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Ruling

Subject: WET and taxable value

Question 1

Will the Commissioner agree to you calculating the taxable value of particular wine sales as the fully discounted price on a portion of your wholesale sales of wine to particular customers.

Answer

Yes

Relevant facts and circumstances

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

· You sell wine to particular customers who act as wholesalers.

· These customers offer particular services.

· Each month these customers require a contribution from you towards the services they provide.

· Some of the sales made to these customers attract a rebate based purely on volume, while others are based on; a better position in store, advertising reimbursement, fridge space and a variety of other reasons.

· At the time you supply wine you are not aware of what discounts may apply nor are you aware what the total of the discounts may amount to.

· The customers concerned provide you with a periodic quotation in the approved form in relation to wine sales you make to them. You do not include WET on any of the tax invoices you issue to them relating to wine sales.

· You have provided a spreadsheet detailing sales, and the various discounts that applied to those sales, over a sample period.

· You claimed the maximum producer rebate of $500,000 previously before the end of the financial year concerned.

Relevant legislative provisions

A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)

Reasons for decision

Wine tax payable (and the producer rebate) is calculated by multiplying the taxable value by 29%. Rules for determining the taxable value are set out in Division 9 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act).

Subsection 9-5(1) of the WET Act provides that the general rules for calculating the taxable value are set out in the assessable dealings table in section 5-5 of the WET Act. This table provides that for wholesale sales the taxable value is the price (excluding WET and GST) for which the wine is sold.

The meaning of price is discussed in paragraphs 97 to 127 of Wine Equalisation Tax Ruling WETR 2009/1. The effect of 'trade incentives' on price is discussed in paragraphs 118 to 122 of WETR 2009/1. These paragraphs provide that certain incentives reduce the taxable value, on which wine tax is payable, while others do not.

Although taxable value is generally calculated in accordance with subsection 9-5(1) of the WET Act, as set out above, section 9-10 of the WET Act provides that the Commissioner may enter into an agreement with you about calculating the taxable values of particular taxable dealings in wine.

You advise that, at the time you make wholesale sales of wine to some customers, you are not aware of the particular discounts that may apply. You also advise that, to ensure the taxable value of the wine sold W is calculated correctly in accordance with WETR 2009/1, you would need to calculate and record every sale manually. This would place an onerous and costly burden on you. Therefore, you have requested that the Commissioner enter into an agreement with you regarding the calculation of taxable value of wine you sell to these entities.

Based on details you provided, you consider that the taxable value of wine you sell should be the sale price less all discounts allowed on a portion of your total sales to these customers. The taxable value of the remaining sales would be the full selling price (excluding WET and GST) without taking any discounts into account.

With regard to wholesale sales of wine you make, we recognise that it would be time consuming and costly for you to determine the taxable value, in respect of each sale, in accordance with the guidelines provided in paragraphs 118 to 122 of WETR 2009/1.

We note that your sales of wine to these entities are made under quote. We note also that you previously claimed the maximum wine producer rebate prior to the end of a financial year.

It appears likely that you will continue to be entitled to the maximum producer rebate in the future.

The Commissioner considers your proposal to be appropriate and reasonable and agrees that you may calculate the taxable value of wine sales to particular customers on as the sale price (excluding WET and GST) less all discounts, on the basis you suggested.

This agreement is made on the understanding that:

· you will review your sales annually to ensure the method of calculation remains appropriate, and

· you will notify the Commissioner should there be any significant change in your circumstances which might affect the taxable value calculation.