ATO ID 2006/114: Excise: ship's stores consumed during an aborted international voyage
Date of decision: 10 May 2006
Business line: Indirect Tax

Issue
Is excise duty payable on ship's stores that are consumed during an aborted international voyage?

Decision
No. Excise duty is not payable on ship's stores that are consumed during an aborted international voyage.

Facts
A ship leaves port with the genuine intention of undertaking an overseas voyage. The vessel has ship's stores on board. Some or all of the ship's stores are consumed during the voyage. The ship is forced to return to an Australian port without making landfall overseas.

Reasons for decision
Summary: Section 160A of the Excise Act 1901 (Excise Act) provides that ship's stores will not be subject to duty except as prescribed by the regulations. Therefore, goods taken on board a vessel will be free from excise duty if: The term 'ship's stores' is defined in subsection 160A(5) of the Excise Act as follows: ship's stores means stores for the use of the passengers or crew of an overseas ship, or for the service of an overseas ship. The term 'overseas ship' is defined in section 4 of the Excise Act as follows: Overseas ship has the same meaning as ship has in Part VII of the Customs Act 1901. The term 'ship' is defined in section 130C (of Part VII) of the Customs Act 1901 (Customs Act) as follows: ship does not include: (a) a ship that is not currently engaged in making international voyages; or (b) a ship that is currently engaged in making international voyages but is about to make a voyage other than an international voyage. The expression 'international voyage' is also defined by section 130C of the Customs Act to mean, in relation to a ship: ...a voyage, whether direct or indirect, between a place in Australia and a place outside Australia. It was stated in the High Court case of BP Australia Limited v. Bissaker (1987) 163 CLR 106; 71 ALR 449 that: The words "whether direct or indirect" take account of the circumstance that a vessel may, for example, proceed to or from an Australian port to a foreign port via another Australian port. In this situation the fact that a foreign port is not the previous port of call or the immediate destination does not detract from the international character of the voyage. It is reasonable to accept that where a vessel leaves port with the genuine intention of undertaking an overseas voyage, it is an overseas ship under the definition of 'ship' in the Customs Act, notwithstanding the fact that at some point, through misadventure or some other eventuality, it has to turn around. In such an instance, excisable goods provided to passengers and crew will be ship's stores and will be free from duty unless they are rendered excisable via the regulations to the Excise Act. However, if the vessel never intended to make an international voyage it is never engaged in an international voyage and the goods were never classified as ship's stores. Excise duty would be payable in this circumstance. As detailed below, section 55 of Excise Regulation 2015 sets out a number of circumstances where ship's stores are subject to duty. 55 Ship's stores liable to excise duty (1) For subsection 160A(1) of the Act, this section sets out ship's stores that are liable to excise duty. (2) The ship's stores liable to excise duty are those consisting of: (a) alcoholic beverages (other than beer) sold to a passenger or member of the crew of a ship, other than by the glass or nip; or (b) cigars sold to a passenger or to a member of the crew of a ship, other than by the individual packet, tin or box containing 25 or less cigars; or (c) cigarettes sold to a passenger or to a member of the crew of a ship, other than by the individual packet or tin containing 50 or less cigarettes; or (d) tobacco products (other than those mentioned in paragraphs (b) and (c)) sold to a passenger or to a member of the crew of a ship in a quantity that exceeds 120 grams in weight; or (e) alcoholic beverages (including beer), cigarettes, cigars or other tobacco products sold to a person other than a passenger or a member of the crew of a ship. Provided that the goods consumed on the vessel are dispensed to passengers or crew in acceptable quantities (for example, spirits by the nip and cigarettes by the individual packet) they will not be liable to excise duty even where the vessel is forced to return to an Australian port without making landfall overseas. The only exceptions are where there was never a genuine intention for the vessel to undertake an overseas journey (in which case the goods cannot be regarded as ship's stores) or where the stores are dispensed to people or in quantities that render them liable to excise duty under the Excise Regulation 2015 .

Legislative references: Excise Act 1901 section 160A
Case references: BP Australia Limited v. Bissaker (1987) 163 CLR 106 71 ALR 449
Subject references: Excise Ship's stores