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Edited version of your written advice
Authorisation Number: 1012708969731
Ruling
Subject: Wine equalisation tax (WET) - retention of title
Question 1
Do you satisfy the requirements set out in Practice Statement Law Administration (General Administration) PS LA 2013/1 (GA) (PS LA 2013/1 (GA)) which allows an entity that sells wine under a contract of sale that includes a 'retention of title' clause to:
• treat the time of the sale (that is, the earlier of when the purchaser first uses the wine or when full payment is received) as being made in the month after the wine is attributed for GST purposes, and
• attribute the WET payable in the month after the wine is attributed for GST purposes?
Answer
Yes
Relevant facts and circumstances
You are part of a group of companies.
You are the wholesale supplier of goods (which includes wine) supplied to Liquor Retailers for on-sale to customers.
You and the Liquor Retailers are registered for the goods and services tax (GST) and are all members of the same GST group.
The supply contract with the Liquor Retailers requires payment within 60 days which is performed by way of an inter-company transfer.
As members of the same GST group, no tax invoices are issued by you for the supply of wine to the Liquor Retailers.
You generate a 'shipping document' to accompany the wine despatch from your warehouse to the Liquor Retailers.
You issue invoices within 14 days of the end of each monthly trading period to the Liquor Retailers.
You have recently inserted a 'retention of title' clause in all contracts with the Liquor Retailers
You capture stock movement with the following systems:
a) warehouse management system (WMS)
b) store stock management system (SSMS)
c) stock and merchandise system (SMS)
d) point of sale system (PSS).
WMS captures stock movement in and out of your warehouse to the Liquor Retailers.
SSMS captures stock movement into the Liquor Retailers.
Stock sold by the Liquor Retailers (to customers) is captured by PSS.
PSS, WMS and SSMS all assist in updating SMS.
Relevant legislative provisions
A New Tax System (Wine Equalisation Tax) Act 1999 Section 5-5,
A New Tax System (Wine Equalisation Tax) Act 1999 Paragraph 5-5(2)(c),
A New Tax System (Wine Equalisation Tax) Act 1999 Section 5-10,
A New Tax System (Wine Equalisation Tax) Act 1999 Subsection 5-10(2),
A New Tax System (Wine Equalisation Tax) Act 1999 Section 12-10, and
A New Tax System (Wine Equalisation Tax) Act 1999 Subsection 29-5(1).
Reasons for decision
The Commissioner is empowered with the general administration of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) pursuant to section 356-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA). Broadly, the purpose of the general administration power is to place the day to day administration of the various tax laws in the hands of the Commissioner.
In PS LA 2013/1 (GA) the Commissioner has exercised his power of general administration in respect of wine equalisation tax and contract of sale that includes a 'retention of title' clause.
Subject to certain conditions, the Commissioner will allow entities that sell wine under a contract of sale that includes a 'retention of title' clause to:
• treat the time of the sale (that is, the earlier of when the purchaser first uses the wine or when full payment is received) as being made in the month after the wine is attributed for goods and services taxes (GST) purposes, and
• attribute the WET payable in the month after the wine is attributed for GST purposes.
Entities will be allowed to treat the time of sale as being made in the month after the wine is attributed for GST purposes and attribute the WET payable to that month, subject to the following conditions:
1. they have sold the wine under a sale contract that contains an 'effective' retention of title clause,
2. they experience practical difficulties in determining when the wine is first used by the purchaser,
3. on average they receive full payment for their sale of wine at least one month or more after the invoice date, and
4. on average their major customers on-sell the wine at least one month or more after the invoice date.
You have prepared a submission addressing each of the above conditions in PS LA 2013/1 (GA) detailing reasons why you believe you are entitled to treat the time of wine sales as being in the month after GST on the taxable supply is attributable, and to attribute the WET payable to that month.
Condition 1: Effective retention of title clause
The contract of sale between you and each of the Liquor Retailers contains an effective retention of title clause consistent with paragraph 21 of PS LA 2013 (GA)
• your contract clearly states that property in the goods does not pass to the Liquor Retailers (the purchaser) until the goods are paid for in full;
• the purchaser must keep the goods (upon delivery) separate and sufficiently identifiable from their other stock to enable repossession where full payment is not made within the required time; and
• where the goods are not kept separate, the purchaser forfeits ownership in their stock, and title reverts to them only when they have paid for the goods in full.
Condition 2: Practical difficulties in determining when the wine is first used by the purchaser
You have stated two main reasons why you were experiencing difficulties in the second condition of PS LA 2013(GA)
• The Liquor Retailers often use wine for tastings in their stores and that provides difficulty in determining when this actually occurs. No form of recording is implemented (electronic or otherwise) to capture this application of own use.
• Due to the limits of barcoding, you are unable to identify differences between various vintages of wine. For example, a 2010 vintage shiraz could sell for $12 a bottle but a 2012 vintage bottle could sell for $10 as the season that year was not good. The barcode used for both those years are the same and create difficulty when trying to identify which vintage was sold.
Condition 3: On average receive full payment of sale of wine at least one month after the invoice date.
You receive payment from the Liquor Retailers more than one month after the date of invoice, consistent with your 60 day payment terms.
Condition 4: On average major customers on-sell wine at least one month after the invoice date.
You have stated that the Liquor Retailers have on average a 60 day turnover of stock indicting that wine is on-sold more than one month after the invoice was issued (by you).
You therefore meet all the conditions required under PS LA 2013/1 (GA) to:
• treat the time of the sale (that is, the earlier of when the purchaser first uses the wine or when full payment is received) as being made in the month after the wine is attributed for GST purposes, and
• attribute the WET payable in the month after the wine is attributed for GST purposes.
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