Australian wine industry body welcomes reforms to WET tax
The Australian government has released the latest draft of reforms to the wine industry’s rebate scheme, the Wine Equalisation Tax, which has been welcomed by the Winemakers’ Federation of Australia (WFA).
“The Australian wine industry, a significant contributor to the Australian economy, employing thousands of Australians in regional and rural communities, has fought long and hard for reform of the WET rebate eligibility criteria,” said WFA chief executive Tony Battaglene.
“The WET reforms announced last year have gone a long way to restoring integrity in the tax system and, once implemented, will allow this very important sector to continue to grow and deliver benefits to rural and regional Australia.”
In Australia, domestically produced wine is taxed at 30% of its wholesale value, the WET. The rebate scheme currently enables winemakers to claim a rebate of up to $500,000 on the tax they have paid, but that is all about to change under the reforms. The current scheme was widely being abused, and eligibility criteria needed to be firmed up, according to assistant agriculture minister Anne Ruston, hence the need for reform.
The wine industry has been calling for the Government to tighten up the scheme for years, arguing that multinational companies were playing the system by claiming the rebate on bulk wine they traded, and by buying bulk wine, selling it under a range of labels and claiming the rebate on each of them.
“The WET rebate was being accessed in a manner in which it wasn’t originally intended, which was actually creating some very perverse distortions in the market place,” said Ruston. "We were seeing some very significant downward pressure on the price of wine grapes and wine, and we were also seeing a focus on the domestic market when we know the Australian wine industry is at its best when it's exporting."
Under the new legislation, winemakers must own the “source product”, (ie the wine grapes), and the final product must contain 85% of that source product.
The rebate will also be lowered from $500000 to $350,000, and the Australian Taxation office will require proof that a taxable sale has occurred before the rebate is claimed.
Products must also be branded with a registered trademark in packaging no larger than five litres.
“In the past it’s been unclear about who’s eligible but the AOTO will now require you to have paid the tax to claim it back. “
If they meet the new eligibility requirements, New Zealand winemakers will be able to continue claiming the rebate, much to the fury of the local industry and politicians. However it has been difficult to remove because of its inclusion in the Australia New Zealand Free Trade Agreement.
Public comment on the draft leglislation is open until April 28th.