Edited version of private ruling

Authorisation Number: 1011701108517

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Ruling

Subject: WET Producer Rebate

Question

Are you entitled to claim wine equalisation tax (WET) producer rebate for wine sold when you sold your winery as a going concern?

Answer

No.

Relevant facts and circumstances

At all relevant times, you were registered for GST.

You owned and operated a winery.

You were the producer of rebatable wine.

You sold the winery to an unrelated entity as a going concern.

At this time, you sold all of the wine you had on hand to the unrelated entity.

No GST was included in the sale of the wine.

You stated that the unrelated entity quoted their ABN to you at the time of the sale, and so you did not charge WET on the sale.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(1),

A New Tax System (Goods and Services Tax) Act 1999 Division 38,

A New Tax System (Goods and Services Tax) Act 1999 section 38-325,

A New Tax System (Goods and Services Tax) Act 1999 section 195-1,

A New Tax System (Wine Equalisation Tax) Act 1999 section 5-5,

A New Tax System (Wine Equalisation Tax) Act 1999 section 7-5,

A New Tax System (Wine Equalisation Tax) Act 1999 Division 19,

A New Tax System (Wine Equalisation Tax) Act 1999 section 19-5 and

A New Tax System (Wine Equalisation Tax) Act 1999 section 33-1.

Reasons for decision

Section 19-5 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) states that you are entitled to a producer rebate for rebatable wine if you are the producer of the wine and either:

a) you are liable to WET for a taxable dealing in the wine during the financial year; or

b) you would have been liable to WET had the purchaser of the wine not quoted for the sale at or before the time of the sale.

Section 5-5 of the WET Act sets out the circumstances in which you would be liable for WET on a taxable dealing. Subsection 5-5(2) states that, if a dealing with wine is an assessable dealing and no exemption applies under Division 7 of the WET Act, then the dealing is a taxable dealing.

Subsection 5-5(4) of the WET Act contains an assessable dealings table that sets out all of the assessable dealings that can be subject to wine tax. Assessable dealing AD1a states that a wholesale sale of wine by an entity who manufactured the wine in the course of any business is an assessable dealing.

However, Division 7 of the WET Act provides exemptions from WET for certain assessable dealings. Section 7-5 states that an assessable dealing is not taxable if the dealing is a supply that is GST-free.

Section 33-1 of the WET Act states that the term 'GST-free' has the meaning given by section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which in turn states that the term has the meaning given in subsection 9-30(1) and Division 38 of the GST Act.

Subsection 9-30(1) of the GST Act relevantly says that a supply is GST-free if it is GST-free under Division 38. Relevantly, section 38-325 of the GST Act states that a supply of a going concern is GST-free.

Therefore, under the WET Act and the GST Act, the supply of wine as part of a supply of a going concern is GST-free and, as such, it is not a taxable dealing for WET purposes. As the supply of wine is not a taxable dealing, then under section 19-5 of the WET Act you are not entitled to a producer rebate because you would not be liable to WET on the wine.

In your case, you sold the winery to an unrelated entity as a going concern. You have stated that the wine was sold as part of this going concern. As such, the supply of the wine was GST-free. You would not be required to pay WET on that wine because it is not a taxable dealing under the definition in subsection 5-5(2) of the WET Act.

Further, you have stated that the purchaser of the winery quoted for the wine. However, as stated above, you would not have been required to pay WET on the wine had the purchaser not quoted, because the sale of the wine is not a taxable dealing under subsection 5-5(2) of the WET Act.

As such, the sale of the wine does not meet all of the requirements under section 19-5 of the WET Act because you were not liable for WET on the wine and also you would not have been liable for WET if the purchaser had not quoted. You are therefore not entitled to a producer rebate under section 19-5 of the WET Act.