SENATE

REPLACEMENT Explanatory Memorandum

(Circulated by the authority of the Treasurer the Hon John Dawkins, M.P.)

CHAPTER TWO Sales Tax: Wine, Cider and Other Similar Beverages

Summary of proposed amendments

•

Purpose of amendments: To increase the rates of tax on wine, cider and similar beverages:

(a)

from 10% to 21%, if the beverages have a low alcohol content (not more than 1.15% by volume); and

(b)

from 20% to 31%, if the beverages do not have a low alcohol content (more than 1.15% by volume).

Date of effect: The amendments will apply to dealings with goods on or after 18 August 1993.

Background to the legislation

Low alcohol wine, cider etc.

Under the existing law, the following low alcohol beverages:

•

Australian-made wine and cider, and beverages similar to wine and cider (such as wine coolers); and

•

mead, perry, sake and other similar fermented beverages;

are taxed at the concessional rate of 10%. Goods are taken to be low alcohol if they contain no more than 1.15% by volume of alcohol.

Imported low alcohol wine and cider, however, is taxed at the general rate of 20%.

The 10% concessional rate does not apply to:

•

beer, spirits, liqueurs or spirituous liquors; or

•

beverages that contain beer, spirits (other than spirits for fortifying wine or other beverages), liqueurs or spirituous liquors.

Other wine, cider etc.

Under the existing law, the following alcoholic beverages:

•

wine, cider and beverages similar to wine and cider (such as wine coolers); and

•

mead, perry, sake and other similar fermented beverages;

are taxed at the general rate of 20%. Goods are taken to be alcoholic if they contain more than 1.15% by volume of alcohol.

Explanation of proposed amendments

The following table shows the range of alcoholic and low alcohol beverages whose rates of tax are proposed to be changed by this Bill together with the existing rates and proposed increased rates.

The Bills, STEA,STGA, and STCA will amend Schedule 2 to the Sales Tax (Exemptions and Classifications) Act 1992 by deleting Item 15, which covers the following low alcohol beverages :

•

wine and cider manufactured in Australia;

•

beverages similar to wine or cider; and

•

mead, perry, sake, and other similar fermented beverages.

Low alcohol beverages consist of no more than 1.15% by volume of alcohol.

This will have the effect of increasing the tax on those beverages from 10% to the general rate (proposed by this Bill to be 21% from 18 August 1993) [item 4 in schedule 1 to clause5, STEA, STGA,and STCA] .

The Bills,STEA, STGA, and STCA will also amend Schedule 5 to the Sales Tax (Exemptions and Classifications) Act 1992 by adding Item 15, which covers the following alcoholic beverages:

•

wine, cider and beverages similar to wine or cider; and

•

mead, perry, sake, and other similar fermented beverages.

Alcoholic beverages contain more than 1.15% by volume of alcohol.

This will have the effect of increasing the tax on those beverages from 20% to the second highest rate (proposed by this Bill to be 31% from 18 August 1993) [item 7 in schedule 1 to clause5, STEA, STGA, and STCA] .