Edited version of your private ruling

Authorisation Number: 1012477872376

Ruling

Subject: Classification of beverage

Question 1

Is your product classified as a grape wine product under section 31-3 of the A New Tax System (Wine Equalisation Tax) Act 1999 (the WET Act)?

Answer

Yes

This ruling applies for the following periods:

From 14 May 2013

The scheme commences on:

Unknown

Relevant facts and circumstances

The recipe of your product is as follows:

· Combine grape spirit (at 96% alcohol by volume) and permeate (at less than 10% alcohol by volume), and

· Add fruit syrup.

The grape spirit and permeate will be supplied to you by third parties.

It is only the permeate stream that is used in the manufacture of your product. The permeate stream is produced from the following process:

Wine is introduced into the reverse osmosis plant, which separates out a stream of wine derived water (the permeate stream) from the other components of the wine.

The wine used in the manufacture of the permeate stream is table wine that has been produced from fresh grapes.

The fruit syrup contains no alcohol.

The permeate stream comprises greater than 70% of the final product.

The final product contains greater than 8% but less than 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 31-2

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

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

A New Tax System (Wine Equalisation Tax) Regulations 2000, Regulation 31-3.01

Reasons for decision

Wine is defined in section 31-1 of the WET Act as meaning grape wine, grape wine product, 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.

Having regard to these definitions, your product falls for consideration as either grape wine or a grape wine product.

Grape wine

Grape wine is defined in section 31-2 of the WET Act. Section 31-2 of the WET Act states:

Grape wine is a beverage that:

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

· 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.

The primary statement in the definition of grape wine is that the beverage is the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. The other parts of the definition are subsidiary, as they only qualify that statement.

When wine is passed through a reverse osmosis process, it is split into two streams called the permeate stream and the retentate stream. Both streams contain alcohol and both streams are usually accepted by the ATO as being grape wine, as long as the stream contains more than 1.15% alcohol. In any case, both streams are considered to be products derived solely from the complete or partial fermentation of fresh grapes.

Your product will be manufactured by combining the permeate stream, grape spirit and fruit based syrup. The wine used in the manufacture of the permeate stream is table wine that has been produced from fresh grapes.

Although the permeate stream itself is considered to be grape wine for the purposes of the WET Act, the addition of fruit based syrup to your product means that your product is not the product of the complete or partial fermentation of fresh grapes or the complete or partial fermentation of products derived solely from fresh grapes.

Your product is therefore not grape wine as defined in section 31-2 of the WET Act.

Grape wine product

Grape wine product is defined in section 31-3 of the WET Act. Section 31-3 of the WET Act states:

Grape wine product is a beverage that:

· contains at least 700 millilitres [or 70%] of *grape wine per litre; and

· has not had added to it, at any time, any ethyl alcohol from any other source, except:

· grape spirit; or

· alcohol used in preparing vegetable extracts (including spices, herbs and grasses); and

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

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

In regards to grape wine products, regulation 31-3.01 of the WET Regulations states:

For paragraph (d) of the definition of grape wine product in section 31-3 of the Act, this regulation prescribes requirements for grape wine products.

A grape wine product must not have added to it the flavour of any alcoholic beverage (other than wine), whether the flavour is natural or artificial.

The ethyl alcohol used in preparing vegetable extracts, mentioned in subparagraph (b)(ii) of the definition:

· must only be used to extract flavours from vegetable matter; and

· must be essential to the extraction process; and

· must not add more than one percentage point to the strength of alcohol by volume of the beverage.

The permeate stream constitutes greater than 70% of your final product and as outlined earlier, the permeate stream is considered to be grape wine. The requirement for your product to contain at least 70% grape wine per litre has therefore been met.

The fruit based syrup added to your product does not contain any ethyl alcohol and therefore the addition of the syrup does not exclude your product from being classified as a grape wine product.

Further, the addition of grape spirit to your product is in accordance with the WET Act, which states that ethyl alcohol from grape spirit may be added to grape wine products.

As your final product contains greater than 8% but less than 22% by volume of ethyl alcohol, your product is therefore classified as a grape wine product and will be subject to WET.