Indirect taxes
Excise duty
Excise duty is a federal tax on certain goods made in Australia, such as fuel, alcohol and tobacco, which is built into the price and also attracts GST.
Excise duty is a tax charged on specific goods produced or manufactured in Australia, mainly fuel, alcohol and tobacco products. It is generally imposed when the goods are manufactured or released from a controlled environment for sale, and it is built into the price consumers pay. The ATO administers excise, while customs duty on imported goods is administered at the border.
Excise rates are set in legislation and many are indexed, so they change over time. For alcohol and fuel the rates differ by product, alcohol content and use, and for tobacco they are applied per stick or per kilogram. Because of this, the amount of excise on a particular product can only be confirmed from current ATO information rather than any rule of thumb.
The people who deal with excise directly are manufacturers and those who operate licensed premises or storage, such as brewers, distillers, fuel refiners and tobacco producers. They need an excise licence or permission, must keep detailed records, and report and pay excise on a regular basis. Most ordinary retailers and consumers never lodge anything for excise, since it is already in the price.
Excise interacts with GST in a layered way. GST is charged on the price of excisable goods including the excise, so GST is calculated on a tax-inclusive amount. A GST-registered business buying excisable goods for resale can generally claim a GST credit on the GST it paid, but it cannot claim back the excise itself, because that cost is part of the purchase price.
There are some concessions and rebates. Some fuel users can claim fuel tax credits for the fuel tax in fuel used for certain purposes, which effectively refunds the excise. Some alcohol producers can access rebates on part of the tax. Exported excisable goods can often be treated as free of excise. The detailed rules vary and are explained on ato.gov.au.
Common misunderstandings include thinking excise appears as a separate line for consumers, and assuming excise is recoverable as a GST credit. It is not. Imported goods face customs duty instead. This is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A registered liquor wholesaler buys a carton of spirits from a distiller for $770 including GST. The price already includes excise built in by the distiller, and GST of $770 / 11 = $70, calculated on the excise-inclusive price. The wholesaler claims a $70 GST credit, but cannot separately claim back the excise, which is simply part of the $700 GST-exclusive cost.
Practical tips
- Excise is built into the price, so you normally see only the total and the GST on that invoice.
- You can claim a GST credit on the GST but not on the excise itself.
- If you manufacture excisable goods, check licensing and reporting obligations with the ATO before you start.