In the May 2016 Budget, the Turnbull Government announced significant proposed reforms to the Wine Equalization Tax (WET) Rebate.
On 2 December 2016—after extensive consultation with the wine industry—the Government made a number of further important changes.
- The Government has dropped the proposed requirement that winemakers must own, or have a long term lease over, a winery to qualify for the Rebate.
- Instead, winemakers must own 85% of the grapes used to make the wine at the crusher—and maintain ownership throughout the winemaking process.
- Winemakers who don’t not own physical assets—such as a vineyard or winery, but own a brand—should therefore remain eligible to claim Rebates.
The other main changes are:
- The annual Rebate “cap” will remain at the current level of $500,000 until 1 July 2018, when it will reduce to $350,000—as a result, the new cap will be at a higher level, and the existing cap will operate for 12 months longer, than announced in the Budget.
- The Rebate will be limited to packaged wine, in containers not exceeding 5 litres (51 litres for cider and perry), branded with a registered trademark for domestic retail sale—the Rebate will not be available for bulk wine.
Note: common law trademarks will be allowed if a winemaker can’t legally register their trademark.
- Australian, but not NZ, producers who exceed the $350,000 cap may be entitled to a further $100,000 p.a. Wine Tourism Cellar Door grant (WTCD Grant)—the Government stating that it: “wants to back producers who add value and vibrancy to regional communities by encouraging visitors to wine regions”.
- The eligibility criteria will be subject to consultation, but it appears likely the WTCD Grant will be similar to the former State Cellar Door Subsidies (which still operate in Victoria).
It is critical to note that the new eligibility requirements will likely be audited carefully by the ATO.
Of particular concern will be whether winemakers can prove they maintain ownership throughout the wine making process; especially where grapes of various winemakers are “pooled” during that process.
Although winemakers who have their wine contract-processed should qualify for rebates, the ATO will likely look closely to ensure the winemaker controls the production process; such as by providing clear specifications. Well drafted contract-processing agreements will be vital.
Winemakers should also:
- ensure they label their wine with: (i) a registered trademark they own; (ii) a common law trademark (to the extent they can’t legally register their trademark); or (iii) a trademark over which they hold a valid licence; and
- follow, and engage in, the consultation process for the proposed WTCD Grant.
Finlaysons have advised a large number of clients, in a number of segments of the wine industry, on WET and WET-related issues (including State Cellar Door Subsidies). We are therefore well-placed to help winemakers claim the WET Rebate and WTCD Grant.
This Alert is intended as an alert only. It does not purport to be comprehensive advice. Readers should seek professional advice before acting in relation to these matters.