Calculation of excise liability for beer by averaging alcohol strengths within the same Excise Tariff Item

Is a beer manufacturer permitted to average different alcohol strengths of beer within the same Excise Tariff Item, as defined in The Schedule to the Excise Tariff Act 1921 , when calculating excise liability?

Yes. A beer manufacturer is permitted to average the different alcohol strengths of beer within the same Excise Tariff Item, as defined in The Schedule to the Tariff Act 1921 , when calculating excise liability, provided: • the averaging calculations are carried out in the manner illustrated in the example below; • the averaging calculations result in the payment of the same amount of total duty at the same time as would be the case if the return included details of individual alcohol strengths; • sufficient detailed records are maintained to fully account for each individual product manufactured; and • the averaging approach is only used for goods within the same Excise Tariff Item.

A licensed manufacturer manufactures beer in Australia.

Section 50 of the Excise Act 1901 requires a licensed manufacturer to keep such records, and furnish to the Chief Executive Officer (CEO) such returns as the CEO directs.

Section 54 of the Excise Act requires a licensed manufacturer of excisable goods to pay the excise duty on those goods.

The Excise Act does not prescribe the form that a return must take. However, subsection 50(1) of the Excise Act states that: A licensed manufacturer, and a proprietor of an approved place, shall: (a) keep such records, and furnish to the CEO such returns, as the CEO directs; (b) retain any records so kept for such period as the CEO directs; and (c) on demand by an officer, produce the records to the officer.

Paragraph (b) above effectively allows the CEO to specify the form and content of an excise return.

A return based on a weighted average approach will be accepted. However, acceptance of this approach is contingent upon the following requirements being satisfied: • the averaging calculations are carried out in the manner illustrated in the example below; • the averaging calculations result in the payment of the same amount of total duty at the same time as would be the case if the return included details of individual alcohol strengths; • sufficient detailed records are maintained to fully account for each individual product manufactured; and • the averaging approach is only used for goods within the same Excise Tariff Item.

The following example illustrates the calculation and reporting of excise liability under a line by line approach (detailing the alcoholic strength of each product) and the calculation and reporting of excise liability using a weighted average approach.

Line by line approach based on a rate of duty of $34.66 per dutiable Lal No. of Brews Litres per Brew Total Litres Strength (a/v) Non-dutiable Allowance Dutiable Strength Dutiable Lals Amount of Duty 1 50 50 3.7% 1.15% 2.55% 1.27 $44.02 2 50 100 4.5% 1.15% 3.35% 3.35 $116.11 8 50 400 4.6% 1.15% 3.45% 13.80 $478.31 2 50 100 4.7% 1.15% 3.55% 3.55 $123.04 13 650 21.97 $761.48

No. of Brews | Litres per Brew | Total Litres | Strength (a/v) | Non-dutiable Allowance | Dutiable Strength | Dutiable Lals | Amount of Duty

1 | 50 | 50 | 3.7% | 1.15% | 2.55% | 1.27 | $44.02

2 | 50 | 100 | 4.5% | 1.15% | 3.35% | 3.35 | $116.11

8 | 50 | 400 | 4.6% | 1.15% | 3.45% | 13.80 | $478.31

2 | 50 | 100 | 4.7% | 1.15% | 3.55% | 3.55 | $123.04

13 | 650 | 21.97 | $761.48

The approved averaging method of calculating excise liability: No. of Brews Litres per Brew Total Litres Strength (a/v) Litres of Alcohol (Lals) 1 50 50 3.7% 1.85 2 50 100 4.5% 4.50 8 50 400 4.6% 18.40 2 50 100 4.7% 4.70 13 650 29.45

No. of Brews | Litres per Brew | Total Litres | Strength (a/v) | Litres of Alcohol (Lals)

1 | 50 | 50 | 3.7% | 1.85

2 | 50 | 100 | 4.5% | 4.50

8 | 50 | 400 | 4.6% | 18.40

2 | 50 | 100 | 4.7% | 4.70

13 | 650 | 29.45

Average Strength = Litres of Alcohol (Lals) divided by Total Litres (29.45 / 650 = 4.5307% * )

Therefore, using the averaging method: Average 4.5307% * Less non-dutiable allowance 1.1500% * Dutiable strength 3.3807% * Total volume (litres) 650 Total dutiable Lals 21.97 Duty rate used $34.66 Duty payment $761.48

Average | 4.5307% *

Less non-dutiable allowance | 1.1500% *

Dutiable strength | 3.3807% *

Total volume (litres) | 650

Total dutiable Lals | 21.97

Duty rate used | $34.66

Duty payment | $761.48

* Calculations, where indicated in the example, are to be performed to four (4) decimal places.

The average strength is calculated by dividing the total litres of alcohol (Lals) by the total quantity (in litres). The dutiable strength is calculated by subtracting the non-dutiable allowance (currently 1.15%) from the average strength. The quantity of dutiable litres of alcohol (Lals) is calculated by multiplying the total volume (in litres) by the dutiable strength. The amount of duty payable is calculated by multiplying the appropriate duty rate by the dutiable litres of alcohol.