House of Representatives

Tax Laws Amendment (Wine Producer Rebate and Other Measures) Bill 2004

Second Reading Speech

Mr Ross Cameron (Parliamentary Secretary to the Treasure)

I move:

That this bill be now read a second time.

This bill amends the A New Tax System (Wine Equalisation Tax) Act 1999 to implement a new wine producer rebate and to improve certain compliance and administration arrangements.

The government announced in the 2004-2005 federal budget a wine producer rebate that will provide a $290,000 rebate of wine equalisation tax (WET) to every wine producer per annum which effectively exempts from WET the first $1 million (wholesale value) of each producer's domestic sales every financial year.

The new wine producer rebate arrangements apply from 1 October 2004 and will replace the existing Australian government cellar door rebate scheme. The new producer rebate will apply to all domestic sales, not just cellar door sales. The maximum of $290,000 in rebate that will be available to each wine producer under the new scheme is significantly greater than the $42,000 cap of the current cellar door rebate scheme. This maximum rebate applies to each individual producer or a group of producers that are associated or connected with each other.

Around 90 per cent of wine producers will receive a rebate that will offset their WET liability, with around 85 per cent of the benefits being received by small wine producers in rural and regional Australia.

The rebate will continue to be claimed through the business activity statement. To reflect the implementation of the arrangements from 1 October 2004, transitional provisions in the bill provide that the rebate available in the 2004-2005 financial year will be pro-rated.

The two compliance measures relate to ensuring wine packaging is included in the tax base and the export and re-entry of wine.

In particular, the practice of a retailer purchasing bulk wine and then subsequently and separately undertaking steps integral to preparing the wine for retail sale, such as bottling and packaging the wine, will be addressed. This practice artificially excludes the costs of these value adding processes from the wine tax base.

The other revenue protection measure will ensure WET is not bypassed by the practice of exporting wine, claiming a WET credit for the export, then re-entering the same wine WET-free for sale in the Australian market.

This bill will also remove accelerated depreciation for grapevines, with effect from 1 October 2004. New grapevine plantings will fall for consideration under the general arrangements for horticultural plants.

Currently, a grapevine starts to decline in value in the year in which the taxpayer first uses it in a primary production business for the purpose of producing assessable income. Grapevines can be written off over a four-year period at a rate of 25 per cent per annum. Under the horticultural plant provisions, grapevines will still be subject to write-off at an accelerated rate, depending on their effective life.

Full details of the measures in the bill are contained in the explanatory memorandum.

I commend the bill and present the explanatory memorandum.

Debate (on motion by Mr Gavan O'Connor) adjourned.