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Edited version of private advice
Authorisation Number: 1012636132544
Ruling
Subject: Wine equalisation tax - grape wine and grape wine products
Question
Do the products meet the definition of 'wine' for the purposes of section 31-1 of the A New Tax System (Wine Equalisation Tax) 1999 (WET Act)?
Answer
Yes, the products meet the definition of wine for the purposes of the WET Act. Specifically, the products are a 'grape wine product' under section 31-3 of the WET Act.
Relevant facts and circumstances
The entity is presently launching a new grape wine product in Australia elsewhere. There will be three flavour variations of the product
Each product consists of at least 70% grape wine, including added water and sugar. The balance of the ingredients comprises small quantities of flavour and other standard food additives. The final alcohol content of each product will be at least 8% by volume. The flavours do not contain any ethyl alcohol.
These beverages are to be produced in Australia according to the entity's specifications.
To produce the product, the entity will use local grape wines and process them at arms-length via a contract facility.
The contract facility will then blend the wine with the other ingredients in accordance with the process specified by the entity. The product will then be packaged and labelled in accordance with Australian and New Zealand labelling requirements.
Production method
1 to 7
(processes withheld for reasons of commercial confidentiality)
Relevant legislative provisions
A New Tax System (Wine Equalisation Tax) Act 1999
Section 31-1
Section 31-2
Section 31-3
Reasons for decision
Summary
The products are a grape wine product within the meaning of section 31-3 of the WET Act, and are therefore wine.
Detailed Reasoning
Wine is defined in section 31-1 of the A New Tax System (Wine Equalisation Tax) Act 1999 (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 is 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 the products, the entity blends grape wine with water, sugar and fruit flavourings and other minor ingredients. The final product is at least 70% grape wine and contains at least 8% alcohol by volume.
Notwithstanding that the end product comprises at least 70% grape wine and the remainder is mainly water, sugar and flavouring, we cannot conclude that the end product is the product of the complete or partial fermentation of grapes or that the end product possesses the essential characteristics of traditional grape wine.
However, section 31-3 of the WET Act defines a grape wine product. It states:
Grape wine product is a beverage that:
(a) contains at least 700 millilitres of *grape wine per litre; and
(b) has not had added to it, at any time, any ethyl alcohol from any other source, except:
(i) grape spirit; or
(ii) alcohol used in preparing vegetable extracts (including spices, herbs and grasses); and
(c) contains at least 8% by volume of ethyl alcohol, but not more than 22% by volume of ethyl alcohol; and
(d) complies with any requirements of the regulations, made for the purposes of section 31-8, relating to grape wine products
The products contain at least 70% wine base per litre of final product.
We note that you have advised that the wine base is filtered. The base wine after filtration must still retain the characteristics that are expected of a product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes in order to be considered to be a 'grape wine'.
Based on the information you have provided we have assumed that these characteristics (colours, flavours, odours) are retained in your base wine, and that therefore it can be considered 'grape wine'. If this is not the case you will not be able to rely on this ruling. It is only where normal characteristics are retained in the base wine that your end product contains at least 700 millilitres of grape wine per litre as required for a grape wine product by paragraph 31-3(a) of the WET Act.
The products have not had any ethyl alcohol added to it from any other source, so they meet the requirements of paragraph 31-3(b).
The products contain at least 8% alcoholic content; they therefore meet the requirements of paragraph 31-3(c).
The WET Regulations set out some further requirements in relation to grape wine product. Subregulation 31-3.01(2) provides that a grape wine product must not have added to it the flavour of any alchoholic beverage other than wine. Your product does not include the flavouring of any alcoholic beverage. The fruit flavourings are not the addition of flavour of an alcoholic beverage.
Subregulation 31-3.01(3) of the WET Regulations also refers to ethyl alcohol; however, ethyl alcohol has not been added to the products, and therefore the requirements of subregulation 31-3.01(3) are met. The products therefore meet the requirement of paragraph 31-3(d).
As all of the requirements of section 31-3 of the WET Act are met (subject to our comments above), the products are a grape wine product. They therefore fall within the meaning of wine as per section 31-1 of the WET Act and will be subject to wine equalisation tax.