Edited version of private advice

Authorisation Number: 1012639290529

Ruling

Subject: WET Product Classification

Question 1

Are your flavoured 'wine cocktail' beverages (products A & B) a 'grape wine product' under section 31-3 of the WET Act?

Answer

Yes, your flavoured 'wine cocktail' beverages (products A & B) are considered a 'grape wine product' under section 31-3 of the WET Act.

Question 2

Are your flavoured 'wine cocktail' beverages (products C & D) a 'grape wine product' under section 31-3 of the WET Act?

Answer

No, your flavoured 'wine cocktail' beverages (products C & D) are not considered a grape wine product' under section 31-3 of the WET Act.

This ruling applies for the following periods:

May 2014 onwards

Relevant facts and circumstances

• You are registered for goods and services tax (GST)

• You account for GST on an accruals basis

• You are not registered for wine equalisation tax (WET)

• You intend to produce new 'wine cocktail' beverages.

• You have provided the following specifications for your products:

Product A

Product B

Product C

Product D

• You provided the following points in support of your products being classified as a grape wine product:

1. All final products to contain at least x% by volume of ethyl alcohol but not more than xx%;

2. The final product contains at least xx% grape wine and the remaining percentages include colour, flavours and sugar;

3. The grape wine component of all products will comprise 'z' grapes or any other white grape available at the time of harvest having high Baume;

4. No reverse osmosis is proposed in the manufacture of these products;

5. All flavouring agents are grape spirit based.

Relevant legislative provisions

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

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

A New Tax System (Wine Equalisation Tax) Act 1999 Subsection 31-1(2)

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

A New Tax System (Wine Equalisation Tax) Act 1999 Section 33-1

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

Excise Tariff Act 1921

Reasons for decision

Summary

Your products A & B flavoured 'wine cocktail' beverages meet the definition of 'grape wine product' for the purposes of the WET Act.

Question 1

Your products C & D flavoured 'wine cocktail' beverages are considered to be a 'grape wine product' under section 31-3 of the WET Act.

Detailed reasoning

Wine is defined in section 33-1 of the WET Act as having the meaning given by Subdivision 31-A of the WET Act.

Subsection 31-1(1) of the WET Act states that wine means any of the following:

• Grape wine;

• Grape wine products;

• Fruit or vegetable wines;

• Cider or Perry;

• Mead;

• Sake.

Subsection 31-1 (2) of the WET Act provides that wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol.

Each of the products specified in subsection 31-1(1) of the WET Act is further defined in the WET Act. Having regard to these definitions, all of your products fall for consideration as a grape wine product under section 31-3 of the WET Act

Section 31-3 of the WET Act defines grape wine product as follows:

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.

To determine whether your 'wine cocktail' products are to be considered a grape wine product for the purposes of the WET Act, all of the requirements of section 31-3 of the WET Act above need to be met.

Paragraph 31-3(a) above requires that the grape wine product contains at least 700 millilitres of grape wine per litre of product (70% grape wine). From the formulations you propose, the amount of grape wine in your products is xx%, which meets the 70% grape wine requirement.

We note that you have advised that no xxxxx of the wine base will occur. Should the wine be xxxxx at any stage (using for example, reverse osmosis and/or carbon filtration), the base wine after xxxxxx 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 is required for a grape wine product by paragraph 31-3(a) of the WET Act.

Paragraph 31-3(b) above requires that the beverages have not added to them any ethyl alcohol from any other source except grape spirit. Your products will be fortified with grape spirit. Additionally, product specifications supplied indicate that your flavours contain 'grape spirit'. No other alcohol is added, hence paragraph 31-3(b) of the WET Act is satisfied.

Paragraph 31-3(c) above requires that the beverages have an alcoholic content of between x-xx%. The final alcoholic strength for each of your wine cocktails ranges between xx to xx%, which meets the requirements of paragraph 31-3(c).

Finally paragraph 31-3(d) requires that a grape wine product complies it any requirements of the regulations relating with grape wine products.

The regulation for grape wine products is regulation 31-3.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations) which 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;

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

b) must be essential to the extraction process; and

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

The requirement for consideration is whether the various flavours added to your products are 'the flavour of an alcoholic beverage' as per subregulation 31-3.01(2) of the WET Regulations.

The provision is wide and looks at whether a flavour is that of an alcoholic beverage (other than wine).

The addition of the XYZ and ABC flavours added to your products A & B 'wine cocktail' products respectively does not constitute the addition of the flavour of an alcoholic beverage and as such, your products A & B 'wine cocktail' products are considered to have met paragraph 31-3 (d).

Therefore, both products A & B 'wine cocktails' are considered to be a 'grape wine product' under section 31-3 of the WET Act.

Summary

Your products C & D flavoured 'wine cocktail' beverages do not meet the definition of 'grape wine product' for the purposes of the WET Act.

Question 2

Your products C & D flavoured 'wine cocktail' products are not considered to be a 'grape wine product' under section 31-3 of the WET Act.

Detailed reasoning

Having successfully addressed the first three requirements for section 31-3 of the WET Act, your products C & D flavoured 'wine cocktails' fail to meet the requirement of paragraph 31-3(d) of the WET Act because the flavour of an alcoholic beverage has been added.

Subregulation 31-03.01(2) of the WET Regulations is not directed at alcoholic beverages themselves, it is directed at flavours of alcoholic beverages. Even if a flavour itself does not contain any alcohol, it is a flavour of an alcoholic beverage if it imparts the flavour of an alcoholic beverage (other than wine).

XXX is a recognized brand of 'yyyy' liqueur, which can be consumed on its own or used to make a variety of cocktails.

Similarly, ZZZ is a recognised 'ssss' and 'tttt' flavoured liqueur, which can also be consumed on its own, with water, or used to make a variety of cocktails.

As the XXX and ZZZ flavours impart the flavour of well known liqueurs, the addition of the flavours constitutes the addition of the flavour of an alcoholic beverage for the purposes of subregulation 31-03.01(2) of the WET Regulations.

Therefore, your products C & D 'wine cocktail' products cannot be considered a 'grape wine product' because they fail to meet the requirements of subregulation 31-03.01(2) of the WET Regulations and as such, fail to meet paragraph 31-3 (d) of the WET Act.

As these products are an alcoholic beverage that contain more than 1.15% alcohol by volume and do not fall within any of the other products defined as 'wine' for the purposes of the WET Act, products C & D will be subject to excise duty as an 'other excisable beverage'. You cannot manufacture excisable goods without an excise manufacturer licence.

If you require further information on your excise obligations, please contact the Alcohol Industry Group at the Tax Office on 1300 137 290.