The Federal Government has recently released exposure draft regulations (available here) that propose to remake the current Excise Regulations 1925 (Cth) (“Current Regulations”). The proposed regulations are designed to improve the operation of the current excise rules by reducing compliance costs, simplifying language and repealing redundant provisions so that they are easier to navigate and understand.
Simplifying rules relating to excise duty
The Explanatory Statement to the exposure draft recognises that the Current Regulations “have become difficult to navigate because of multiple amendments over the past 90 years”. On this basis, the exposure draft proposes to make amendments to the existing rules so as to simplify regulations which “were cumbersome and difficult to navigate”.
In this regard, a key change proposed by the exposure draft is to restructure and simplify the existing rules regarding remissions, rebates and refunds that presently exist in Part III and Schedule 1 of the Current Regulations. The exposure draft proposes to do this by amalgamating into a single provision the rules in the Current Regulations concerned with specific goods (such as, amongst others, tobacco, cigarettes and cigars) being returned to a manufacturer and/or destroyed.
The proposed regulations also seek to implement a number of changes in order to make the existing excise rules easier to navigate and understand. These changes include (amongst other things):
- repealing redundant provisions in the Current Regulations, such as:
- provisions imposing excise duty on aircraft’s stores (which, due to the extensive listed exceptions in the Current Regulations, as a practical matter do not operate to impose any excise duty);
- the regime relating to the drawback of excise duty on “specified goods” (which is no longer relevant under the proposed regulations); and
- provisions relating to the review of decisions regarding the drawback of excise duty (which are unnecessary as review rights are provided for in section 162C of the Excise Act 1901 (Cth));
- repealing unnecessarily prescriptive provisions, such as the provisions regulating the types of security that may be taken by the Commissioner of Taxation (“Commissioner”) for compliance with the excise legislation and for the protection of the revenue more generally;
- restructuring provisions relating to duty-free shops;
- simplifying the requirements for excise duty on cigarettes sold to passengers or crew members of a ship. These requirements now align with relevant passenger concessions; and
- simplifying and updating language, including replacing all references to “Collector” with “CEO” (being a reference to the Commissioner).
Key substantive changes proposed under the exposure draft
In addition to simplifying language and restructuring the Current Regulations, the exposure draft makes a number of substantive changes to the existing excise rules.
The key substantive change proposed by the exposure draft relates to the provision of an additional circumstance under which taxpayers may obtain a refund, remission or rebate of excise duty without needing to make an application in this regard. In particular, unlike the position under the Current Regulations, the draft regulations seek to allow a refund, remission or rebate of excise duty without an application being made where:
- a remission, rebate or refund of excise duty would be allowed on the making of an application in circumstances in which the relevant excisable goods have been totally lost or destroyed, or have otherwise ceased to exist; or
- goods are delivered for home consumption and sold for a specified diplomatic or consular use.
An application in relation to each of the above matters is presently required under the Current Regulations (see, for instance, regulation 50(1)(ta) of the Current Regulations).
The proposed regulations also allow an application for a refund of excise duty to be made up to 12 months after the payment of duty (or other relevant event). This period is significantly longer than that afforded under the Current Regulations, which provide a default period of 14 days with a discretion on the Commissioner to extend this to 12 months if it is equitable to do so (see current regulation 53(2)(b)). The Explanatory Statement to the exposure draft recognises that the short time frame of 14 days has led to the Commissioner adopting a general practice of extending the period in almost all matters. The proposed regulations seek to reflect this practice.
The proposed regulations make several other amendments to the excise rules which are intended to reduce compliance costs for taxpayers. These changes include:
- the removal of the requirement that the Commissioner must enter into a formal “arrangement” with a taxpayer before setting off any rebate or refund of excise duty against that taxpayer’s excise duty liability. This will provide the Commissioner with the power to automatically set off debits and credits of excise duty, which is consistent with the operation of other taxes such as income tax and GST;
- the removal of requirements relating to specific matters that certain applications (such as an application for a remission, rebate or refund of excise duty) must contain. The requirements will be replaced with a general condition that an application be in “approved form” as defined in the Taxation Administration Act 1953(Cth). This will allow the use of electronic forms; and
- the removal of the requirement that the proprietor of a duty-free shop produce a computer generated list of certain invoice numbers each month.
Regulation 58 of the proposed regulations provides that any “thing” that is done for a particular purpose under the Current Regulations (such as a notice, application or other instrument being given or made) will be valid for the purpose of the proposed regulations as if they had been done under the proposed regulations.
This section is intended to ensure that any “thing” done for a particular purpose continues to exist and continues to apply as a transitional matter as if it had been done under the proposed regulations.
Timing and consultation
Submissions on the proposed regulations may be made here and close shortly.
Whilst the exposure draft does not specify a date from when the proposed regulations are intended to commence, the Current Regulations are legislated to automatically repeal (sunset) on 1 April 2015. It is accordingly expected that, once the consultation process is complete, the Government will review comments on the exposure draft and release a final version to commence with effect on or before 1 April 2015.