The Australian Taxation Office have recently published Excise Ruling ER 2023/1 – Excise: the meaning of ‘legally and economically independent’ on their webpage. A Ruling Compendium has also been published and is available at this link.

The Ruling sets out the Commissioner’s view of the meaning of ‘legally and economically independent’ for the purposes of the ‘excise remission scheme for manufacturers of alcoholic beverages’ (Remission Scheme) and the ‘excise refund scheme for alcohol manufacturers’ (Refund Scheme). The Remission Scheme replaced the Refund Scheme for eligible alcoholic beverages that entered home consumption on or after 1 July 2021.

The requirement to be ‘legally and economically independent’ is one of the eligibility criteria to receive a remission under the excise remission scheme for manufacturers of alcoholic beverages, or a refund under the former excise refund scheme for alcohol manufacturers.

For an entity to be able to apply the Remission scheme for alcohol manufacturers (AMR), they need to meet all aspects of the eligibility criteria. Eligibility arises as a result of meeting the criteria, and cannot simply be traded.

To be eligible to apply the AMR, an entity must:

• Hold a manufacturer licence authorising them to manufacture alcoholic beverages at the premises specified in their licence

• Have manufactured an alcoholic beverage and entered it into the Australian domestic market

• Have fermented or distilled at least 70% of the alcohol content by volume of the alcoholic beverage

• Be legally and economically independent of any other entity that has received the AMR in the financial year (or, in certain circumstances, a refund)

• For distilled alcoholic beverages, satisfy the still ownership test where required

Where an member/distiller that has not exceeded the $350K annual threshold is approached by an entity that has, with a view to manufacturing additional product for them, eligibility for the AMR ultimately depends on the specific facts and the arrangement between the parties.

It is likely that the requirement to be legally and economically independent (particularly economically independent) of any other entity that has received the AMR would be a key consideration. Further information (including examples) is available in the following ATO View documents.

Excise guidelines for the alcohol industry - Chapter 7 – refer to section 7.3.3

Excise Ruling 2023/1

Members should be aware that you can not trade away your threshold. Members should err on the side of caution and seek advice from the ATO before agreeing to any undertakings.

Members are reminded they must agree to comply with the Australian Distillers Code of Conduct, including complying with applicable laws and codes.