Edited version of your private ruling

Authorisation Number: 1012005009038

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Wine equalisation tax (WET)

Question 1

Does your product meet the definition of 'grape wine' for the purposes of section 31-2 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Answer

No.

Question 2

Is your product subject to WET?

Answer

No.

This ruling applies for the following periods:

From 26 September 2011.

The scheme commences on:

26 September 2011

Relevant facts and circumstances

You blend base wine with other wine.

You add low sugar grape juice to the blended wine.

The low sugar grape juice is produced in one of the following ways:

Method 1: Grapes are crushed. The juice is collected in a tank and then heated. This produces a vapour which is then cooled, resulting in low sugar grape juice.

Method 2: Finished wine is heated and de-alcoholised. The vapour produced is cooled, resulting in low sugar grape juice.

You fortify the blended product with grape ethanol.

The finished beverage is then filtered and bottled.

The finished beverage is 22% a/v.

The majority of the finished beverage is low sugar grape juice.

Relevant legislative provisions

A New Tax System (Wine Equalisation Tax) Act 1999 section 31-2

A New Tax System (Wine Equalisation Tax) Regulations 2000 regulation 31-2.01

Reasons for decision

Question 1

Summary

Your product is not grape wine for the purposes of section 31-2 of the WET Act.

Detailed reasoning

Section 31-2 of the WET Act defines grape wine. It states:

(1) Grape wine is a beverage that:

(a) is the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes; and

(b) complies with any requirements of the regulations, made for the purposes of section 31-8, relating to grape wine.

(2) A beverage does not cease to be the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes merely because grape spirit, brandy, or both grape spirit and brandy, have been added to it.

The regulations referred to in section 31-2 above are the A New Tax System (Wine Equalisation Tax) Regulations 2000. Regulation R31-2.01 relates to grape wine. It states:

For paragraph 31-8(1)(a) of the Act, a beverage mentioned in paragraph 31-2(1)(a) of the Act must not contain more than 22% by volume of ethyl alcohol.

Paragraph 31-2(1)(a) of the WET Act refers to the 'complete or partial fermentation of fresh grapes, or products derived solely from fresh grapes'. A literal reading of the provision would mean that no unfermented grape juice could be present for a product to meet the definition.

Further, other than grape spirit and brandy, the definition is silent on whether or not grape wine may include things other than fresh grapes or products derived solely from fresh grapes that have been fermented to an extent. A literal and narrow reading would mean that only grape spirit and brandy can be added to the fermented fresh grapes or products derived solely from fresh grapes.

Paragraph 1.236 of the Explanatory Memorandum to the Bill to the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 states:

Grape wine will cover traditional products such as table wine, sparkling wine and grape wines fortified by the addition of grape spirit and brandy.

The Australian New Zealand Food Standard Code Standard 4.5.1 - Wine Production Requirements allows for additives to be used in the production of grape wine. While not directly relevant to the WET Act, the Standard is instructive in relation to what is seen as traditional products.

Applying a literal reading to section 31-2 of the WET Act would seem to result in many traditional products that contain additives, not meeting the definition of grape wine. Therefore, the preferred view is that additives which are a normal part of the production of wine may be present in the product.

While the requirements of the WET Act are not necessarily the same as the requirements of the Food Standards, we consider that grape juice could be an allowable additive in the production of wine. However, the amount of grape juice used in the product must be consistent with the normal production of wine.

The majority of your final beverage is low sugar grape juice. The proportion of this 'additive' is so large that your beverage cannot be considered to be a product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes to which permissible additives have been added.

Your product is therefore not grape wine for the purposes of section 31-2 of the WET Act.

Question 2

Summary

Your product is not subject to WET. However, it is subject to excise duty.

Detailed reasoning

As explained in Question 1, your product does not meet the definition of grape wine for the purposes of the WET Act. Nor does it meet the definition of any other wine as defined in the WET Act. Consequently, you would not be liable for WET on any dealings with this product. However, your product would be subject to excise duty. For more information, contact Excise Licensing by phone on 1300 137 290 or by email at ATO-EXC-Alcohol@ato.gov.au.