ATO Interpretative Decision

ATO ID 2005/268 (Withdrawn)

Excise

• This ATO ID is withdrawn as it is superseded by Wine Equalisation Tax Ruling WETR 2009/2
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a person a producer of rebatable wine for the purposes of Division 19 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) where they purchase raw grape wine and process it into finished grape wine?

Decision

Yes. A person is a producer of rebatable wine for the purposes of Division 19 of the WET Act where they purchase raw grape wine and process it into finished grape wine.

Facts

A person purchases grape wine which has undergone primary fermentation. The person then converts this raw wine into finished grape wine. Depending on the type and style of finished wine being produced, the processes undertaken may include the following:

•

analysis of the wine at various stages to determine sugar, pH, acid, sulphur dioxide, alcohol and malic acid content. Adjustments are made according to the results of the analysis.

•

secondary fermentation (malolactic fermentation). This may occur naturally or be induced.

•

maturation

•

racking to clarify the wine by removing unwanted solids. This may be performed several times during the process.

•

stabilising, fining and filtering.

The wine is then bottled or packaged ready for sale.

The finished product meets the definition of 'grape wine' in section 31-2 of the WET Act.

Reasons for Decision

Section 19-5 of the WET Act requires that in order to be eligible for the producer rebate for rebatable wine a person must be the 'producer' of the wine. A 'producer' is defined in section 33-1 of the WET Act as an entity that:

...manufactures the wine or supplies to another person the grapes, other fruit, vegetables or honey from which the wine is manufactured.

The term 'rebatable wine' is defined in section 33-1 of the WET Act to mean grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead or sake, all of which are separately defined in section 31 of the WET Act. The finished wine produced from the raw wine satisfies the definition of 'grape wine' in section 31-2 of the WET Act.

The term 'manufacture' is also defined in section 33-1 of the WET Act. The definition expands the ordinary meaning of manufacture to include:

...

(a)

production

(b)

combining parts or ingredients so as to form an article or substance that is commercially distinct from the parts or ingredients

(c)

applying a treatment to foodstuffs as a process in preparing them for human consumption

but does not include any prescribed combination of parts or ingredients.

The meaning of manufacture was considered in McNicol & Anor. v. Pinch (1906) 2KB 352 at p361 where Darling J posed the question in these terms:

The essence of making or manufacturing is that what is made shall be a different thing from that out of which it is made.

This statement was quoted with approval by Dixon J in Federal Commissioner of Taxation v. Jack Zinader Pty Ltd (1949) 78 CLR 336; (1949) 9 ATD 46. In that case it was held that articles which resulted from the remodelling of fur garments were goods manufactured and sold within the meaning of the Sales Tax Assessment Act (No. 1) 1930-1942 and were liable to tax under that Act. In his judgement Dixon J stated:

The argument is answered by the consideration that, according to the conclusion already stated, the process produces a different article. When that consideration is added to the fact the actual work done and the procedure employed in producing the new, that is the distinct, article, is characteristically a manufacturing process, it must follow that the "goods" are "manufactured" within the ordinary meaning of that term.

Depending on the type and style of finished wine being produced, the processes undertaken to convert the raw wine to finished wine may include the following:

•

analysis of the wine at various stages to determine sugar, pH, acid, sulphur dioxide, alcohol and malic acid content. Adjustments are made according to the results of the analysis.

•

secondary fermentation (malolactic fermentation). This may occur naturally or be induced.

•

maturation

•

racking to clarify the wine by removing unwanted solids. This may be performed several times during the process.

•

stabilising, fining and filtering.

The wine is then bottled or packaged ready for sale.

These processes convert the raw wine into commercially saleable grape wine. While the difference in physical appearance of the goods may not be great, new and commercially distinct goods are brought into existence. In view of the degree of change, it is considered that new goods have been produced and the process undertaken is manufacture in the ordinary meaning of the word.

As the process of converting raw wine into finished grape wine is considered to be manufacture and as the finished grape wine meets the definition of wine in section 31 of the WET Act, the person undertaking the process is a producer of rebatable wine for the purposes of Division 19 of the WET Act.

Legislative References:
A New Tax System (Wine Equalisation Tax) Act 1999
   section 19-1
   section 19-5
   section 31-1
   section 31-2
   section 33-1

Case References:
McNicol and Anor v. Pinch
   (1906) 2 KB 352

Related Public Rulings (including Determinations)
Wine Equalisation Tax Ruling WETR 2004/1

Keywords
Alcohol
Excise
Excise collections
Grape wine
WET credit
WET producer rebate
WET rebate
Wine
Wine equalisation tax

Business Line:  Excise

Date of publication:  23 September 2005

ISSN: 1445-2782