House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 5 - Exemptions

Overview

5.1 This Chapter describes the general situations in which assessable wine which is the subject of an assessable dealing will not be taxable. These situations are referred to as exemptions and are dealt with in Division 7 of Part 2 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).

5.2 The basic structure of the law is that assessable wine which is the subject of an assessable dealing will be taxable unless one of the exemptions applies.

What are the general categories of exemption?

5.3 There will be three general categories of exemption:

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there is a supply of wine which is goods and services tax (GST)-free, other than for child care; [Section 7-5]

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there is a quotation in respect of the dealing; [Section 7-10]

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a miscellaneous exemption applies. [Section 7-15, Section 7-20]

Exemption 1: The assessable dealing is a supply of wine that will be GST-free

5.4 GST-free supplies are covered in Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). One of the supplies of wine that will be GST-free is wine that is to be exported. Other supplies that will be GST-free include supplies of wine for religious services (Subdivision 38-E) and supplies in relation to treatment in hospital (section 38-20). [Section 7-5]

Exemption 2: There is a quotation in respect of the dealing

5.5 There will be an exemption whenever a quotation is made in respect of an assessable dealing, at or before the dealing time. This exemption is available for every kind of assessable dealing except an application to own use. [Section 7-10]

What is quotation?

5.6 Quotation is a mechanism that will prevent wine tax being payable on an assessable dealing (other than an application to own use). The purpose of quotation is to defer taxability to a later assessable dealing or to give effect to a full exemption from wine tax for a particular supply of wine. The only form of quotation will be the quotation by a registered entity of their Australian Business Number.

5.7 Quotation will be authorised for dealings with assessable wine that are not assessable dealings (for example, a retail sale of wine tax-paid wine). The effect of quotation in this context will be to authorise the seller to exclude wine tax from the selling price and to claim a refund of the wine tax from the Commissioner of Taxation (Commissioner).

Consequences of quotation

5.8 If the quoter does not intend to satisfy a quotation ground at the time of quoting, but still quotes, then the quoter will be guilty of an offence. This will not, of itself, impose a liability to wine tax on either the quoter or the entity receiving the quote. However, anything that the quoter does with the wine after acquiring it will constitute an assessable dealing. If, at the time of that later assessable dealing, an exemption does not apply then the dealing will be taxable.

5.9 Quoting is covered in more detail in Chapters 7 and 8.

Exemption 3: Miscellaneous Exemptions

5.10 There will be two other exemptions:

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if the dealing is a customs dealing that is an importation of wine covered by item 17, 18A, 18B, 18C, 21, 23A, 23B, 24, 25A, 25B, 25C, 32A, 32B, 33A, 33B or 34 in Schedule 4 to the Customs Tariff Act 1995 ; [Section 7-15] or

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if the wine has previously been taxed while in bond. This exemption applies only to a dealing that is a local entry. [Section 7-20]