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Edited version of your private ruling
Authorisation Number: 1012466511375
Ruling
Subject: Classification of beverage
Question 1
Is your product a wine for the purposes of Subdivision 31-A of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) and therefore subject to wine equalisation tax?
Answer
Yes
This ruling applies for the following periods:
From 1 July 2012
The scheme commences on:
Unknown
Relevant facts and circumstances
1. You are registered for goods and services tax and for wine equalisation tax (WET).
2. You will purchase low alcohol grape concentrate (LAGC). The LAGC is made from various types of grapes.
3. You will also purchase low sugar grape juice (LSJ). The LSJ is made by crushing fresh grapes.
4. The process of producing your product is as follows:
a. The LAGC is fermented
b. When fermentation starts to take place, the LSJ is added, which naturally ferments
c. The product is racked and filtered
d. Unfermented grape juice is added
e. The product is then fortified using grape spirit
f. The product is then bottled.
5. The final product contains greater than 1.15% but no more than 22% alcohol by volume.
Relevant legislative provisions
A New Tax System (Wine Equalisation Tax) Act 1999 Subdivision 31-1
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
Wine is defined in section 31-1 of the WET Act as meaning, grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead and sake and does not include beverages that do not contain more than 1.15% alcohol by volume. Each of these beverages are then further defined in the WET Act.
Grape wine is defined in section 31-2 of the WET Act. Section 31-2 of the WET Act 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.
Regulation 31-2.01 of A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations) states that a beverage mentioned in paragraph 31-2(1)(a) of the WET Act must not contain more than 22% by volume of alcohol.
To produce your product, you blend the LAGC with the LSJ and allow fermentation to take place. Additional grape juice is then added and the product is finally fortified by the addition of grape spirit. The final composition of your product is LAGC, fermented LSJ, grape spirit and less than 30% unfermented LSJ, containing no more than 22% alcohol by volume.
As your product is comprised of LAGC and LSJ, your product is not the product of the complete or partial fermentation of fresh grapes. For the purposes of subsection 31-2(1) of the WET Act, it therefore needs to be determined if your product is the product of the complete or partial fermentation of products derived solely from fresh grapes.
The LAGC and LSJ are products derived from fresh grapes. Your product however also contains unfermented grape juice. According to ATO Interpretative Decision 2011/92 Wine equalisation tax: addition of unfermented grape juice to grape wine, the Commissioner considers that grape juice (including concentrated grape juice) is an allowable additive in the production of wine, as long as the wine remains the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes.
As the unfermented grape juice added to your product comprises less than 30% of the total product, your product is still considered to be a product of the complete or partial fermentation of products derived solely from fresh grapes.
The addition of grape juice after fermentation therefore does not exclude your product from being grape wine under paragraph 31-2(1)(a) of the WET Act.
As your product does not contain more than 22% by volume of alcohol, your product meets the requirements of subsection 31-2(1) of the WET Act.
Paragraph 11 of Wine Equalisation Tax Ruling WETR 2009/1 Wine equalisation tax: the operation of the wine equalisation tax system states that fortified wines can still meet the requirements of grape wine. The fortification of your product by using grape spirit is therefore in accordance with subsection 31-2(2) of the WET Act.
Your product is therefore classified as a grape wine under section 31-2 of the WET Act and therefore will be subject to WET.