Bills Digest No. 78   1997-98 Excise Tariff Amendment Bill (No. 1) 1997

Numerical Index | Alphabetical Index

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.


Passage History

Excise Tariff Amendment Bill (No. 1) 1997

Date Introduced: 5 March 1997
House: House of Representatives
Portfolio: Industry, Science and Tourism
Commencement: Formal provisions and item 5 of the Schedule commence on Royal Assent. Items 1 and 2 of the Schedule are to be taken to have commenced on 3 February 1996, item 3 of the Schedule will commence on 1 August 1996 and item 4 will commence on 3 February 1997.


The Bill will substitute new items into the Excise Tariff Act 1921 that will retrospectively ensure that the amount of excise collected on certain alcoholic beverages is valid. The Bill will also ensure that excise is payable on such beverages in the future.


The rationale given by the Government in the Second Reading Speech to the Bill for the proposed amendments is:

In November 1994, Carlton and United Breweries (CUB) commenced the manufacture of the product known as 'Subzero Alcoholic Soda'. At that time, the beverage was made from spirit obtained from the de-alcholisation of beer and had approximately 5.5% alcohol content. The Australian Customs Service (ACS) considered 'Subzero' excisable under sub-item 2(H) of the Schedule to the Tariff Act as a spiritous beverage. CUB appealed the decision of the ACS to the Administrative Appeals Tribunal (AAT).

On 7 June 1996, the AAT determined that the production of 'Subzero', with such a low alcohol content by volume, could not be described as spiritous and was therefore not excisable under sub-item 2(H). The decision was based on what the AAT considered is commonly regarded as the definition of 'spirit' in the community, which is a strong alcoholic liquor usually containing not less than 37% alcohol by volume.

The ACS is also appealing this decision in the Federal Court and has continued to impose excise duty under sub-item 2(H) on all other similar low alcohol beverages.

In order to ensure the continuing exciseability of all beverages containing distilled alcohol, it is proposed to amend the Tariff Act to:

(i) delete all references to 'spiritous beverages' in the Schedule and item 2 (item 1 of Schedule 1 refers); and

(ii) clarify that excise liability is imposed upon all beverages which contain distilled alcohol (except fortified wine)(new sub-item 2(H), item 2 of Schedule 1 refers).

By removing the term 'spiritous' from the present sub-item 2(H), this will remove any connotation as to the strength that an alcoholic beverage must be before it will be excisable. All such beverages will continue to be excisable regardless of their alcohol content and the excise duty will be calculated according to the alcohol content of the beverages.

On 13 May 1997 the Bill was referred to the Senate Economics Legislation Committee. The report of the Committee was presented in the Senate on 18 June 1997.

Industry submissions to the Committee were without exception opposed to the Bill. Bodies opposing the Bill included: the Distilled Spirits Industry Council of Australia Inc; the Bundaberg District Tourism and Development Board; United Distillers Australia Ltd; the Institute of Chartered Accountants; the Law Council of Australia; and the Bundaberg Distilling Company Pty Ltd.

The spokesperson for the Distilled Spirits Industry Council of Australia Inc in evidence to the Committee stated:

The bill arbitrarily reimposes excise on one market competitor that is, pre-mixed spirits whilst direct competitors with different alcohol bases, designer drinks, and wine coolers remain non-excisable. Moreover, the bill establishes unequivocally for the first time that excise is only to be levied on the distilled spirit component of pre-mixed drinks. All manufacturers are now looking at ways of reformulating their products so that less spirit is incorporated.(1)

Submissions to the Committee from United Distillers (Aust.) Limited (UDA) listed a number of consequences of the Bill, including:

  • continued tax loophole for 100% fermented P5 designer drinks which would not be subject to any excise tax, but would impose excise duty at the full spirit rate on a P5 product which as been produced by distillation;
  • a significant tax incentive for spirits manufacturers to develop 'hybrid' products to reduce excise payments; and
  • it will encourage imports of hybrid alcohol products and this will impact adversely on Australian investments and Australian producers from pursuing export markets in Asia.(2)

While recommending that the Bill be passed, the Majority Report of the Committee recommended that the Government undertake an immediate review which should look at the equity of tax treatment between ready to drink products and designer drinks in the P5 category with particular reference to:

  1. the social effect on consumption patters caused by the differential taxation treatment according to the production method of the alcohol;
  2. potential loss of government revenue with a change to the use of different forms of alcohol (other than distilled spirits) in ready to drink products; and
  3. the possibility of introducing common taxation treatment for ready to drink products with an alcohol content of 5% or less and those above 5%.(3)

Two Minority Reports were presented in respect to the Bill. The Australian Labor Party in its Minority Report recommended that the Government use the opportunity of this legislation to address the anomalies contained in the current excise regime. The Australian Democrats in their Minority Report indicated that they would seek to amend the Bill, or support amendments to the Bill, which meet the most significant of the problems identified.

Main Provisions

Item 2 of Schedule 1 of the Bill will substitute a new item 2 into the Schedule of the Excise Tariff Act 1921 (the Principal Act) to insert a list of beverages containing spirits that are subject to excise. The main change between the current item 2 and the proposed item 2 is that the new Item contains a reference to 'beverages (other than beverages comprised solely of fortified wine) containing distilled alcohol'.

Items 3 and 4 of Schedule 1 also substitute new item 2 into the Principal Act. The reason for the multiple new item 2 is that they will have effect from 3 February 1996, 1 August 1996 and 3 February 1997. This reflects the indexing of the rate of exercise every six months and the desire to have the amendments applying from February 1996.

The Bill was amended in the Senate to insert a further item 2 that will have effect from the day the Bill receives Royal Assent. The proposed item differs from the other proposed items in that for beverages containing distilled alcohol a lower rate will apply where the alcohol is attributable to brandy and different rules will apply where the beverage falls within Food Standard P5. (Food Standard P5 deals with alcoholic beverages not dealt with in the other categories of Part P of the Food Standards. The other categories in Part P are beer, wine, spirits and liqueurs, sparkling wine and fortified wine.)Where a drink falls within P5, it will be subject to a rate of excise approximately 50% lower where they do not contain more than 5% alcohol.

Item 5 of Schedule 1 provides that if excise is payable on alcohol after 3 February 1997 the amount of excise is to be determined according to the amendments made by this Bill even if an application for review has been made to the Administrative Appeals Tribunal (AAT), an application has been made for a refund or court proceedings have been commenced in regard to the excise payable. However, if the AAT has made a determined and a refund has been paid, no action is to be taken to seek to recover the amount refunded.


  1. Senate Economics Legislation Committee, Excise Tariff Amendment Bill (No. 1) 1997, p. 5.
  2. Ibid., at p. 6.
  3. Ibid., at p. 12.

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Chris Field & Ian Ireland
31 October 1997
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