If you produce wine, sell wine by wholesale or import wine into Australia, you may have to account for Wine Equalisation Tax (WET).
WET is a tax on wine at 29% of the wholesale value of wine and is applied if the trading entity is registered or required to be registered for Goods and Services Tax (GST).
The tax is designed to be paid by the end consumer. This is generally on the last wholesale sale of wine, which is usually between the wholesaler and retailer. However, WET may apply for other circumstances such as cellar door sales or tastings, where no wholesale sale has occurred. The tax also captures importing wine, whether or not the trading entity is registered for GST.
Changes to Legislation
A number of changes have been made to the legislation which came into affect on 1 July 2018. This document provides an overview of the changes to ensure wine makers understand and comply with the new measures. The updates detailed in this document include:
- the producer rebate cap for each financial year is now $350,000 (previously $500,000)
- changes to the eligibility for claiming the producer rebate
- changes to the ownership of the source product
- tightened eligibility criteria for the producer rebate now applies to all wines
- changes for information required when buying under quote.
Demonstrating proof of grape ownership
Eligibility to claim the rebate now requires proof of ownership of the grapes used in producing wine. Some form of contract must be in place at the weighbridge (prior to crushing) to demonstrate ownership of the grapes. Ownership may take the form of an exchange of letters, but a more formal contract will provide more surety. The producers rebate requires at least 85% of the total volume of wine to originate from the source product (e.g. grapes) wholly ‘owned’ by the producer.
Required record keeping
In accordance with the Australian Taxation Office (ATO), records are required to demonstrate ownership of the grapes from the crusher through to the final product. Forms of evidence required include written grape supply contracts, weighbridge documents, tax invoices and/or production records.
Retention of title clauses may mean ownership does not pass to the grape purchaser at the weighbridge. Therefore, such clauses may not satisfy WET eligibility requirements.
Branding requirements – trade mark
The new changes to the legislation state, a container must be branded with a trade mark within the meaning of the Trade Marks Act 1995. The container that immediately holds wine at time of dealing must be branded, i.e. label on bottle. To be an eligible trade mark the wine must satisfy one of the following:
- trade mark registered (with IP Australia)
- a trade mark application is lodged and accepted or pending
- an unregistered trade mark that has been used by the producer since 2015 (limited application).
Buying under quote (sales to distributor)
The grounds for quoting remain unchanged, however forms for buying under quote have been updated with additional information required.
The approved quoting form can be downloaded from the ATO website here.
The transitional provisions are complex and require clear guidance on the treatment of existing bottled product and that in barrels, as well as the differences applying to table and fortified products.
What should you do now?
- review branding to ensure it is compliant
- register a trade mark with IP Australia
- review contracts with grape suppliers to ensure the ownership tests are satisfied
- review details and buying under quote forms for selling to distributors to ensure the arrangements are valid. Use the new updated buying under quote forms for reference.
We are here to help. If you have any questions on the WET rebate please call Jacob Lea, Business Services Manager on 03 5443 0344.
Further information on the legislation changes from Winemakers’ Federation of Australia: www.wfa.org.au/activities/wine-equalisation-tax-wet-tax-information
Trade mark search: search.ipaustralia.gov.au/trademarks/search
To contact the ATO directly we provide the following email address contacts:
email@example.com – for advice about the WET legislative changes
firstname.lastname@example.org – for general WET enquiries.