ATO Interpretative Decision
ATO ID 2011/5
Excise
Wine equalisation tax: grape wine product and the addition of the flavour of an alcoholic beverageFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a cosmopolitan flavour, (being the flavour of a recognised alcoholic cocktail) the flavour of an alcoholic beverage for the purposes of regulation 31-3.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations)?
Decision
Yes. A cosmopolitan flavour is the flavour of an alcoholic beverage for the purposes of regulation 31-3.01 of the WET Regulations.
Facts
An entity manufactures alcoholic beverages by adding flavours to wine.
One of the flavours is a cosmopolitan flavour.
A cosmopolitan cocktail is a cocktail consisting of vodka, Triple Sec, cranberry juice, and fresh-squeezed lime juice or sweetened lime juice.
The cosmopolitan flavour does not contain alcohol.
Reasons for Decision
A grape wine product is defined at section 31-3 of the A New Tax System (Wine Equalisation Tax) Act 1999 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.
The regulation for grape wine products is regulation 31-3.01 of the WET Regulations which states:
- (1)
- 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.
- (2)
- 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.
- (3)
- 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 cosmopolitan flavour is 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). A cosmopolitan is a well known cocktail. Cocktails generally are mixtures of various spirits and or liqueurs and other substances. Cocktails containing alcohol are alcoholic beverages.
A cosmopolitan is a cocktail made from vodka, Triple Sec, cranberry juice, and fresh-squeezed lime juice or sweetened lime juice. Vodka and Triple Sec both contain alcohol therefore a cosmopolitan is an alcoholic beverage. Subregulation 31-03.01 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).
The cosmopolitan flavour imparts the flavour of a cosmopolitan cocktail which is an alcoholic beverage that is not wine, therefore a cosmopolitan flavour is the flavour of an alcoholic beverage for the purposes of regulation 31- 3.01 of the WET Regulations.
Date of decision: 21 December 2010
Legislative References:
A New Tax System (Wine Equalisation Tax) Act 1999
Subdivision 31-A
section 31-1
section 31-3
paragraph 31-1(1)(a)
paragraph 31-1(1)(b)
Regulation 31-3.01 Excise Tariff Act 1921
the Schedule
Related Public Rulings (including Determinations)
Wine Equalisation Tax Ruling WETR 2009/1
Keywords
Excise
Excise CoE
Wine
Wine equalisation tax
Ready to drink excise
Alcohol excise
Other excisable beverage
Grape wine products
ISSN: 1445-2782