The Australian Government has introduced new rules for importing tobacco, which start on 1 July 2019. The new rules were part of the ‘Black Economy Package’ for combatting illicit tobacco, but will apply much more broadly.
The reforms prohibit tobacco being imported without a permit – with some exceptions. The new rules also modify the point at which customs duty is payable on legal imports of tobacco. Importers will no longer be able to defer payment of custom duty by entering the goods into a bonded warehouse: customs duty will be paid at the time of importation.
New general rule prohibiting imports of tobacco without a permit
A new regulation will prohibit the importation of tobacco and tobacco products without a permit.
Some tobacco products are exempt from this requirement including:
- tobacco imported by tourists and members of airline staff within duty free limits
- certain oral tobacco products.
If none of these exemptions apply, the importer will need to obtain a permit from the Minister.
The Department of Home Affairs has introduced a new Form 1537 – Application for permits to import tobacco – to assist with this process.
Immediate payment of customs duty required
The reforms also modify the point at which customs duty is paid on imported tobacco. From 1 July 2019, customs duty must be paid at the time of importation.
This is a significant change from the bonded warehouse system that allows importers to delay the payment of customs duty where imported goods are kept in a licensed warehouse facility.
To complement this regime, the Department of Home Affairs has introduced a refund system. Importers who sell tobacco to duty-free sellers (including duty free stores, catering bonds that supply aircraft stores and providores that supply ship stores) will be able to obtain a refund for the duty that was already paid upon importing the tobacco. The refund will be available at the time the tobacco is sold to the duty-free sellers. The importer will have four years to obtain the refund.
Transition to new regime
Tobacco already held in bonded warehouses will be deemed to be in home consumption from 1 July 2019. Outstanding customs duty on this stock will need to be paid within seven days from 1 July 2019. The Department of Home Affairs has suggested that arrangements may be available to pay this customs duty by way of instalments.
However, tobacco held by duty free stores and equivalents will not be deemed to be in home consumption. These suppliers will have until 1 January 2020 to reduce their stock.
What do importers need to do to prepare?
- obtain a permit to import tobacco from the Department of Home Affairs as soon as practicable to ensure no interuption to business operations from 1 July 2019
- anticipate and plan for duty that will become payable in the first week of July on stock held in licensed warehouses
- review their insurance coverage, as the cost of goods stored in warehouses will soon include the customs duty component.
Please contact a member of our team if you would like to discuss these changes.