Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 1 - Wine Equalisation Tax Overview
Overview
1.1 The broad aim of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill) is that the wine tax should be imposed on the last wholesale sale of wine in Australia. If wine is not the subject of a wholesale sale (for example, because it is sold by retail by the manufacturer), then the law seeks to impose tax on the appropriate retail sale or use of the wine. Tax is imposed on the wholesale selling price of wine. If wine is not sold by wholesale, alternative values are used. Tax is imposed at the rate of 29%.
1.2 Wine tax will be imposed on assessable dealings with wine, unless an exemption applies. If the dealing is taxable, tax will be calculated on the taxable value of the dealing. Tax will be imposed at the rate of 29%. If the wine, or some input to the wine, has already been taxed, then a credit for that earlier tax will reduce the tax payable on the later dealing. Goods and services tax (GST) will also apply to almost all assessable dealings in wine. The wine tax is calculated on the GST exclusive value of the wine in most cases.
1.3 An assessable dealing may be exempted from tax because one of the parties to the dealing has made a quote. There are general grounds for quoting. Registration relates to registration under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
1.4 The most common assessable dealing will be a wholesale sale. A wholesale sale of wine will be taxable even if the wine has been taxed previously (although there will be a credit for the earlier tax). This ensures that tax is imposed on the final wholesale sale.
1.5 There will also be a number of situations where retail sales of wine will be assessable dealings. These will usually involve retail sales of wine which have not yet been taxed. However, there are several types of retail sales of wine (that have borne tax) which the law will seek to tax again. This ensures that wine is taxed on a full wholesale value.
1.6 The third class of assessable dealing will be application to own use of wine. Most commonly, this term means a use of wine after it has passed through the marketing chain - although its precise meaning is wider. As with retail wine, an application to own use will be an assessable dealing if the wine has not yet been taxed or, if it has been taxed, if the law regards the earlier taxable dealing as not having recouped the full wholesale sale value of the wine.
1.7 A local entry of wine at the customs barrier will also be an assessable dealing.
Exemptions
1.8 If an exemption applies to an assessable dealing, wine tax will not be imposed on that dealing. There will be 4 categories of exemption:
- •
- the dealing is a supply that is GST-free (eg. wine that is exported);
- •
- there is a quote given in respect of the dealing;
- •
- the dealing is a customs dealing covered by one of the specified items in Schedule 4 to the Customs Tariff Act 1995 ; and
- •
- there is a local entry of wine that has been taxed while in bond.
Taxable value
1.9 Wine tax will be calculated on the taxable value of an assessable dealing. The most common taxable value is the price for which the wine is sold by wholesale. If the assessable dealing is not a wholesale sale, then there are alternative taxable values which will apply. The most common alternative taxable value is the notional wholesale selling price of the wine. Wine which is taxable at the customs barrier has a taxable value equal to the GST importation value of the wine.
1.10 Sometimes, not all the costs of wine are reflected in their taxable value. When this happens, there will be additional amounts specifically included in the taxable value. A royalty paid separately by the taxpayer is a situation where an additional amount will be added.
Rate of tax
1.11 Wine tax will be imposed at the rate of 29%.
Credits
1.12 There will be a range of situations in which credits will be available for tax paid on wine. Tax may have been overpaid on wine or paid when there was no liability. Alternatively, tax may have been paid on wine but the wine may again be the subject of an assessable dealing. In these cases, the law will provide a credit for the tax previously paid.
1.13 A registered entity may claim credits as a reduction in the entitys GST liability. An entity that is not registered or required to be registered may claim credits as a direct refund.
Collection and recovery
1.14 Entities that engage in taxable dealings (other than the local entry of imported wine) will be required to add the wine tax to net amounts under the GST Act. Entities that import wine will, generally, be required to pay the tax at the time of the customs dealing.
Quoting
1.15 Quoting is a mechanism to relieve or defer tax on wine to a later assessable dealing. If a quote is made in respect of an assessable dealing, then the quote will be an exemption, but only for that dealing.
1.16 Only an entity that is registered or required to be registered for GST and satisfies a quotation ground may quote an Australian Business Number for a dealing with wine.