Edited version of your written advice

Authorisation Number: 1051286550388

Date of advice: 6 November 2017

Ruling

Subject: Wine Equalisation Tax (WET) - Wine Product Classification, Fruit or Vegetable Wine

Question 1

Are your fruit beverages ‘fruit or vegetable wine’ for the purposes of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Answer

Yes.

This ruling applies for the following periods:

August 2017.

The scheme commences on:

August 2017.

Relevant facts and circumstances

You are registered for goods and services tax (GST) and wine equalisation tax (WET).

You plan to make fruit beverages with an alcoholic content between 8% and 8.5% alcohol by volume.

No alcohol, flavours or colours will be added to the beverage.

You will use the following method to make your fruit beverages:

● Fruit will be juiced and then frozen to preserve until needed.

● Some of the fruit juice will be converted into juice concentrate.

● Some of the fruit juice will also be converted into fruit juice by subjecting the fruit juice to repeated filtration to reduce acidity.

● The fruit juice, crystallised sugar, yeast, and other additives are combined and undergo fermentation.

● Of the total ingredients used in the fermentation process, the fruit juice will form at least 80%, the added crystallised sugar will make up less than 20%, and yeast and various additives will make up less than 0.03%.

The crystallised sugar, yeast and other additives do not add colour or flavour.

The fermented product contains approximately 14% alcohol by volume and contains more than 8% alcohol by volume at all times up to and including when it is finalised and bottled.

Other ingredients will be added immediately after fermentation to produce a beverage, which will be comprised of:

● at least 62% fermented fruit juice,

● less than 30% freshly squeezed fruit juice, fruit juice concentrate or fruit juice,

● less than 0.03% yeast and other additives, and

● greater than 8% alcohol by volume.

The product is then subject to fining, filtration and pasteurisation to settle the yeast. During this step, additives are introduced as a preventative treatment of oxidation to assist clarification and stabilisation of the beverage. These additives together make up less than 6% of the final product. No colours, flavours or alcohol are added during this step.

The product is then finalised by being carbonated to 2.5 volumes and bottled with an alcoholic strength greater than 8% alcohol by volume.

Relevant legislative provisions

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

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

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

Australia New Zealand Food Standards Code, Standard 2.7.3 -2

Summary

Your fruit beverages are ‘fruit or vegetable wine’ for the purposes of the WET Act.

Detailed reasoning

Section 31-1 of the WET Act states that wine means any of the following:

a) grape wine;

b) grape wine products;

c) fruit or vegetable wine;

d) cider or perry;

e) mead;

f) sake.

However, wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol.

Each of the above headings is further defined in the WET Act. Having regard to these definitions, your product falls for consideration as a ‘fruit or vegetable wine’ under section 31-4 of the WET Act and the requirements specified in regulation 31-4.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations).

Taking into account the requirements of both the WET Act and the WET Regulations, a fruit or vegetable wine is a beverage that:

● 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; and

● has not had added to it, at any time, any ethyl alcohol from any other source, except grape spirit or neutral spirit, as specified in the WET Regulations; and

● has not had added to it, at any time, any liquor or substance that gives colour or flavour (other than grape spirit or neutral spirit as specified in the WET Regulations); and

● contains between 8% and 22% (inclusive) of ethyl alcohol by volume or if grape spirit or neutral spirit has been added, contains between 15% and 22% (inclusive) of ethyl alcohol by volume as specified by the WET Regulations.

In order for us to determine whether your product is a fruit or vegetable wine for the purposes of the WET Act and the WET Regulations, we need to consider whether your product meets the requirements listed above.

One of the first processes in the manufacture of your product is the fermentation of fruit juice.

During fermentation, less than 20% of the total product is added crystallised sugar which is fermented along with the natural sugars contained in the juice. The Commissioner accepts that it is common practice for sugar to be added in the ordinary course of winemaking despite not being explicitly allowed under the legislative definitions. In ATO Interpretive Decision ATO ID 2003/951 Excise Addition of sugar to fruit wine, the Commissioner is of the view that:

“The sweetness of a wine is not part of the flavour description of the wine (i.e. the style). Sweetness determines the type of wine rather than the style of wine.”

“As the wine industry does not recognise that sugar contributes to the flavour of wine and taking into account the differentiation between sugar and flavour in the Food Standards Code, it is considered that sugar is not a substance that gives flavour within the terms of the definition of a ‘fruit or vegetable wine. Accordingly, sugar added to a fruit or vegetable wine will not preclude the wine from being subject to WET provided the other conditions for classifying wine as a ‘fruit or vegetable wine’ are met.”

The amount of sugar in your product relative to the fermented fruit juice means that the sugar is properly described as an 'additive' and the end product can still be said to be the product of the fermentation of the juice of fruit.

After fermentation, freshly squeezed juice, juice concentrate or de-ionized juice is added to the alcoholic fermented juice.

The addition of unfermented fruit juice, de-ionised juice, or juice concentrate to your product after fermentation still results in your beverages being the product of the partial fermentation of the juice of fruit or products derived solely from fruit. Further, it is not considered that a substance has been added that gives colour or flavour where fruit juice or concentrate is added to your fermented fruit product.

The Commissioner accepts that it is common practice that juice and fruit juice products (such as juice concentrate or de-ionised fruit juice) may be added to fruit wine during production. Although not binding on the Commissioner, it is instructive to refer to Australia New Zealand Food Standards Code, Standard 2.7.3 -2:

“‘fruit wine or vegetable wine’ means;

(a) a food that:

(i) is prepared from the complete or partial fermentation of fruit, vegetable, grains, cereals or any combination or preparation of those foods; and

(ii) is not a wine or a wine product; or

(b) such a food with any of the following added during production:

(i) fruit juice and fruit juice products;

…”

Throughout the winemaking process, you add in small amounts of additives (such as yeast strains and other fermentation aids) for the purposes of facilitating the fermentation process. These additives comprise less than 6% of the total product at any given time. The Commissioner does not consider that these additives are substances that give colour or flavour to your products.

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 fruit or vegetable wine under the WET Act.

Additionally, the process of carbonation is an accepted winemaking process and will not preclude your product from being considered to be fruit or vegetable wine for the purposes of the WET Act.

According to the information provided, your fruit beverages meet the definition of ‘fruit or vegetable wine’ for the purposes of the WET Act.

ATO view documents

ATO Interpretative Decision ATO ID 2003/951 Addition of sugar to fruit wine