Revised Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - wine export and re-entry
Outline of chapter
3.1 Schedule 2 to this bill also makes amendments to the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) to ensure that wine exported from Australia for which a wine tax credit (other than a refund under the tourist refund scheme) has been claimed then imported into Australia by the same person for further dealings, will attract a wine tax liability notwithstanding the earlier attribution of a wine tax credit. [Schedule 2, item 2]
3.2 The amendments remove the potential for export and import arrangements to be manipulated to avoid payment of wine tax.
Context of amendments
3.3 Generally speaking, wine exports are exempt from the wine equalisation tax (WET) while imports of wine are subject to wine tax.
3.4 Where WET has been borne by an exporter they may claim a wine tax credit which ensures that the export is exempt from WET. If that exporter then returns the wine to Australia as an importer, WET is not applied provided that:
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- the wine is unaltered from when it was exported;
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- there has been no change in ownership;
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- the original acquisition of the wine (if the importer did not manufacture the wine) was by a dealing that was subject to wine tax; and
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- a payment had not been claimed under the tourist refund scheme.
3.5 Under these arrangements it is possible for a person to first acquire wine in a way that is subject to a taxable dealing, then export the wine and claim a wine tax credit before returning the wine to Australia with no requirement to pay wine tax. The result would be that a person has avoided wine tax for wine intended for sale in Australia.
Summary of new law
3.6 Conditions are attached to claims of wine tax credits for exports of wine such that, if the person claiming such a credit returns the wine to Australia in unaltered condition, the credit must be repaid.
| New law | Current law |
|---|---|
| No change. | A wine tax credit may be claimed by an exporter for wine tax they have borne. |
| Claims of wine tax credits for wine exports on which the exporter has borne wine tax, must be repaid if the exporter then returns the wine to Australia in unaltered condition and the wine is sold by retail sale or was applied for own use. | No equivalent. |
Detailed explanation of new law
3.7 Under existing Credit Rule 10 in section 17-5, a credit may be claimed for wine tax that has been borne on wine which is then exported. This ensures that WET does not apply to those exports.
3.8 New subsection 17-37(1) requires that claims for wine tax credits under Credit Rule 10 must be repaid if:
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- the wine is imported to Australia; the import is exempt from WET under section 7-25 (or the equivalent section 42-10 of the A New Tax System (Goods and Services Tax) Act 1999 ); and
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- the wine is later subject to retail sale or an application to own use.
[Schedule 2, item 2]
3.9 Section 7-25, which allows WET not to be applied to a re-entry of unaltered wine by the exporter (except where the exporter has made a claim under the tourist refund scheme), would otherwise exempt the import described above.
3.10 New subsection 17-37(2) provides a mechanism to determine the credit amount applicable for repayments under subsection 17-37(1) for the purpose of application of the collection and recovery rules in Part VI of the Taxation Administration Act 1953 . This new section is consistent with existing arrangements governing the clawback of excess wine credit claims. [Schedule 2, item 2]
Application and transitional provisions
3.11 Schedule 2, item 2 commences on the date this bill receives Royal Assent.