ATO Interpretative Decision

ATO ID 2004/790 (Withdrawn)

Excise

• This ATO ID is withdrawn and is replaced by ATO ID 2005/62.
  This document has changed over time. View its history.

Issue

Is a beverage made by the addition of grape spirit or neutral spirit to fruit juice 'wine' as defined in section 31-1 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

Decision

No. A beverage made by the addition of grape spirit or neutral spirit to fruit juice is not 'wine' as defined in section 31-1 of the WET Act.

Facts

Juice is produced by crushing fruit.

Grape spirit or neutral spirit is added to the juice to produce a beverage with an alcohol content between 15% and 22% (inclusive) of ethyl alcohol by volume.

Reasons for Decision

Wine is defined in subsection 31-1(1) of the WET Act as meaning grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead and sake. Each of these beverages is in turn defined.

Fruit or vegetable wine is defined in section 31-4 of the WET Act as a beverage that:

(a)

is the product of the complete or partial fermentation of the juice or must of:

(i)

fruit or vegetables; or

(ii)

products derived solely from fruit or vegetables; and

(b)

has not had added to it, at any time, any ethyl alcohol from any other source, except as specified in the regulations; and

(c)

has not had added to it, at any time, any liquor or substance that gives colour or flavour, except as specified in the regulations; and

(d)

contains at least 8% by volume of ethyl alcohol, but not more than 22% by volume of ethyl alcohol; and

(e)

complies with any requirements of the regulations, made for the purposes of section 31-8 of the WET Act, relating to fruit or vegetable wine.

The, A New Tax System (Wine Equalisation Tax) Regulations 2000 allow the addition of ethyl alcohol from grape spirit or neutral spirit but specify that if grape spirit or neutral spirit has been added, the beverage must contain between 15% and 22% (inclusive) of ethyl alcohol by volume.

The definition of 'fruit or vegetable wine' requires that the beverage be the product of the complete or partial fermentation of the juice or must of fruit or vegetables or products derived from fruit or vegetables.

Although partial fermentation is sufficient to fulfil the definition, there must be sufficient fermentation for the juice to take on the essential character of wine.

In the Explanatory Memorandum to A New Tax System (Wine Equalisation Tax) Bill 1999, the following statement is made at paragraph 2.3:

An essential character test will be used to determine whether a beverage is wine or cider for the purposes of the provisions.

The essential character tests have been established by the Courts in cases such as Thomson Australia Holdings Pty Ltd v. Federal Commissioner of Taxation 88 ATC 4916 and Deputy Federal Commissioner of Taxation v. Rotary Offset Press Pty Ltd 71 ATC 4170; 1971 45 ALJR 518.

The point at which sufficient fermentation has occurred is prescribed in the legislation. The definition in subsection 31-1(2) of the Wet Act prescribes a minimum of 1.15% by volume of ethyl alcohol.

Accordingly, a beverage made by the addition of grape spirit or neutral spirit to fruit juice (which has not been fermented to produce 1.15% alcohol by volume) does not meet the definition of 'fruit or vegetable wine' in section 31-1 of the WET Act.

Legislative References:
A New Tax System (Wine Equalisation Tax) Act 1999
   section 31-1
   section 31-4
   subsection 31-1(1)
   subsection 31-1(2)

Case References:
Thomson Australian Holdings Pty Ltd v. Federal Commissioner of Taxation
   (1988) 20 FCR 85
   (1988) 19 ATR 1896
   88 ATC 4916

Related Public Rulings (including Determinations)
WETR 2002/2

Other References:
Explanatory Memorandum to A New Tax System (Wine Equalisation Tax) Bill 1999

Keywords
Fortified wine
Fruit wine
Wine
Wine equalisation tax
Alcohol
Excise collections

Business Line:  Excise

Date of publication:  1 October 2004

ISSN: 1445-2782