Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 10 - Miscellaneous
Overview
10.1 This Chapter describes several miscellaneous provisions which will be necessary to enable the new wine tax legislation to operate effectively. These matters are dealt with in Part VI of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).
Application of Bill to cider, perry, mead and sake
10.2 The WET Bill applies to cider, perry, mead and sake in the same way that it applies to wine (other than grape wine).
10.3 In determining whether a particular product is classified as cider, perry, mead or sake the essential character of the product is relevant. The essential character of a product derives from the basic nature of the product, from what they are, though composition, function and other factors necessarily play a part. The essential character is determined by an objective identification of the product.
Wholesale wine invoices
10.4 Where a taxable wholesale sale of wine is made and an invoice is issued, the taxpayer must show the amount of wine tax on that invoice. [Section 27-5]
10.5 The law will not require an entity to show wine tax on a retail sale even where there is a liability to pay wine tax on the retail sale, eg. where a manufacturer sells wine by retail. An entity will be able show the amount of wine tax included in a retail sale of wine but only the amount of wine tax that has been paid should be shown.
Special provision for non-arms length transactions
10.6 There will be a special provision in the law to prevent a wine tax benefit from being obtained by being a party to a non-arms length transaction . [Section 27-10] Two conditions that must be established in order for the provision to apply are:
- •
- a taxpayer (or an associate of the taxpayer) must have been a party to the non-arms length transaction; and
- •
- if the transaction had been at arms length, then either the taxpayers liability to wine tax would have been increased or an entitlement to a credit would have been reduced.
10.7 The second condition will be satisfied if it would be reasonable to expect that the liability or entitlement would have been different had the transaction been at arms length. In addition, the liability or credit entitlement can relate to any transaction, not just the non-arms length transaction.
10.8 If both these conditions are satisfied, then the taxpayers liability to wine tax, or entitlement to a credit, will be assessed on the basis of the liability or credit that would have applied if the transaction had been an arms length transaction.
Example
An entity purchases wine at a non-arms length price under quote. The wine is then sold to an arms length party at a deflated value because of the low purchase price. The later sale is caught because it is linked to a non-arms length transaction.
10.9 The arms length provision will operate automatically without the need for the Commissioner to exercise any discretion. The parties to a transaction will be required at all times to ensure that wine is sold at an arms length price. Where the wine is not sold at an arms length price the law will operate to apply an arms length price to the sale or other taxable dealing.
Liability for a non-arms length dealing
10.10 A taxpayer who has dealt with wine at a non-arms length price will be liable to pay the wine tax underpaid from the time payment for wine tax is due on the dealing. [Subsection 27-10(2)]
Apportionment of amounts
10.11 If wine and other goods are packaged and sold together for one inclusive price, then the goods will be treated separately for the purpose of calculating the taxable value. The value for the wine will be the value for which the wine could reasonably have been expected to have sold for separately. [Section 27-15]
Commonwealth and Commonwealth entities not liable for wine tax
10.12 Under the Constitution, liability to wine tax cannot extend to the Commonwealth or to a defined category of a Commonwealth entity. To ensure that Commonwealth entities are also effectively covered by wine tax, a notional liability to wine tax and a notional entitlement to wine tax credits will instead apply to them. [Section 27-20]
Cancellation of exemptions from wine tax
10.13 This provision expressly overrides an existing Commonwealth law which otherwise would provide an exemption from liability to wine tax. [Section 27-25]
Regulation power
10.14 The Governor-General will be authorised to make regulations prescribing matters that are either required or permitted by the Act to be prescribed, or that are necessary or convenient to be prescribed for carrying out or giving effect to the Act. [Section 27-35]
10.15 In particular the regulations may make provision allowing wine to be brought into Australia on a temporary basis, without the payment of wine tax. [Paragraph 27-35(2)(a)]
General anti-avoidance provisions
10.16 Division 165 of the GST Act, the general anti-avoidance provisions, applies to amounts of wine tax payable. This is achieved by incorporating wine tax payable on taxable dealings in wine into the net amount under Division 17 of the GST Act. However, wine tax on importations of wine is not incorporated into the net amount but is generally paid with customs duty. Section 23-10 expressly states that Division 165 of the GST Act applies to amounts payable upon an importation of wine as if it were payable under the GST Act.
- •
- Division 165 of the GST Act will operate to deter avoidance schemes that are designed to obtain GST benefits by taking advantage of GST law in circumstances other than that intended by GST tax law.
- •
- The general anti-avoidance rules will only apply to negate any GST benefit under a scheme if it can be established that the dominant purpose for entering into the scheme or principal effect of the scheme is to give an entity any such benefit.
[Section 23-10]
Application of the Criminal Code
10.17 The Criminal Code will apply to all offences under the WET Bill. [Section 27-30]
Administration, collection and recovery
10.18 Provisions relating to the administration, collection and recovery of amounts of wine tax are contained in Part VI of the Taxation Administration Act 1953 . [Section 2-35] Taxpayers who engage in taxable dealings will be required to calculate the wine tax payable on those dealings and add it to their net GST amount for the tax period. [Section 21-5]
10.19 The only exception to the above is if wine tax is payable on a local entry of wine, or a removal of wine from a customs clearance area, then the wine tax will generally be payable at the time of the customs dealing. [Section 23-5]
10.20 Wine tax payable on wine removed from a customs clearance area or on a local entry of wine will generally be required to be paid at the same place and in the same way as Customs duties are payable.
10.21 There will not be a separate registration requirement in the wine tax law. An entity that is registered or required to be registered for GST purposes will be affected by the wine tax law if they have assessable dealings which are covered by the wine tax law. [Section 33-1, definition of registered]