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Edited version of your private ruling
Authorisation Number: 1012513125525
Ruling
Subject: producer rebate entitlement
Question 1
Are you entitled to a producer rebate in respect of cider and perry produced overseas which you have imported and sold, subject to WET in Australia?
Answer
Yes
This ruling applies for the following periods:
From 1 July 2013
Relevant facts and circumstances
· You carry on an enterprise and are registered for goods and services tax (GST) in Australia.
· You state that the cider and perry meet the definitions of cider and perry in accordance with section 33-5 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act).
· You will engage an overseas wine maker to manufacture cider and perry on your behalf in accordance with the recipes, instructions and specifications provided by you.
· You will have an agreement with the wine maker that you will arrange for delivery and supply of all base constituents necessary for them to manufacture cider and perry on your behalf.
· You will have an agreement with an overseas fruit supplier to supply fruit for the purpose of cider and perry manufacture.
· You will send a representative to the engaged contract manufacturer to observe, direct and specify the manufacturing process.
· The base constituents and cider and perry manufactured remains your property at all times.
· The cider and perry are imported by you for sale in Australia.
· The sales are to be mainly wholesale to bars, pubs, clubs, restaurants and large retail liquor chains in Australia.
Relevant legislative provisions
A New Tax System (Wine Equalisation Tax) Act 1999 section 5-5
A New Tax System (Wine Equalisation Tax) Act 1999 subsection 19-5(1)
A New Tax System (Wine Equalisation Tax) Act 1999 section 19-15
A New Tax System (Wine Equalisation Tax) Act 1999 section 33-1
Reasons for decision
Subsection 19-5(1) of the WET Act provides that you are entitled to a producer rebate for rebatable wine for a financial year if you are the producer of the wine and you are liable to wine tax for a taxable dealing in the wine during the financial year; or you would have been liable to wine tax for a dealing in the wine during the financial year had the purchaser not quoted for the sale at or before the time of the sale. Rebatable wine includes cider and perry.
You are liable to wine tax when you have an assessable dealing with imported wine. The relevant assessable dealings are provided by section 5-5 of the WET Act and include local entry and wholesale sales.
In your case you have a liability to wine tax for assessable dealings and are therefore entitled to a producer rebate if you are the producer of the cider and perry.
Section 33-1 of the WET Act provides that a producer of rebatable wine is an entity that manufactures the wine, or supplies to another entity the grapes, other fruit, vegetables or honey from which the wine is manufactured.
Manufacture of wine is discussed at paragraphs 26 to 55 of Wine Equalisation Tax Ruling WETR 2009/2 Wine equalisation tax: operation of the producer rebate for other than New Zealand participants.
Paragraphs 48 to 50 in particular discuss the Commissioners view on having wine made under contract on your behalf. The Commissioner considers that when an entity engages a contract wine maker and:
· provides the inputs such as grapes, other fruit, vegetable or honey; and
· maintains ownership of the inputs and resulting wine; and
· provides the specifications for the wine to be manufactured,
then despite not having physically carried out the processes, the entity has manufactured the wine. As such the entity is considered to be the producer of that wine for the purposes of the producer rebate.
The fact that the base constituents and manufacture takes place overseas does not prevent a GST registered Australian entity from being entitled to a producer rebate under the terms of subsection 19-5(1) of the WET Act.
In your case you acquire the base constituents of your cider and perry and provide these to the wine maker that you have engaged to make cider and perry to your specifications. You own the base constituents and resulting cider and perry at all times. We therefore consider that you are the producer of the cider and perry.
As you are the producer of the cider and perry, you are registered for GST in Australia, and you are liable to wine tax on rebatable wine, you are entitled to a producer rebate under subsection 19-5(1) of the WET Act.
Section 19-15 of the WET Act provides that the maximum amount to which you are entitled for a financial year is $500,000. However, if you are an associated producer (refer to paragraph 66 of WETR 2009/2) of one or more other producers for a financial year, the maximum amount to which you are entitled as a group for each financial year is $500,000.