Edited version of your private ruling

Authorisation Number: 1012444920843

Ruling

Subject: WET - Product Classification

Question 1

Do products 2, 4 and 5 meet the definition of 'wine' for the purpose of Subdivision 31-A of the WET Act?

Answer

No, products 2, 4 and 5 do not meet the definition of 'wine' for the for the purpose of Subdivision 31-A of the WET Act.

Question 2

Do products 1, 3 and 6 meet the definition of 'wine' for the purpose of Subdivision 31-A of the WET Act?

Answer

Yes, products 1, 3 and 6 meet the definition of 'wine' for the for the purpose of Subdivision 31-A of the WET Act.

Question 3

Are products 2, 4 and 5 'other excisable beverages' for the purposes of the Excise Act 1901 (the Excise Act) and therefore subject to excise?

Answer

Yes, products 2, 4 and 5 are considered 'other excisable beverages' and therefore subject to excise.

Relevant facts and circumstances

· You are a winery and distillery

· You hold an Excise manufacturers licence

· You are registered for wine equalisation tax (WET)

· You purchase products i.e permeates and ingredients 1 and 2 from various suppliers

· You have supplied the following six recipes:

Product 1

A permeate is blended with ingredient 1 resulting in a strength of less than 22% av. The mix ratio is approximately 50:50.

Product 2

Ingredient 1 is fortified with grape spirit resulting in an alcoholic strength of less then 22% av. The ratio would be approximately 25% ingredient 1 with 75% grape spirit.

Product 3

A permeate (P1) is mixed with another permeate (P2). The mix ratio for both permeates would be approx 33% P1 to 66% P2 to ensure an alcoholic strength of no more than 22% av

Product 4

Ingredient 2 is be blended with a permeate resulting in a final alcoholic strength of less then 22% av. The mix ratio would be 50:50.

Product 5

Grape spirit is mixed with ingredient 2 resulting in an alcoholic strength of less than 22% av. Mix ratio is approximately 25% grape spirit with 75% ingredient 2.

Product 6

A permeate with an alcoholic content of greater than 1.15% and less than 22% av is fortified with grape spirit. The final product will have be not more than 22% av.

Relevant legislative provisions

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

A New Tax System (Wine Equalisation Tax) Act 1999 Subsection 31-1(1)

A New Tax System (Wine Equalisation Tax) Act 1999 Subsection 31-1(2)

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

A New Tax System (Wine Equalisation Tax) Act 1999 Paragraph 31-2(1)(a)

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

A New Tax System (Wine Equalisation Tax) Act 1999 Section 31-3

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

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

Excise Tariff Act 1921

Reasons for decision

Question 1

No, Products 2, 4 and 5 do not meet the definition of 'wine' for the for the purpose of Subdivision 31-A of the WET Act.

Detailed reasoning - Question 1

Wine is defined in section 33-1 of the WET Act as having the meaning given by Subdivision 31-A of the WET Act.

Subsection 31-1(1) in Subdivision 31-A of the WET Act states that wine means any of the following:

· Grape wine;

· Grape wine products;

· Fruit or vegetable wines;

· Cider or Perry;

· Mead;

· Sake.

Subsection 31-1 (2) of the WET Act provides that wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol.

Section 31-2 of the WET Act defines grape wine as follows:

(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 31-2.01 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.

Product 2

You intend to manufacture your product by adding grape spirit to ingredient 1.

However, the definition of grape wine requires the beverage to be the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. As ingredient 1 is not the product of complete or partial fermentation of grapes or products derived solely from fresh grapes the product will not meet the definition of grape wine.

Product 4

In the manufacture of Product 4, ingredient 2 is blended with a permeate.

Ingredient 2 is a product derived from an evaporation process.

Permeate is created when wine is passed through a reverse osmosis filter and splits into two portions called permeate and retentate. Both portions contain alcohol and both portions are accepted by the Australian Tax Office (ATO) as being wine provided that the alcoholic strength of each portion is more than 1.15% av and not more than 22% av.

Product 4 is not the product of 'complete or partial fermentation of grapes, or products derived solely from fresh grapes' and is therefore not considered a grape wine for the purposes of section 31-2 of the WET Act.

Product 4 is also not considered a grape wine product as under section 31-3 of the WET Act it would need to contain 700 millilitres of grape wine per litre. As the permeate has a volume of ethyl alcohol greater than 22% it is not grape wine and therefore the product cannot meet the definition of a grape wine product.

Product 5

You intend to manufacture your product by adding grape spirit to ingredient 2.

However, the definition of grape wine requires the beverage to be the 'complete or partial fermentation of fresh grapes or products derived solely from fresh grapes'. As ingredient 2 is not the product of complete or partial fermentation of grapes or products derived solely from fresh grapes the product will not meet the definition of grape wine.

Question 2

Yes, Products 1, 3 and 6 meet the definition of 'wine' for the for the purpose of Subdivision 31-A of the WET Act.

Detailed reasoning - Question 2

As discussed in Question 1 above wine includes any of the following provided that they contain more than 1.15% by volume of ethyl alcohol:

· Grape wine;

· Grape wine products;

· Fruit or vegetable wines;

· Cider or Perry;

· Mead;

· Sake.

Each of these products is then further defined in the WET Act.

Having regard with the above definitions, your products fall for consideration as a grape wine under section 31-2 of the WET Act.

Product 1

Permeate is blended with the ingredient 1. A blending of the two (at a ratio of approximately 50% each) ensures an alcohol volume of less than 22%.

Product 1 is considered a grape wine for the purposes of section 31-2 of the WET Act.

Product 3

Permeate with an alcoholic strength of approximately x% is blended with another permeate with an alcoholic strength of y%. A mix of the two permeates (at a ratio of approximately 33% and 66%) ensures an alcohol volume of not more than 22%.

As discussed above permeate is accepted as being wine provided that the alcoholic strength is more than 1.15% av and not more than 22% av. As the permeates are the product of complete or partial fermentation of fresh grapes, or products solely derived from fresh grapes and the strength of the final product produced by blending these permeates will be not more than 22% av Product 3 fulfils the definition of grape wine under section 31-2 of the WET Act.

Product 6

A permeate is fortified with grape spirit to increase the overall product's alcohol volume to 22%.

Subsection 31-2(2) of the WET Act, states that a beverage does not cease to be a product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes just because grape spirit has been added to increase the strength of alcohol.

This means that the addition of grape spirit (to increase the strength of the alcohol) would not disqualify a beverage from being considered a grape wine.

As previously discussed, a permeate is accepted as being wine provided the alcoholic strength is more than 1.15% av and not more than 22% av. Your product will be produced using a permeate within this alcoholic strength range. The fortification of the beverage to 22% av by using grape spirit is in accordance with subsection 31-2(2) of the WET Act and accordingly your product meets the definition of a grape wine under section 31-2 of the WET Act.

Question 3

Yes, Products 2, 4 and 5 are considered 'other excisable beverage' and therefore subject to excise.

Other excisable beverages are defined in the Excise Tariff Act 1921 as any beverage containing more than 1.15% of alcohol by volume excluding beer, brandy and wine. As your products were found not be wine they therefore will fall within the definition of other excisable beverages. Other excisable beverages manufactured in Australia are subject to excise duty.