Edited version of private ruling

Authorisation Number: 1011851656360

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Ruling

Subject: Wine equalisation tax - Cider

Question

Will cider added with concentrated fruit juice satisfy the definition of cider under section 31-5 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Answer: Yes.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for goods and services tax (GST).

You intend to produce a new beverage by the addition of concentrated fruit juice to an existing cider.

You currently produce the existing cider and it complies with the definition of cider in section 31-5 of the WET Act.

The water and the concentrated fruit juice will be the only substances that will be added to the existing cider that might impart colour or flavour.

You will bottle the new beverage for domestic sale and distribution.

Reasons for decision

These reasons for decision accompany the Notice of private ruling for you.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Detailed reasoning

Section 2-1 of the WET Act provides an overview of the wine equalisation tax (WET). It says the WET is a single stage tax applying to dealings in wine at the wholesale level. 'Note 1' to section 2-1 advises 'wine' is defined by Subdivision 31-A of the WET Act.

Section 31-1 of the WET Act exhaustively defines wine as:

(a) …

(b) …

(c) *fruit or vegetable wine;

(d) *cider or perry

(e) …

(f) …

*Note asterisks denote a defined term in the WET Act, but they do not alter the meaning of the word.

Subsection 31-1(2) of the WET Act requires wine to contain more than 1.15% ABV. The new beverage will meet this requirement.

Cider or perry is specifically defined by section 31-5 of the WET Act. Section 31-5 says:

Cider or perry is a beverage that:

(a) is the product of the complete or partial fermentation of the juice or must of apples or pears; and

(b) has not had added to it, at any time, any ethyl alcohol from any other source, except as specified in the regulations; and

(c) has not had added to it, at any time, any liquor or substance (other than water or the juice or must of apples or pears) that gives colour or flavour, except as specified in the regulations; and

(d) complies with any requirements of the regulations, made for the purposes of section 31-8, relating to cider or perry.

There is no need to consider paragraph 31-5(d) of the WET Act because no regulations have been made for the purposes of section 31-8 of the WET Act relating to cider or perry.

Paragraph 26 of Wine Equalisation Tax Ruling WETR 2009/1 says traditionally cider has referred to fermented apple juice and perry has referred to fermented pear juice. However, the structure of the definition in section 31-5 of the WET Act allows for cider to contain pear juice and perry to contain apple juice.

The new definitions were incorporated into the WET Act with the enactment of the A New Tax System (Indirect Tax and Consequential Amendment) Act 1999 (ANTS Amendment Act). The explanatory memorandum to the amending Bill says the definitions were inserted into the WET Act to provide certainty as to the types of beverages that would be covered under the WET. It also advises traditional cider beverages shall be included within the definition of cider, even though there is no explanation of what is a traditional cider or perry product.

Paragraph 31-5(a) of the WET Act requires for a beverage to be cider it must be the product of the fermentation of the juice or must of apples or pears. The words 'juice' or 'must', are not defined in the WET Act, therefore there ordinary meaning is relevant.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines juice as:

2. the liquid part of plant or animal substance…

4. any extracted liquid, especially from a fruit…

The Macquarie Dictionary defines must as a noun as:

1. new wine; the unfermented juice as pressed from the grape or other fruit.

In ATO Interpretative Decision ATO ID 2009/38 the Commissioner advises the juice of apples for the purposes of paragraph 31-5(a) of the WET Act includes reconstituted apple juice. The juice of apples will also include combinations of products derived solely from the juice of apples.

In ATO Interpretative Decision ATO ID 2003/951 the Commissioner advises fermentation is the process of conversion of naturally occurring sugars in fruit to alcohol.

The existing cider that you produce is a beverage that meets the definition of cider under the WET Act. You will add the concentrated fruit juice and water to the existing cider after fermentation.

In line with the rationale of ATO ID 2009/38, the concentrated fruit juice will be juice for the purposes of paragraph 31-5(a) of the WET Act. The concentrated fruit juice with the addition of water will be a combination of products derived solely from the juice of apples or pears as referenced in ATO ID 2009/38.

The new beverage will meet the requirement of paragraph 31-5(b) of the WET Act as no alcohol from any other source will be added to the mix of the concentrated fruit juice and the existing cider. The only alcohol present in the mix is the alcohol from the existing cider and any fermentation process that may have begun in the concentrated fruit juice.

No other substance that may impart colour or flavour, other than the water and the concentrated fruit juice, will be added to the existing cider. The existing cider itself is the product of the fermented of apples or pears, or possibly even new wine as defined by The Macquarie Dictionary, and therefore is not liquor or a substance from another source that gives colour or flavour as required by paragraph 31-5(c) of the WET Act.

As previously mentioned, paragraph 31-5(d) of the WET Act has no effect in this instance.

The new beverage, being a mix of concentrated fruit juice with the existing cider, will be the product of fermentation of the juice or must of apples or pears that will have no alcohol, liquor or substance added from any other source. Therefore, it will be cider as defined under section 31-5 of the WET Act.