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Edited version of your written advice
Authorisation Number: 1012813191490
Ruling
Subject: Entitlement to Wine Producer Rebate
Question 1
Are you entitled to claim the wine producer rebate for wine you manufactured that was sold under an asset sale agreement?
Answer
Yes.
Relevant facts and circumstances
An incapacitated entity (You) grew grapes and produced bulk and bottled wine.
You operated a winery with processing facilities, a bottling facility, and a cellar door sales area. You also made wholesale sales of wine.
You manufactured bulk wine from the grapes you grew for this purpose.
You obtained a loan from a bank over certain assets that bestow certain rights upon the bank.
You defaulted on payment of the loan and Receivers and Managers were appointed.
An asset sale was organised by the Receiver appointed to you.
The asset sale agreement provided, amongst other things, for the sale of wine manufactured by you. The purchaser provided you with an ABN quotation for the wine. Before the time of settlement a caveat was registered preventing the Receiver from independently completing the asset sale.
The bank as the secured party, exercised its powers under the loan agreement to forcibly conclude the sale of the wine.
The asset sale agreement listed the bank as the vendor as the bank was the secured entity that exercised the contractual power of sale extended by the loan agreement to forcibly execute the sale agreement.
Title in the wine passed directly from you to the purchaser.
The proceeds from the sale were passed on to you.
No WET was levied on the sale of wine, due to the ABN quotation by the purchaser. The sale of wine was not treated as GST-free under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as part of the sale of a going concern or any other provisions of the GST Act.
Relevant legislative provisions
A New Tax System (Wine Equalisation Tax) Act 1999 Section 17-10,
A New Tax System (Wine Equalisation Tax) Act 1999 Section 19-5,
A New Tax System (Wine Equalisation Tax) Act 1999 Section 19-10,
A New Tax System (Wine Equalisation Tax) Act 1999 Section 21-15 and
A New Tax System (Wine Equalisation Tax) Act 1999 Section 33-1
Reasons for decision
Section 17-10 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) provides that if you are registered or required to be registered for the purposes of A New Tax System (Goods and Services Tax) Act 1999 (GST law), you may make a claim for a wine tax credit (other than a claim for a New Zealand wine producer rebate) by including the amount of the wine tax credit in the reduction of your net amount for the tax period in question under section 21-15 of the WET Act.
Section 19-5 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 had the purchaser not quoted for the sale at or before the time of the sale.
However, section 19-10 of the WET Act prevents you from being entitled to a producer rebate if the purchaser notifies you at the time of the sale that they intend making a GST free supply of the wine.
Section 33-1 of the WET Act defines a producer of rebatable wine as an entity that manufactures the wine, or supplies to another entity the grapes, other fruit, vegetables or honey from which the wine is manufactured.
The term manufacture is also defined in section 33-1 as including the following:
(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.
Before you defaulted on your loan, you were engaged in running a winery business; you operated a winery with processing facilities, a bottling facility, and a cellar door sales area. You also made wholesale sales of wine.
Receivers and Managers were appointed in accordance with the terms of the loan agreement and became your agent.
Production records confirm that you are the manufacturer as defined in paragraph 33-1(a) of the WET Act of the rebatable wine that was sold.
The loan agreement entered into with the bank provided that following a default event the bank may exercise its powers under the agreement. You defaulted when you failed to make the scheduled repayments.
The loan agreement therefore allowed the bank to sell or dispose of the mortgaged property on any terms and in any manner.
The Receiver may also, using his discretion exercise the same powers and rights as those of the bank under the loan agreement to sell or dispose of the mortgaged property on any terms and in any manner.
The mortgaged property included the rebatable wine manufactured by you.
Section 58-5 of Division 58 of the A New Tax System (Goods and Services Tax) Act 1999 provides that:
(1) Subject to this Division, any supply, acquisition or importation by an entity in the capacity of a representative of another entity that is an incapacitated entity is taken to be a supply, acquisition or importation by the other entity.
(2) Subject to this Division, any other act, or any omission, of an entity in the capacity of a representative of another entity that is an incapacitated entity is taken to be an act or omission of the other entity, but only for the purposes of determining, for the purposes of the GST law….
Consequently any supply or acquisition by the Receiver in its capacity as the representative of the incapacitated entity is taken to be a supply or acquisition of the incapacitated entity.
The bank as the secured party exercised its right under the loan agreement to sell or dispose of mortgaged property, enabling the completion of the sale of the rebatable wine to the purchaser.
Title in the wine passed directly to the purchaser. The bank as the secured party effected the sale of the wine between you and the purchaser. The proceeds from the sale of the wine then passed to you.
As you were the producer of the rebatable wine, and the sale resulted in title in the wine passing from you to the purchaser, you are entitled to claim the wine producer rebate.
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