Excise credits set off against Excise liabilities during current weekly settlement period

Can an entity that has a weekly settlement permission set off refunds and remissions allowed under section 78 of the Excise Act 1901 and arising within the current weekly settlement period, against the entity's excise liability for the current weekly settlement period?

Yes. An entity that has a weekly settlement permission can set off refunds and remissions allowed under section 78 of the Excise Act and arising within the current weekly settlement period, against the entity's excise liability for the current weekly settlement period.

The entity records movements of excisable product in its accounts and recordkeeping system. The system has a set of business rules that classifies movements as having no excise liability, excise liability or a negative liability (excise credit). Excise payments for a particular accounting week are the sum of excise liabilities minus excise credits for each material article group (excise classification on the excise return).

The excise liability calculated by the entity equates to 'goods delivered into home consumption' as specified in the entity's weekly settlement permission.

Excise credits arise in several ways: • The entity 'cancelled' transactions by inputting 'contra' movements which have negative values equivalent to the original transactions. • Stock delivered into home consumption which is returned to the entity's underbond stock and a credit generated. • Stock at duty paid stock points which are moved to underbond stockpoints by the entity. This generated credits and converted the stock back to under bond. • Duty paid stock which is used for a prescribed circumstance.

The circumstances leading to excise credits above occur both within and outside current weekly settlement periods.

The client has obtained permission from the Collector in accordance with Law Administration Practice Statement PS LA 2003/1 (PS LA 2003/1) which came into effect on 1 July 2003. This permission enables the client to 'set off' excise credits against excise liabilities, but only for transactions 'that have occurred outside the current settlement period'.

Set off Arrangements generally

Section 78 of the Excise Act sets out the circumstances under which remissions, rebates and refunds of excise duty may be allowed.

Regulation 51 of the Excise Regulations 1925 requires a client to apply to the Collector for a remission, rebate or refund.

Regulation 52 of the Excise Regulations requires applications for a remission, rebate (other than a rebate to which section 78A of the Excise Act relates) or refund of Excise duty to be in writing and include details of the claim.

Subregulation 52(2) of the Excise Regulations enables the Collector to require the applicant to produce records or to provide information in order to verify that the applicant's circumstances warrant a remission, rebate or refund.

Once an application for rebate or refund has been made and the reasons accepted, regulation 58 of the Excise Regulations enables the Collector to make payment.

However, instead of making payment, subregulation 58(2) of the Excise Regulations enables the Collector to make arrangements with the client whereby the amount of the rebate or refund may be set off against the client's excise liability.

The ability of clients to set off their entitlements against their excise liabilities is explained in PS LA 2003/1. The intent of PS LA 2003/1 is to allow clients to seek permission (subject to various conditions) to claim refunds or remissions and report the circumstances at the end of the settlement period with their excise return. This relieves the person of the burden of making the necessary amendments to the excise return for the settlement period in which the adjustment arose. It also removes the need for the client to seek permission from the Collector on each and every occasion. However, the practice statement only allows clients to set off entitlements (and overpayments) that arose in respect of past periods. Therefore, this does not assist a client who wishes to set off refunds and remissions that arose during the current weekly settlement period against their excise liability for the same period.

Set off arrangements in a current settlement period

As stated above, a client may, in certain circumstances prescribed in the excise regulations, apply for a refund, remission or rebate of duty payable.

The fact that PS 2003/1 explains the administrative arrangements in relation to the availability of set-offs under subregulation 58(2) of the Excise Regulations where overpayments or underpayments occurred in prior periods does not mean that a client cannot apply to set off a refund, rebate or remission that arises in the same period as an excise liability.

As explained above, subregulation 58(2) of the Excise Regulations allows the Collector to make arrangements with the client whereby the amount of the rebate or refund may be set off against the client's excise liability. However, notwithstanding the set off, the client is still required (pursuant to regulations 51 and 52 of the Excise Regulations) to apply in writing for any remission, rebate or refund.

If the client wishes to set off their entitlements to rebates, refunds or remissions against their excise liabilities arising in the same settlement period, they should contact the Collector. The Collector will then be able to make appropriate arrangements with the client pursuant to subregulation 58(2) of the Excise Regulations.