Home > Federal budget reveals suite of changes for winemakers

Federal budget reveals suite of changes for winemakers

Editorial
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The 2016 budget has delivered wine tax reforms to clamp down on rorts that have plagued the industry for years.

The Federal Government says its wine equalisation tax (WET) reforms will save $300 million over four years, and it will give $50 million of that to the Australian Grape and Wine Authority to promote Australian wine overseas, and wine tourism at home.

Until now, wine makers have been able to claim back as much as $500,000, that they've paid out in the WET.

That cap will be lowered to $350,000 from July 1 next year, and lowered again to $290,000 from July 1, 2018.

Bulk and unbranded wine will be shut out of the rebate, and the government will "prioritise introducing integrity measures" in an attempt to stop people claiming the rebate more than once a year, and to "help deter artificial business structuring".

The eligibility criteria for accessing the WET rebate will also be tightened, from July 1, 2019.

It's not yet clear exactly who will be eligible for the rebate under the new arrangements; the government says the final details, including the definition of a winery "will be resolved through further consultation".

However, a joint statement from Assistant Treasurer Kelly O'Dwyer and Assistant Agriculture Minister Anne Ruston gives a broad indication of the Government's intentions, noting to be eligible, "a wine producer must own a winery or have a long term lease over a winery and sell packaged, branded wine domestically".

Excise refund extended to distillers

In good news for Australian distillers and "non-traditional" cider makers, they'll be able to claim a rebate of their own from next year.

From July 1, 2017, the Government will extend the excise refund scheme to domestic producers of whisky, vodka, gin, liqueur and producers of "low strength fermented beverages such as non-traditional cider".

Eligible breweries can claim a refund of up to 60 per cent of excise paid, up to $30,000 per financial year.

Alcopop producers who buy spirits to mix with soda and flavour will not be eligible.

New Zealand distillers and non-traditional cider makers will not be eligible for the excise refund.

Renewed attempt to crack down on rorts

The Treasury Department has long been concerned about so-called "virtual winemakers" who have no connection to vineyards or wineries, but buy bulk and repackage bulk wine in order to claim the rebate.

Despite a previous attempt to crack down on rorters in 2012, some continue to claim the rebate multiple times per year. 

The Australian industry has also complained that the rebate is open to wine makers in New Zealand, because of free trade agreements in place between the two countries.

Those same agreements have been cited against locking New Zealand out of the scheme, because of concern it could place Australia in breach of its trade deals.

Back to basics for WET rebate

The wine equalisation tax was introduced in 2000 as part of the GST tax reforms, with the rebate introduced four years later.

It was designed to support small regional wine makers by allowing them to claim up to $290,000 of the tax they paid on wholesale wine.

Under pressure from larger wine makers to expand the scheme, former treasurer Peter Costello lifted the rebate threshold to $500,000 in 2006.

Since then, there's been concern that the scheme has been abused by larger companies and individuals who exploit the tax system.

A recent senate inquiry and industry submissions to the government's taxation white paper made it clear the WET rebate was no longer operating as it was originally intended.

The Federal Government signalled it would act to make changes to the arrangements in a discussion paper released late last year.

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