6. Exemption from duties and taxes
- ACS = Australian Customs Service
- ATO = Australian Tax Office
- GST = Goods and Services Tax
- ITCS = Indirect Taxation Concession Scheme
- LCT = Luxury Car Tax
- WET =Wine Equalisation Tax
6.1 Goods attracting excise and Customs duties
Excise duty is imposed by the Excise Tariff Act 1921 on the production of certain goods in Australia. Alcoholic beverages (excluding wine), tobacco products and fuel (e.g. petrol, diesel and heating oil) are excisable goods. Excise duty is administered by the ATO. An equivalent Customs duty is levied on similar imported goods.
Customs duty is imposed by the Customs Tariff Act 1995 on imported goods either at the time of importation or, if the goods have been stored in a Customs-licensed bonded warehouse, at the time of their release from bond. Customs duty is administered by the ACS.
Goods imported or purchased by diplomatic missions, consular posts and their eligible staff may be exempted from excise and Customs duties, subject to certain conditions. Exemptions are not available to any staff member who is a citizen or permanent resident of Australia. Where staff members have both Australian and foreign nationality, Australian nationality prevails.
Except in the case of fuel, exemption privileges from excise duty are available at the time the goods are being released from an Excise-licensed premise. Orders for the purchase of excisable goods free of duty may be placed with suppliers holding an excise license. Limits apply to purchases by diplomatic missions, consular posts and their eligible staff, and certain international organisations, of excise-free alcohol and tobacco products.
The current limits per six-month period for the official use of a mission or post are: 260 litres of spirits, liqueurs or spirituous liquors; 1,000 litres of beer; and 20,000 cigarette sticks. Eligible privileged staff members have half the official-use entitlements for their personal use.
Refunds of excise duty on fuel can be claimed by diplomatic missions or consular posts both on behalf of the mission or post and on behalf of eligible privileged staff. Applications by individuals are not accepted.
Diplomatic missions and consular posts resident in Australia and their privileged staff may import or purchase goods duty-free provided they are intended for the official use of a mission or post, or for the personal use of an privileged staff member or a dependent family member forming part of the staff member's household in Australia.
Exemption from Customs duty is available only at the time the goods are being cleared on importation or released from bond. There is no mechanism to provide refunds of Customs duty once it has been paid.
Goods acquired under privilege may not be resold, lent, hired, given away, exchanged, traded or otherwise disposed of to a non-privilege person in Australia within a set minimum period. In making application for exemption from Customs duty on imported goods, diplomatic missions, consular posts and their eligible staff are required to acknowledge and sign an undertaking that if any of the goods are resold or otherwise disposed of in Australia to a non-privileged person within two years, or in the case of motor vehicles three years, after the date of importation or purchase, the mission, post or privileged person will be liable to pay to the Commonwealth an amount (less a depreciation for the period of ownership) equal to any customs duty, taxes and related charges that, but for the relevant exemptions, would have been payable in respect of those goods. Only in exceptional circumstances will permission be granted to allow goods acquired under privilege to be disposed of to a non-privileged person in Australia before two years in the case of general goods or three years in the case of motor vehicles.
Goods imported or purchased under privilege by a diplomatic mission or consular post must be necessary to meet the reasonable requirements of the mission or post. Similarly, goods imported or purchased under privilege by diplomatic or consular officers, or by administrative and technical staff or consular employees, or members of their immediate family who form part of their household in Australia, must be necessary to meet their reasonable personal requirements and, in the case of administrative and technical staff or consular employees, must be imported or purchased within six months of the staff member's arrival in Australia ('first installation'). The Head of Mission or Post (or authorised delegate) is required to confirm that the proposed importation or purchase does not relate to articles of the same or similar kind to articles already imported or purchased under privilege and which have already met the reasonable requirements of the mission, post or privileged staff member.
6.3 Customs clearance
Exemption from Customs duty, GST and LCT is granted under the provisions of the Diplomatic Privileges and Immunities Act 1967 or the Consular Privileges and Immunities Act 1972. All applications for release of goods (except motor vehicles) from Customs control to diplomatic missions, consular posts and privileged individuals must be submitted to the ACT Regional Office of ACS at Customs House, 5 Constitution Avenue, Canberra ACT 2600. Applications for the purchase of motor vehicles under privilege should be submitted to Protocol Branch.
The ACT Regional Office of ACS allocates a Customs identification number to each mission, post, member of a mission or post, and to administrative and technical staff and consular employees if they are claiming privilege in respect of a motor vehicle. Administrative and technical staff and consular employees must quote their mission's (or post's) identification number when clearing goods other than motor vehicles covered by their first installation entitlements.
For goods cleared from bond (i.e. Customs licensed bonded warehouses, including duty-free shops), Customs entry formalities are normally handled by either a licensed customs broker or the bond proprietor.
GST of 10 per cent is imposed on most goods and services sold or consumed in Australia. Related indirect taxes are the WET, which is applied to all wines, ciders, mead and sake, and the LCT, which applies to motor vehicles whose value exceeds the LCT threshold.
A limited number of items do not attract GST. These include basic food items (but not restaurant meals, take-away food or catering), education fees, child care costs, visits to medical practitioners, hospital costs, international transport of passengers and goods to and from Australia, prescription medicines, council rates, water and sewerage rates and residential (but not office) rents. This list is a guide only and its coverage is not exhaustive.
ITCS allows diplomatic missions and consular posts headed by career officers in Australia to claim refunds of GST and related indirect taxes on goods and a limited number of services. ITCS is implemented on the basis of reciprocity where a broadly comparable range of tax concessions is granted to Australian overseas missions, posts and accredited staff. Certain international organisations in Australia may also be entitled to indirect tax concessions.
The range of goods and services for which missions, posts and accredited staff may seek refunds depends on the nature of the package of indirect tax concessions negotiated with each country represented in Australia. Different arrangements apply to international organisations.
Eligible missions, posts and international organisations may lodge applications for refund under ITCS for any single tax invoice of at least $200 (including indirect tax) for the taxable supply of: goods (by purchase or lease); diplomatic or consular mail services; telecommunications services; electricity and gas services; protection of official premises services; removal of goods services; freight and cartage other than removal of goods; and commercial rent of official premises.
ITCS also covers alcohol and tobacco products purchased from Excise licensed premises (including duty-free shops) and purchases of fuel. The single tax invoice minimum value of $200 is not applied to claims for refunds of GST on goods that attract excise duty and for which an exemption from the excise duty has been granted. This would cover alcohol (excluding wine), tobacco products and fuel. However, where such goods are purchased without any exemption from excise duty (for example from a normal retail outlet), the minimum invoice value of $200 for claims would apply.
Acquisitions not covered by ITCS include regular maintenance of property, insurance services, travel services, membership subscriptions, hotel accommodation and restaurant services.
Information about ITCS entitlements and ITCS refund claim forms are available from ATO website http://www.ato.gov.au/itcs or by telephoning the ATO ITCS Claims Processing Team in Brisbane on 1300 880 283. Full details of individual country entitlements and arrangements may be found in the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 and the Consular Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000 and related amendments. The texts of these Determinations may be obtained online at http://www.comlaw.gov.au. Any requests for new or upgraded concessional packages under ITCS should be directed to Protocol Branch.
Official use is defined as having a direct relation to the exercise of the functions of the mission or post in accordance with the Vienna Conventions on Diplomatic and Consular Relations.
If electricity, gas and telecommunications accounts are in the name of the mission or post, even though they may cover staff residences, or if such accounts relate to staff residences but are paid directly to the service provider by the mission, they would be acceptable for reimbursement under ITCS as it is considered this would reflect an official cost. If, however, the account is in the staff member's own name and paid by the staff member it would not qualify for a refund under ITCS.
Residential leases do not attract GST.
Commercial leases do attract GST. Commercial leases would include rent of office accommodation. Diplomatic missions and career consular posts are entitled to claim a refund of GST on such leases where it is included in their package of indirect tax concessions.
Crown leases for diplomatic land in the ACT - that is, long term leases (as defined under GST legislation) for land specifically designated for diplomatic use that is leased through the National Capital Authority - do not attract GST.
The following administrative arrangements apply:
- orders for duty-exempt excisable goods may be placed with licensed suppliers on official stationery of the relevant diplomatic mission, consular post or international organisation (see Section 6.2);
- claims for refund of excise and GST on purchases of fuel should be submitted quarterly to the ITCS Claims Processing Team, Australian Taxation Office, GPO Box 9977, Brisbane QLD 4001 using ATO Form NAT 3152 Fuel Claim: Application for refund under Indirect Tax Concession Scheme. ATO Form NAT 3153 Running Sheet for Fuel Purchases should be used to record cash purchases of fuel - the totals from which should be transferred to fuel claim Form NAT 3152 - and submitted with claims;
- general applications for exemption from Customs duty on imported goods (except motor vehicles) should be submitted to the ACT Regional Office, Customs and Border Protection Service, Customs House, 5 Constitution Avenue, Canberra ACT 2600 using the yellow Customs Form B615 Application for Release of Goods from Customs Control to Diplomatic and Consular Personnel. Where possible, Form B615 should be accompanied by shipping and/or commercial documentation. Once approved, Form B615 can either be collected from the ACT Regional Office of ACS or arrangements made for it to be sent by mail to diplomatic missions, consular posts or certain international organisations (see Section 6.3);
- applications for the purchase of an imported motor vehicle free from Customs duty or an Australian manufactured motor vehicle should be submitted individually for each vehicle to Protocol Branch, Department of Foreign Affairs and Trade, John McEwen Crescent, Barton ACT 0221 using the blue Application for the purchase of a motor vehicle under privilege form (see Appendix 18);
- For items other than motor vehicles, personal effects, those carried in diplomatic or consular bags (which cannot be opened or detained) or purchased through a Customs-licensed bonded warehouse, a Customs Import Declaration (N10) must be completed and submitted to ACS for any direct imports valued in excess of $1,000 (price paid plus transport and insurance). Licensed customs brokers are familiar with these procedures;
- general claims for ITCS refunds where the invoice value being claimed is $200 or greater should be submitted on a quarterly basis (January to March, April to June, July to September, October to December) to the ITCS Claims Processing Team, Australian Taxation Office, GPO Box 9977, Brisbane QLD 4001 using ATO Form NAT 3154 Application for refund under the Indirect Tax Concession Scheme (see Section 6.4.1);
- claims for refund of GST and any LCT paid on the purchase of a motor vehicle should be submitted individually for each motor vehicle purchased to the ITCS Claims Processing Team, Australian Taxation Office, GPO Box 9977, Brisbane QLD 4001 using ATO Form NAT 3155 Motor Vehicle Claim: Application for refund under Indirect Tax Concession Scheme, together with a copy of the completed Application for the purchase of a motor vehicle under privilege form (which must have approvals from both the Department of Foreign Affairs and Trade and ACS), the original tax invoice and proof of payment (see Section 7.5);
- all claims and applications must be made through the mission or post, not by an individual, and signed by the Head of Mission or Head of Post or delegated official with the official mission or post stamp affixed;
- the original tax invoice/receipt showing GST and any WET or LCT paid must be attached to any claim for ITCS refunds - purchasers should ensure they request a tax invoice at the time of purchase showing these details and tax invoices for $1,000 or more must also show the name and address of the purchaser; and
- ITCS refunds to a mission, post or organisation will only be paid to a single, nominated bank account.
Under ITCS legislation, the Australian Government may negotiate bilateral arrangements for reciprocal tax concessions on certain construction or renovation projects relating to mission premises. To be eligible, work must relate to chancery premises or a Head of Mission residence and the total cost of the project must be at least $10,000. Other residential accommodation and consular premises are not normally eligible for tax concessions.
Missions proposing to undertake construction or renovation projects that may qualify for tax concessions on a reciprocal basis should direct enquiries to Protocol Branch before any work is undertaken.
Limited exemption from excise or customs duties is available to consular posts headed by honorary consular officers. There is no exemption from Customs duty or entitlement to claim refunds of GST and LCT on the purchase of motor vehicles. Consular posts headed by an honorary consul are permitted limited purchases of alcohol free of excise duty for use at National Day celebrations. They are also permitted limited purchases of wine for use at National Day celebrations where claims for refunds of WET and GST are submitted as part of the official claims by responsible diplomatic missions or consular posts headed by a career consular officer.
The official salary and allowances paid to home-based diplomatic and consular personnel (including administrative and technical staff, consular employees and service staff) posted to Australia are exempt from all forms of taxation in Australia. Other income derived by diplomatic and consular personnel from sources outside Australia is also exempt from Australian taxation. Diplomatic missions and consular posts are reminded, however, that locally engaged staff and any other staff who may be citizens or permanent residents of Australia (in accordance with the migration regulations) will generally be liable to pay Australian tax on their salaries and allowances.
Interest arising in Australia, being interest from banks, building societies or credit unions from all types of accounts, including transaction, savings and term deposit accounts, accruing to missions and posts in the course of their official duties is exempt from taxation in Australia. This exemption also applies to interest from government securities, bonds, debentures, and distributions from unit trusts, including cash management trusts, to which missions and posts are beneficially entitled.
Article 34(d) of the Vienna Convention on Diplomatic Relations of 1961 and Article 49(d) of the Vienna Convention on Consular Relations of 1963 permit a receiving State to tax private income having its source in that State. Australia regards “private income” as including all income derived from Australian sources, some examples being the proceeds of share market dealings, dividends from public companies, dealings in real estate, and the interest that accrues to personal accounts operated by individuals at financial institutions in Australia. Individuals who receive such income are liable to pay Australian tax. This position is consistent with the abovementioned articles and is adopted by a number of other countries.
Diplomatic and consular personnel are generally considered to be in the same position as Australian residents for taxation purposes and may apply to the Australian Taxation Office for a Tax File Number. This has no bearing on their status under the Vienna Conventions or migration regulations and in no way reduces, modifies or otherwise affects their privileges and immunities. It does, however, mean that where individuals quote their Tax File Numbers to investment bodies (such as banks, building societies, credit unions or public companies) with which they have accounts or investments, those bodies will not automatically withhold tax amounts from the interest or dividends payable on those investments. Where Tax File Numbers are not quoted, investment bodies are, unless the account holders or investors are non-residents for tax purposes, liable to withhold tax from any income earned on the investments and to do so at the highest marginal tax rate applicable to individuals (currently 46.5% of the income payable).
As residents of Australia for tax purposes, diplomatic and consular personnel have access to the annual tax-free threshold on their taxable Australian income; currently this threshold is $6,000. (The tax-free threshold may be less than $6,000 if a tax payer entered or left Australia permanently during the financial year). This means they can earn private Australian income, including interest, up to this amount without having to pay Australian income tax. They do not have to take any formal action to be treated as Australian residents for tax purposes. The question of whether a person is a resident for tax purposes is one of fact, with the status flowing, generally, from the intention to live in Australia during a normal-term posting. Where diplomatic and consular personnel are in Australia on short-term postings they should, if necessary, clarify their residency status for tax purposes with the Australian Taxation Office.
Where missions or posts represent a country with which Australia has concluded an agreement for the avoidance of double taxation, the tax position of diplomatic and consular personnel accredited to those missions or posts will also be governed by the terms of that agreement. One consequence that generally flows from this is that, where diplomatic and consular personnel are residents for tax purposes and earn Australian income in excess of $6,000, the average rate of Australian tax payable on that income will, in the case of interest and dividend income, be limited to 10% of the gross interest or 15% of the gross dividends so included. While this limitation is only applicable to diplomatic and consular personnel from agreement countries, it is worth noting that the average rate of Australian tax currently only exceeds 10% or 15% where taxable Australian income exceeds $18,000 or $36,000 respectively.
Persons who are Australian residents for tax purposes are normally required to complete an income tax return each year. Home-based diplomatic and consular personnel who do not derive any private income from sources in Australia are completely outside the scope of the Australian taxation system. They do not have to obtain Tax File Numbers, lodge income tax returns or take any other tax-related actions. Individuals who wish to be in this position have the option of opening a standard, non-interest-bearing cheque account with an Australian bank or other financial institution that offers such accounts. As such, those accounts do not accrue interest and the question of taxation does not arise.
Those diplomatic and consular personnel who derive some private income in Australia but are confident that the total amount will be below the resident tax-free threshold can apply to the Australian Taxation Office for exemption from this requirement. However, if tax has been deducted from any income, the person taxed may need to complete a tax return in order to secure a refund of that tax.
There are various provisions of the law that allow the Commissioner of Taxation to refund tax correctly deducted or withheld other than by lodgement of a return. These provisions operate where the Commissioner is satisfied of certain matters (primarily that the income will not be subject to tax and that the individual will suffer hardship if the amount is not refunded prior to a return being lodged). If individuals have not quoted their Tax File Numbers and wish to avail themselves of these provisions in relation to tax deducted or withheld, they should contact the Australian Taxation Office to obtain further details.
The Department is aware that as a result of confusion about their taxation status, some diplomatic and consular personnel may have informed investment bodies with which they have accounts or investments that they were non-residents. As a result, they have had deducted from any interest that accrued to their accounts, or dividends paid to them, an amount to cover the withholding tax liability imposed on non-residents. It is suggested that any diplomatic and consular personnel affected in this way may now wish to obtain a Tax File Number and notify it to the relevant investment body. After doing so no Australian tax will be payable on interest or dividend income, provided the total Australian income earned in the financial year does not exceed the resident tax-free threshold.
Where amounts have been deducted from interest or dividends based on advice that the individual was a non-resident for tax purposes, the individual can request a refund of the amount of tax withheld by writing to the Deputy Commissioner of Taxation, PO Box 9811 Moonee Ponds VIC 3039. The request should outline the circumstances in which the amount was deducted, the amount(s) deducted, the name of the investment body making the payment, the date(s) of payment and any other information that will assist the Tax Office in identifying the amount(s) to be refunded.
Diplomatic and consular personnel can request a refund only if they are not required to pay any tax in Australia. If tax is to be paid, the amount of tax withheld by investment bodies will be credited against the individual’s tax assessment. Depending on the total tax to be paid, the individual may get a refund when the Tax Office sends the notice of tax assessment.
Any enquiries should be directed to the Australian Taxation Office, GPO Box 9990, in the capital city of the state or territory where you are located. For telephone assistance please call the Australian Taxation Office enquiries line on 13 28 61.