Edited version of private ruling

Authorisation Number: 1011823135903

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Ruling

Subject: WET and producer rebate

Question

Are you entitled to a wine producer rebate in respect of wines produced in New Zealand which you have imported and sold, subject to wine equalisation tax (WET), in Australia?

Answer: Yes.

You are entitled to a wine producer rebate under the terms of subsection 19-5(1) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act).

Facts

You carry on an enterprise and you are registered for goods and services tax (GST) in Australia.

You import wines from New Zealand and sell those wines by wholesale in Australia.

You employ a winemaker who is responsible for selecting grapes and juices and selecting blends to have wine made to a consistent standard. Your winemaker visits New Zealand to select appropriate grapes to make up the required blend.

You then purchase the juice, from the grapes that have been crushed and fermented, from a New Zealand entity.

Your winemaker samples each of the individual batches and mixes them according to taste.

You then decide on the preferred blend and purchase the individual parcels of (bulk) manufactured wine to have blended.

Your winemaker engages the New Zealand entity to blend the wine and to bottle the wine.

You provide specifications to the New Zealand entity regarding the components used to make the end product.

You are the owner of the wine when it is entered for home consumption in Australia.

The wine made in New Zealand and imported into Australia satisfies the definition of wine in the WET Act.

The New Zealand entity does not claim a producer rebate in respect of the wine made on your behalf.

Reasons for decision

Subsection 19-5(1) of the WET Act provides that you are entitled to a producer rebate for rebatable wine for a financial year if you are the producer of the wine and you are liable to wine tax for a taxable dealing in the wine during the financial year; or you would have been liable to wine tax for a dealing in the wine during the financial year had the purchaser not quoted for the sale at or before the time of the sale.

The fact that the grapes are grown, and the wine manufactured, in New Zealand does not prevent a GST registered Australian entity from being entitled to a producer rebate under the terms of subsection 19-5(1) of the WET Act.

New Zealand wine that is imported into Australia is 'rebatable wine' as it will be subject to wine tax when it is locally entered or when a subsequent assessable dealing occurs.

As a liability to wine tax arises when an assessable dealing with rebatable wine occurs, you are entitled to a producer rebate, under the terms of subsection 19-5(1) of the WET Act, if you are the producer of that wine.

Section 33-1 of the WET Act provides that a producer of rebatable wine is an entity that manufactures the wine or supplies to another entity the grapes, other fruit, vegetables or honey from which the wine is manufactured.

Manufacture of wine is discussed at paragraphs 26 to 55 of Wine Equalisation Tax Ruling WETR 2009/2, which is about the operation of the producer rebate for other than New Zealand participants.

Paragraph 31 of WETR 2009/2 provides that an entity that uses base constituents to make a beverage that satisfies the meaning of wine in section 31-1 of the WET Act, manufactures wine.

According to paragraph 37 of WETR 2009/2, whether a particular process or combination of processes that an entity conducts in relation to wine constitutes production, and therefore manufacture, requires examination of the relevant facts and circumstances.

Paragraph 39 of WETR 2009/2 provides that the mixing together of two or more different wines to produce another wine, for example a blended wine satisfies the definition of manufacture.

Paragraph 40 of WETR 2009/2 states:

In the wine industry it is a normal part of winemaking to blend wines. In some cases the wines that are blended may be different varieties of wine, for example cabernet sauvignon and merlot. In other cases the blended wines may be the same variety of wine but with each individual blended wine having characteristics that when combined with the characteristics of the other blended wine results in a wine with its own commercially distinct characteristics. What is commercially distinct will often be a matter of fact and degree. The Commissioner considers that an entity that combines different wines to produce wine with its own characteristics, distinct from the individual blended wines, manufactures wine.

According to paragraph 48 of WETR 2009/2, an entity manufactures wine when it supplies the base materials (such as grapes) to a winemaker which it engages to make wine on behalf of the entity. Paragraph 49 of WETR 2009/2 states:

Although the entity that owns the wine does not carry out any of the physical processes of manufacture personally, by causing the wine to be manufactured on their behalf, the owner has undertaken the manufacture of the wine. In these circumstances the owner of the wine is the producer of that rebatable wine for the purposes of Division 19.

Paragraph 50 of WETR 2009/2 provides that the Commissioner considers the owner of grape wine that provides grape wine and other materials and specifications to make a beverage that meets the definition of grape wine product, manufactures the grape wine product. Following the reasoning of paragraph 50, although you may not provide the grapes or other base materials to the New Zealand entity, you will be considered the manufacturer of the end product if you provide unfinished wine, other materials and specifications to the New Zealand entity to make finished wine on your behalf.

You acquire the wine that is provided to the New Zealand entity and you sample the wines used in blending. You provide selected grape wine and instructions regarding blending etc to the New Zealand entity. We consider that you cause the end product to be manufactured on your behalf, therefore, you are the producer of the wine.

As you are the producer of the wine, you are registered for GST in Australia, and you are liable to wine tax on rebatable wine, you are entitled to the producer rebate under subsection 19-5(1) of the WET Act.

Subsection 19-15(2) of the WET Act provides that the maximum amount of producer rebate a producer is entitled to for a financial year (as from 1 July 2005) is $500,000.00.

Although the Division 19 of the WET Act suggests that the producer rebate is to be claimed on the activity statement for the last tax period in a financial year, paragraph 67 of WETR 2009/2 provides that the rebate may be claimed in the activity statement for the tax period to which the wine tax payable is attributed. Therefore, you may claim the producer rebate in your activity statements for each tax period, provided that the total amount claimed does not exceed $500,000.00 in any one financial year.

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