To make sure you pay the right amount of WET or claim the right producer rebate amount, it is important that you correctly determine the price you sell your wine for.
Price has the same meaning for WET and GST. It is the amount payable for the supply. Ordinarily, the price will be the amount you specify on the invoice you give to the purchaser.
However, when you make payments to a purchaser of your wine, the price will be affected by amounts you pay to the purchaser. This includes amounts:
- paid prior to the sale of the wine
- offset against the price of the wine (reducing the amount you receive from the purchaser of the wine)
- paid at some later point in time.
When working out whether the amounts you pay to a purchaser of your wine affect the selling price of the wine, you need to determine:
- what the payments are for
- if you are receiving specific services in exchange for them.
You will need to do this regardless of how the payments are described in invoices or other documentation.
Determining the price of wine when working out how much WET to pay or how much rebate you can claim can be complex. If you're unsure about how payments made to purchasers of your wine should be treated, you should contact us about WET for advice.
When working out the price of wine, the payments either:
Sometimes the arrangement between you and the purchaser of your wine may involve some payments which reduce the price and some that don't.
See also:
- WETR 2009/1 Wine Equalisation Tax: The operation of the wine equalisation tax system
- GSTR 2000/19 Goods and services tax: making adjustments under Division 19 for adjustment events
Payments that reduce the selling price
If you pay an amount to a purchaser that relates to the sale and selling price of the wine, the payment will reduce the price. Types of payments that reduce the selling price include:
- trade discounts
- volume rebates
- deferred credits
- settlement discounts
- distributor margin payments.
Example 1 – payment that reduces the selling price
ABC Winery sells wine by the case to a distributor for $100. Under the terms of the sales agreement, the distributor invoices ABC Winery an amount of $10 per carton, described on the invoice as a ‘distributor margin’. This payment covers the distributor’s general costs like freight, administration, storage, invoicing, sales monitoring, debt collection, wastage and internet costs.
The $10 fee charged by the distributor is not for specific services being provided to ABC Winery. Rather, the amount charged by the distributor discounts the price of the wine that ABC Winery has sold to the distributor. The price ABC Winery use to calculate their WET liability or producer rebate is the reduced price of $90.
End of examplePayments that don't reduce the selling price
If you make payments to the purchaser that compensate, reimburse or reward them for specific services they provide to you, these amounts do not reduce the selling price of your wine.
Payments that do not reduce the selling price of wine must be for services provided to you by the purchaser for the specific benefit of your product or brand. Such services include:
- positioning your wine in a prime position in a bottle shop so it is marketed in a way that is better than the marketing of other wines in the shop
- advertising your wine as ‘wine of the month’ in the retailer’s sales catalogue.
In both instances, you're paying a fee for specific services provided by the purchaser that promote your brand above and beyond other brands they have for sale.
In these circumstances, each supply (wine supplied by you and services supplied by the purchaser) is independent and must be accounted for separately.
Types of payments that do not reduce the selling price include:
- promotional rebates
- marketing fees
- advertising rebates
- co-operative advertising allowances
- gondola end payments.
Example 2 – payment for specific services that does not reduce the selling price
WYZ Estates sells wine to a distributor for an invoiced price. WYZ Estates agrees to pay the distributor $15,000 to promote and market WYZ’s product and brand at three trade shows during the year and feature WYZ’s product as ‘wine of the month’ in two of its monthly catalogues.
Because the payment by WYZ Estates is for specific services provided by the distributor, the price WYZ Estates sells their wine for is unaffected. The price of the wine is the full invoiced price, and WET is paid (or producer rebate is claimed) based on the full amount.
End of exampleThis is in contrast to example 1, where the $10 per carton fee was applied but there are no specific services provided by the distributor.
Example 3 – payments for both specific services and distributor margin
STP Vineyard sells wine under quote to a distributor. STP Vineyard invoices the distributor $11,000 (including GST) for the wine. The sales agreement provides that STP Vineyard will pay the distributor 35% of the amount invoiced for the wine, which includes:
- 5% for specific promotion and marketing services
- 30% as a ‘distributor margin’.
The specific promotional and marketing services the distributor makes to STP Vineyard involves:
- featuring STP Vineyard’s brand at trade fairs
- promoting STP Vineyard’s wine as the 'wine of the month' in their catalogue.
The distributor invoices STP Vineyard for these services in the amount of 5% of the invoice price for the wine.
In this case, the distributor is making specific identifiable supplies to STP Vineyard and for the benefit of STP Vineyard.
Additionally, the specific promotion and marketing services provided to STP Vineyards can be distinguished from other promotion and marketing activities undertaken by the distributor in the course of carrying on its own wine sales business.
In these circumstances, the amount STP Vineyard pays for these specific supplies (5%) doesn't reduce the price for which STP Vineyard has sold its wine.
The second component of the agreement, the 30% ‘distributor margin’, simply serves to cover the distributor’s general expenses and provide a margin on the dealing to the distributor.
STP Vineyard is not receiving specific services from the distributor in return for paying the distributor margin and as such, the margin is a discount on the price that STP Vineyard is selling its wine for.
Therefore the price STP Vineyard sells its wine for will be reduced by the 30% fixed percentage distributor margin, but it will not be reduced by the amount paid for specific promotion and marketing services.
As the taxable value for WET purposes is the WET and GST exclusive selling price, the taxable value in these circumstances can be calculated as follows:
- $11,000 (GST inclusive invoice price) − $1,000 (GST) = $10,000
- $10,000 (GST exclusive invoice price) − $3,000 (30% distributor margin) = $7,000 (taxable value)