How the Wine Equalisation Tax works
When the goods and services tax was introduced on to the Australian tax landscape in 2000, there was a lot of angst about the negative effect on the cost of living that this blanket 10% impost would have.
A glimmer of consolation was that pulling a cork out of a wine bottle might hopefully be a lot cheaper, as GST would also see the abolition of a raft of other taxes, including wholesale sales tax on wine, which was 41%.
But it wasn’t to be (which just gave us another excuse to pull that cork). At the same time as GST was introduced, the government came up with its “wine equalization” tax, which spikes such nectar with a 29% loading at the wholesale end. The wine you buy from the bottle shop will cop GST on the value of the wine as well as on this 29% loading.
Wine Equalisation Tax (WET) applies to grape wine, grape wine products, alcoholic drinks made from cider and mead and other fruit and vegetable wines, as long as they have at least 1.15% of alcohol in them.
(The definition of the term in the legislation, “grape wine products”, was changed in late 2009, but more to ensure that “alcopops” or ready-to-drink beverages that are wine-based rather than spirit-based did not escape the same level of excise.)
Who pays it?
WET is a once-only, self-assessing tax on the value of wine for consumption in Australia. WET affects wine manufacturers, wholesalers and importers. It is levied at the wholesale end of the supply chain. WET is paid on the last wholesale transaction before the retailer. So the WET element becomes part of the retailer’s cost base and is passed on to the end consumer. Unlike GST, the retailer gets no entitlement to an input tax credit for WET paid – it is simply part of their purchase cost.
If a retailer does make a “wholesale” sale (that is, sells wine to a re-seller), they may be liable to pay WET, but would qualify for an input tax credit for WET already paid in buying that wine (so that there is no double taxation on the same product). Exports of wine that are GST-free exports are not subject to WET.
Wine tax amounts payable are reported to the ATO on a business’s activity statements, and WET credits are claimed on the BAS as well. (Here is a WET calculation worksheet from the ATO to help.)
A producer rebate scheme was introduced in 2004 to alleviate the impost of WET, and entitles wine producers to a rebate of 29% of the tax on domestic sales. The rebate can be claimed through the BAS, but a maximum claim applies. This has climbed incrementally from the rebate’s introduction to now be set at $500,000 for each financial year.
The rebate has been particularly helpful for smaller producers, as while a couple of dozen very large wine companies account for well over 90% of Australia’s wine production, there are literally thousands of smaller ventures that make up the rest.
As qualified and professional accountants we work with you to achieve your goals and minimize your tax. Feel free to contact us at anytime. We are a team of professional and affordable tax consultant providing a complete range of consulting, taxation and business services to clients throughout Australia.
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