The Wine Equalisation Tax or WET was first introduced in 2000 around the same time as that other momentous tax change, the GST. It applies to wine, grape wine products and alcoholic drinksmade from other fruit wines.As you are all aware, WET is a self assessing tax and is payable by the wholesaler and generally applies to wine producers, manufacturers and importers. It is calculated at the rate of 29% and is based on the last wholesale value of the wine being sold. This means the retailer does not have a liability for WET unless they make their own wine. However, the retailer will still need to pay the WET upon acquisition of the wine and passes on the WET to the customer or end consumer.
The WET regime attracted attention in the Henry Tax Review in 2011 which suggested a move to a volumetric tax bringing wine in line with other types of alcoholic drinks. There is no equivalent tax levied elsewhere in the world.
All Australian producers are liable for the WET; however back in 2004 the Government introduced the WET Rebate in an effort to assist small producers who play a key role in innovation within the industry. Therebate on all domestic sales (up to an annual limit of $500,000 per year) has had a positive effect on the industry, in particular smaller producers and in many cases it has secured theongoing viability of many wineries. In the 2013 financial year the ATO handed back over $300m via the rebate.
In recent times the ATO has changed the law in respect to the WET rebate and has taken a tough stance (via substantial audit activity) in regards to the WET producer rebate. The ATO investigations have uncovered fraudulent activities includingfindings that some wine operators were entering into artificial schemes between related corporations in order to maximise their WET rebate. In some cases the police have been called to investigate claims of fraud. This has put further pressure on the need for strict compliance when organisations claim their WET rebate.We note that many of our clients have Audit Insurance that has proven to be useful in a WET review undertaken by the ATO.
In light of the above, certain commentators have suggested that the WET rebate’s days are numbered. However, if abolished it could mean that all small wine producers (even those compliant with the law) will be denied the rebate which, will substantially reduce their profitability and perhaps threaten their very existence. It may also encourage consolidation within the industry and takeover/merger activity with the larger wine producer/players.
The Government didn’t make any changes to the WET rebate in the recent budget however, in this current fiscal climate all taxes are under the spotlight. The answer to our question regarding the future of the WET rebate may be addressed in the Government’s White Paper on Tax Reform which is expected to be released sometime during their first term.The practical application of the WET legislation is certainly not simple and it is vital that all operators exercise due care as well as having the correct systems and processes in place to stay compliant.
Harveys Chartered Accountants supports the winemaking community
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Our clients tell us that they want a trusted advisor to partner with to increase efficiency, productivity and leverage opportunities. We have the experience, current knowledge and commitment to help you achieve your strategy through the growth, maturity and succession stages of your business.We offer our wine industry clients specialist knowledge gained from our long-standing relationships with many key producers and industry bodies including;
A Barossa based family owned industry leading wine producer and distributor
An Australian importer of Central Otago wines selling into Sydney and Melbourne
A Mudgee based boutique vineyard producing and distributing into the Australian market
Please contact Daniel Shalala on 9247 2227 if you wish to discuss how the points raised in this article specifically affect you. For more information on Harveys visit our website