House of Representatives

Explanatory Memorandum

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

Chapter 7 - Quoting General

Overview

7.1 This Chapter describes the general rules relating to quoting. The matters discussed in this Chapter are dealt with in Part 3 of the ANew Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).

7.2 Chapter 5, Exemptions, should be read before commencing this Chapter.

What is quoting?

7.3 Quoting is a mechanism to relieve or defer tax on wine to a later assessable dealing, or to give effect to a complete exemption from tax for the wine. Quoting can have different effects, depending upon the circumstances. A quote:

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will allow an exemption on an assessable dealing;

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will allow a vendor of wine who has already borne wine tax on those wine dealings to sell them for a wine tax-exclusive price - the vendor would then be entitled to a credit of the wine tax excluded from the sale price; Wine Tax Credit Table, CR 6 ;

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or, an entitlement to quote, will be a key pre-condition to several of the grounds for credits under the new law;

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will impose a liability to wine tax on the quoter for any retail sale or application to own use of the wine (as assessable dealings with wine obtained under quote - ADs 2b, 3c, 12b and 13c ), unless an exemption applies to that later dealing.

When will quoting be allowed?

7.4 Broadly, there will be four conditions governing when, and if, an entity can quote, all of which must be satisfied.

Condition 1

7.5 An entity can only quote for a sale or a customs dealing (ie. local entry or removal from a customs clearance area).

7.6 Quoting will not be available for an application to own use (because there would be no-one to quote to).

Condition 2

7.7 The quoter must be:

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in the case of a sale - the purchaser; or

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in the case of a customs dealing - the entity that makes the local entry or removes the wine from the customs clearance area.

Condition 3

7.8 The quote must be made at or before the time of the dealing, and in the form and manner approved by the Commissioner of Taxation (Commissioner).

Condition 4

7.9 The quoter must intend to satisfy one of the specified grounds for exemption. Alternatively, the quoter makes the quote in special circumstances authorised by the Commissioner. [Section 13-10]

Quoting an Australian Business Number (ABN)

7.10 The quote of an ABN will be essentially no more than that: the quoter will notify the other party to a dealing that the quoter is the holder of a particular ABN (which they will cite), and that the number is being quoted in respect of the particular dealing. [Section 13-20]

7.11 The grounds for quoting an ABN are set out in Chapter 8.

Quoting an ABN not compulsory

7.12 Under the law, quoting an ABN will be optional. Entities entitled to quote their ABN may choose not to quote.

7.13 An entity that is entitled to quote an ABN, but that does not, will be entitled to a credit for the wine tax paid. Wine Tax Credit Table, CR2 .

Effects of incorrect quoting

7.14 There are a number of situations in which an entity may incorrectly quote. These are:

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an entity quotes, but there is no entitlement to quote;

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an entity quotes other than in accordance with the form and manner approved by the Commissioner (or the quote occurs after the dealing time); or

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an entity makes a quote that is false or misleading.

7.15 The effects of a quote in any of these circumstances are:

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The entity will be treated as having acquired the wine under quote. Consequently, any sale or application to own use by the quoter with the wine will be an assessable dealing; [Paragraph 13-25(a)]

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If the supply of wine is an assessable dealing, the entity receiving the quote (the supplier) will not be liable to wine tax. However, the supplier will not be exempted from liability if the supplier had reasonable grounds for believing that the quote was ineffective. [Paragraph 13-25(b) and Section 13-30]

7.16 If the quote was made to a supplier of tax-paid wine, the supplier will be entitled to a credit for any wine tax excluded from the sale price as a result of the quote, unless the supplier had reasonable grounds for believing that the quote was ineffective. [Wine Tax Credit Table, CR6 and Section 13-30]

7.17 If the supplier had reasonable grounds for believing that the quote has been incorrectly made the quote will not exempt the supplier from liability on the dealing. Alternatively, if the supply of wine is from wine tax-paid stock (and is not an assessable dealing), the supplier will not be entitled to a credit on the supply. [Section 13-30]

7.18 In this case, a supplier may still be entitled to a credit if the supplier can establish that the quote was in fact a fully effective quote (ie.a quote that is effective without the assistance of section 13-25). [Wine Tax Credit Table, CR3]

7.19 In any case where an entity incorrectly quotes, they will also be guilty of an offence of improper quoting. [Section 13-35]

Reasonable grounds

7.20 A quote will not be effective if the entity receiving the quote has reasonable grounds for believing any of the things set out in the paragraph 7.14 above titled Effects of incorrect quoting. This is an objective test. The only relevant consideration is whether or not there are reasonable grounds for the quotee to believe that the quote is improperly made. This means that the provision may apply even where the quote has in fact been made correctly. If that happens the entity receiving the quote will be entitled to a credit for any wine tax paid, but excluded from the sale price on the basis of the quote. [Wine Tax Credit Table, CR3]

Example

Reasonable grounds exist for believing that a quote is improperly made. Despite being fully aware of these grounds and believing the quote to be made improperly, an entity accepts the quote. However, contrary to the entitys belief, the quote was properly made. The quote will nevertheless be ineffective (although the quotee will be entitled to a credit under CR3 ). [Section 13-30]