Edited version of your private ruling

Authorisation Number: 1012471396279

Ruling

Subject: Fruit or vegetable wine

Question 1

Are your liqueur products classified as fruit or vegetable wines for the purposes of section 31-4 of the A New Tax System (Wine Equalisation Tax) Act 1999 (the WET Act)?

Answer

No

This ruling applies for the following periods:

From 1 July 2013

The scheme commences on:

Unknown

Relevant facts and circumstances

1. You are registered for goods and services tax and wine equalisation tax.

2. The recipe of product one, two and three is the following:

a. Juice is derived from various fresh fruits

b. Add sugar, water and yeast

c. Fermentation takes place, resulting in a fermented concentrated juice. This fermented concentrated juice constitutes less than 20% of each final product

d. Add sugar syrup. At this point each product contains less than 8% alcohol by volume

e. Add neutral spirit

f. Add fresh fruit, being the same fruit as the fruit used to make the concentrated fruit juice

a. Each final product contains between 1.15% and 22% alcohol by volume.

Relevant legislative provisions

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

A New Tax System (Wine Equalisation Tax) Act 1999 Section 31-4

A New Tax System (Wine Equalisation Tax) Regulations 2000 Regulation 31-4.01

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.

Fruit or vegetable wine is defined in section 31-4 of the WET Act. It is also subject to certain requirements as specified in regulation 31-4.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations).

Section 31-4 of the WET Act defines fruit or vegetable wine as a beverage that:

(a) is the product of the complete or partial fermentation of the juice or must of:

(i) fruit or vegetables; or

(ii) products derived solely from fruit or vegetables; 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 that gives colour or flavour, except as specified in the regulations; and

(d) contains at least 8% by volume of ethyl alcohol, but not more than 22% by volume of ethyl alcohol; and

(e) complies with any requirements of the regulations, made for the purposes of section 31-8, relating to fruit or vegetable wine.

The Commissioner considers that sugar, yeast and water are not substances that add colour or flavour for the purposes of classifying a beverage as a wine under the WET Act. Further, as the fresh fruit added to each product is the same as the fruit used to manufacture the concentrated fruit juice for that particular product, this fresh fruit is also not considered to be a substance that adds colour or flavour to each product.

The addition of neutral spirit to each product is also in accordance with the regulations, which state that ethyl alcohol from grape spirit or neutral spirit may be added to fruit or vegetable wine.

The primary statement, however, in the definition of fruit or vegetable wine is that the beverage is the product of the complete or partial fermentation of the juice or must of:

· fruit or vegetables, or

· products derived solely from fruit or vegetables.

The other parts of the definition are subsidiary, as they only qualify that statement.

As the fermented concentrated juice constitutes less than 20% of the final beverages, products one, two and three are not considered to be 'the product' of the complete or partial fermentation of the juice or must of fruit or vegetables, or products derived solely from fruit or vegetables. This principle is outlined in ATO Interpretative Decision 2007/192 Excise The product of distillation. Here a beverage was classified as the product of distillation rather than the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. This product consisted of 30% fermented grapes and 70% distilled liqueur and was therefore not classified as a grape wine under the WET Act.

It is also a requirement that each product meet the definition of fruit or vegetable wine prior to the addition of neutral spirit, including the requirement for each product to contain between 8% and 22% by volume of ethyl alcohol. As each product contains less than 8% alcohol by volume prior to the addition of neutral spirit, this requirement has also not been met for each product.

As such, product one, two and three are not subject to WET because they do not meet the definition of fruit or vegetable wine for the purposes of section 31-4 of the WET Act. Specifically, paragraphs 31-4(a) and 31-4(d) of the WET Act have not been met.

You are therefore not liable for WET on any dealings with product one, two or three.

However, as each product is an alcoholic beverage that contains more than 1.15% alcohol by volume, product one, two and three will be subject to excise duty.