BAS.
4. Tight timeframe between excise rate changes and their application: With excise rates indexed in February and August each year in line with CPI, the timing of the release of CPI data by the Australian Bureau of Statistics either immediately before or, at times, after the effective indexation dates mean businesses need to work quickly to update their pricing, budgeting and excise return processes. This can lead to split, multiple, or factually incorrect returns being lodged. A change to the effective date of CPI indexation to provide businesses with sufficient time to incorporate rate changes into their business process would have been a welcome change.
5. Changing the taxing point of excisable and EEG to a different point in the supply chain: The administrative cost of utilising the ‘under bond’ system has led some businesses to express a desire to apply excise and customs duty earlier in their supply chain (e.g. once the product has been manufactured to its final form). Such a change would mean businesses would be free to deal with their excise or duty-paid products as they please without the regulatory impediments of goods being controlled by the ATO or ABF. However, purchasers of goods that have bonded facilities may be disadvantaged by paying excise-inclusive prices for goods that may not be sold for some time. Alternatively, a change in the taxing point of excisable alcohol from ‘entry for home consumption’ to the last wholesale sale (as is the case general case for WET) would provide alcohol manufacturers with a uniform approach to determining when their excise liabilities arise if they deal with both the excise and WET regimes.
6. Removing ad valorem customs duty for EEG: EEG retain a volumetric as well as an ad valorem customs duty rate, which can be difficult from a business systems perspective to administer, considering inventory value and sales that may occur while the goods remain under bond. The difficulties are exacerbated when goods may be entitled to a free trade agreement preferential ad valorem duty rate, but the party entering the goods for home consumption is not the importer and therefore may not have the relevant substantiating paperwork.
7. Excise liabilities on samples: Presently, there is no exemption from remitting excise on samples, where entered for home consumption without specific ATO permission. Given its low value, it was proposed to remove this requirement for the sake of administrative ease, but no action was taken.
8. Bunker Fuel: Such fuel used by commercial ships is intended to be free of excise or customs duty, however, this is only achieved in practice by meeting burdensome exemption and refund requirements under excise, customs and fuel tax credit law. Only some of these regimes are free of cash flow pressure on businesses. A single simplified means to remove this impost would have been welcomed.

Additional reforms we would welcome

1. The interface between the customs regime and excise regime remains cumbersome: For example, when importing fuel or alcohol to manufacture, typically, a Nature 20 entry is lodged to receive the goods into a dual licensed warehouse where manufacturing occurs. Then, a Nature 30 entry (with a 444-treatment code) is applied to formally transition the goods from the customs regime to the excise regime. Such processes should change to allow a single customs entry (e.g. entry for excise), allowing immediate transition of imported goods to the excise regime. There may be constitutional reasons why such reforms are not implemented, but we query whether serious attempts have been made to overcome these potential hurdles.
2. Single licence for excise and EEGs: Currently, businesses must nominate whether they apply for an excise, EEG or a dual licence, and the documentation and security information requirements are detailed and time consuming. The ATO should administer a single licence whereby the licence holder would be able to deal with excisable or EEGs with a single application. For example, an ‘alcohol licence’ (to cover domestically manufactured beer and imported vodka) or similarly a ‘fuel licence’ (to cover domestically manufactured biodiesel and imported aviation fuel).
3. Reliance of businesses on the public excise and EEG warehouse licence register and elimination of movement permissions: A business that moves goods under bond to a place in Australia which is not licensed may deem the goods to have been entered for home consumption, thereby triggering an excise or duty liability. We believe businesses should be able to rely on the instruction of a licence holder to deliver goods to a particular location, which they’re told by the licence holder is a licensed location and, by reference to the public excise and EEG warehouse register indicating that the instructing party is licensed, be held harmless under excise and customs law, if in fact that particular location is not licensed. Given the amount of information required in licence applications and the ongoing obligations of licence holders to continuously update or disclose relevant facts and circumstances to the ATO or ABF, we believe licence holders should be able to move goods freely under bond to or from premises of other licence holders without the need for specific permission. If licence holders have a history of non-compliance with the law, the ATO can apply the (current) requirement for individual or continual movement permissions.
4. Removal of double excise on the same product: There are circumstances where, due to technicalities under excise law, excise can be paid twice on the same goods without the opportunity for a refund. While the WET regime has a provision in place to allow a refund or credit in the event of double taxation, the excise regime only allows refunds under limited circumstances.
5. End the automatic indexation of excise: Australia has amongst the highest excise rates in the world, with the potential for excise rates to increase twice a year via legislatively automated excise increases (linked to CPI). An imbalance in the alcohol sector sees beer and spirit manufacturers subject to large rate increases, whereas the rate that wine producers pay has remained the same for since the WET was implemented more than 24 years ago. The indexation should cease, with the Government free to seek an increase or decrease in the rate in Federal Budgets like all other taxes.
6. Alcohol Manufacturer’s Remission (AMR): This concession allows certain alcohol manufacturers to not pay the first $350,000 of excise per financial year.
   • Means test the AMR: This concession applies regardless of a business’s size. The AMR has greatly assisted new and small alcohol manufacturers in getting started and competing. For middle and large alcohol manufacturers, the concession is quickly absorbed early in the financial year, with the benefit hardly registering in their bottom line. We would suggest a turn-over threshold approach that would see medium-sized businesses receive a lower level of AMR support, and large manufacturers receive no AMR support.
   • Index the AMR to CPI if the excise rate remains indexed to CPI: While the rate of excise is indexed in line with the CPI, the $350,000 AMR is not, meaning over time, the volume of alcohol manufactured which qualifies for the AMR by a brewer or distiller will be reduced. If excise remains indexed to CPI, the AMR should also be indexed to CPI.
7. ATO allocating resources to deal with excise and EEG matters: Presently, it’s often difficult to contact an officer of the ATO by phone for a general enquiry in relation to excise or EEG matters. Often a call is answered by a team voicemail or a message referring the caller to the relevant website. Email or written submissions are met with the standard ‘28-day processing time’ response, which can be frustrating, leaving businesses uncertain about the correct course of action for their excise or EEG query. We suggest the ATO have an officer available to deal with such queries by phone, or a call-back service with 24-hour response time.
8. Australian Trusted Trader Scheme (ATT) for excise: The ATT Scheme, under customs law, provides international traders a range of benefits in exchange for a business demonstrating and maintaining effective controls of their supply chain. A similar scheme adopted by the excise regime would take the approach of not treating all businesses the same, but instead apply compliance measures on businesses based on a documented risk profile and agreed risk protocols.

How BDO can help

BDO’s experienced customs, international trade & excise team can provide businesses with tailored advice to help them understand what these changes mean for them and how they can take advantage of them to improve their businesses.

We can also assist with customs or excise risk reviews, ruling requests, procedure manuals, exploring refund opportunities and assistance in the event of audit.

Contact us today to learn more about how we can assist you in capitalising on the benefits these new streamlining measures bring to businesses nationally.