Explanatory Statement
Excise (Denatured spirits) Determination 2016 (No. 3)
Revoking of previous instrument
- This Explanatory Statement is provided in accordance with subsection 15G(4) and section 15J of the Legislation Act 2003 (Legislation Act)
- Excise (Denatured spirits) Determination 2006 (No. 2) (‘previous instrument’) was registered on 30 June 2006 and is scheduled to be repealed on 1 October 2016 under the sunsetting provisions prescribed in Part 4 of Chapter 3 of the Legislation Act.
- Excise (Denatured spirits) Determination 2016 (No. 3) (‘determination’) revokes and replaces the previous instrument.
- The determination is made under subsection 77FG(1) of the Excise Act and is intended to be a restatement of the previous instrument.
- The determination sets out the formula for denaturing spirits so that the spirit can be delivered for home consumption at a rate of duty of free under subitem 3.8 of the Schedule to the Excise Tariff Act 1921 (Excise Tariff Act).
Date of effect
6. The determination commences on the day after registration.
Effect of the determination
7. Under section 77FG(1) of the Excise Act 1901 (‘Excise Act’) the CEO may determine a formula for denaturing spirits, so that the spirit can be delivered for home consumption at a rate of duty of free under subitem 3.8 of the Schedule to the Excise Tariff Act.
8. Where spirit has been denatured in accordance with the determination, (and the spirit is not for use as a fuel in an internal combustion engine) the spirit may be entered at a duty rate of free under subitem 3.8 of the Schedule to the Excise Tariff Act.
9. This determination preserves and continues the formula (and Schedule) previously prescribed for that purpose.
10. The formula is expressed so that if spirit contains at least one of the substances listed in the Schedule at or above the minimum concentration specified for that substance then it is denatured according to the formula. The addition of other substances beyond that requirement is not relevant.
11. For ease of administration the formula does not consider the cumulative effects of denaturants. If the spirit does not contain at least one substance listed in the Schedule at or above the specified minimum concentration for that substance then the spirit cannot be delivered under subitem 3.8.
12. However, the spirit may instead be delivered duty-free under subitem 3.6[1] or 3.7[2] to an eligible user for an industrial, manufacturing, scientific, medical, veterinary or educational purpose.
13. Under section 77FJ of the Excise Act it is an offence to remove all or part of a denaturing substance from spirit delivered for home consumption classified to subitem 3.8 unless the person has written permission from the CEO.
| Denaturant | CAS registry number | Minimum concentration 100% ethanol | Risk mitigation | |
1 | acetaldehyde | 75-07-0 | 1.0% v/v | Detectable at less than 1ppm | |
2 | n-propanol | 71-23-8 | 1.0% v/v | Detectable at approx 20ppm | |
3 | n-propyl acetate | 109-60-4 | 1.0% v/v | Detectable at approx 20ppm | |
4 | acetone | 67-64-1 | 2.0% v/v | Detectable at approx 1000ppm | |
5 | denatonium benzoate | 3734-33-6 | 5 ppm | Taste threshold 1:20,000,000 | |
6 | ethyl acetate | 141-78-6 | 1.0% v/v | Detectable at approx 1ppm | |
7 | propylene glycol mono-methyl ether | 107-98-2 | 1.0% v/v | Detectable at approx 100ppm | |
8 | sodium nitrite | 7632-00-0 | 0.25% v/v | Toxic at 85ppm | |
9 | methyl ethyl ketone | 78-93-3 | 0.5% v/v | Detectable at approx 10ppm | |
10 | methoxy propyl acetate | 108-65-6 | 0.5% v/v | Detectable at approx 150ppm | |
11 | methanol | 67-56-1 | 5.0% v/v | Detectable at approx 2000ppm | |
12 | isopropanol | 67-63-0 | 5.0% v/v | Detectable at approx 2500ppm | |
13 | tertiary butyl alcohol | 75-65-0 | 0.25% v/v | Detectable at approx 73ppm | |
14 | methyl isobutyl ketone | 108-10-1 | 0.25% v/v | Detectable at approx 10ppm | |
15 | n-hexane | 110-54-3 | 1.0% v/v | Detectable at minute levels | |
16 | ethyl ether | 60-29-7 | 1.0% v/v | Detectable at approx 0.33ppm | |
17 | propylene glycol | 57-55-6 | 20.0% v/v | Colourless, odourless but oily liquid | |
18 | sodium hydroxide | 1310-73-2 | 0.25% w/w | Odourless but very corrosive | |
19 | sodium molybdate | 7631-95-0 | 0.25% w/w | Odourless but harmful if inhaled / swallowed | |
20 | sodium tolytriazole | 64665-57-2 | 0.25% w/w | Characteristic odour | |
Background
14. In determining the formula under section 77FG of the Excise Act, subsection 77FG(2) requires the CEO to give the greatest weight to the protection of the revenue.
15. The formula therefore seeks to reduce the risk of the product being diverted for use as a beverage or fuel.
16. A table is attached at paragraph 13 listing the substances and how they mitigate the risk of diversion. In the determination and this explanatory statement the common names of chemicals are used rather than proprietary names, but to avoid ambiguity CAS registry numbers are also used to identify each denaturant[3].
17. Factors that have been taken into account in prescribing denaturants and concentrations in the Schedule include:
- The degree of difficulty in removing the denaturant from the spirit
- The effectiveness of the denaturant as a deterrent to using the spirit in a beverage at 5% strength on dilution by the addition of water, cola, lemonade or other beverages. Ways in which the denaturant can achieve this deterrent effect include imparting an unpleasant odour or taste, oily or viscous qualities indicating the presence of a denaturant or toxicity.
- The relative prices of spirit and fuel.
- Whether a denaturant is itself a fuel, such as petrol, or an additive typically used in producing fuel ethanol, such as an emulsifier.
Consultation:
18. Subsection 17(1) of the Legislation Act requires that the CEO undertake an appropriate level of consultation that is reasonably practicable to undertake before making a legislative instrument.
19. Industry input into the formula (and denaturants in the Schedule) was gathered prior to publishing the instrument in 2006.
20. In 2016, prior to publishing the updated instrument, feedback was sought from manufacturers entering significant amounts of goods under subitem 3.8 to ensure that the denaturants specified were up to date.
Legislative references:
Excise Act 1901 section 77FG
Excise Tariff Act 1921, the Schedule, subitem 3.8
Legislation Act 2003
Statement of Compatibility with Human Rights
This Statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Excise (Denatured spirits) Determination 2016 (No. 3)
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
This instrument sets out a formula for denatured spirits that can be delivered into home consumption duty-free under subitem 3.8 of the Excise tariff.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms. It is considered to be minor or machinery in nature and continues the current approach.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
[1] Subitem 3.6 allows delivery of spirit duty-free to determined classes of persons to meet their industrial, manufacturing, scientific, medical, veterinary or educational purposes. See Excise (Concessional spirits - class of persons) Determination 2014 (No.1).
[2] Subitem 3.7 allows delivery of spirit duty-free to a person who has received specific approval from the ATO to use the spirit for an industrial, manufacturing, scientific, medical, veterinary or educational purpose or use that is otherwise covered by their approval. See Concessional spirit approval guidelines.
[3] These are unique identifying numbers allocated to the chemical substances. They enable a reliable, common and international identification of the specific substances.