ATO Interpretative Decision
ATO ID 2009/98
Excise
Producer rebate: pooling of grapes from which wine is manufacturedFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is an investor in a wine statutory Managed Investment Scheme (MIS) the producer, as defined in section 33-1 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act), of the wine, if the investor's grapes are pooled with those of other investors and the pooled grapes are manufactured into grape wine?
Decision
No. An investor in a wine statutory MIS is not the producer, as defined in section 33-1 of the WET Act, of the wine, where the investor's grapes are pooled with those of other investors and the pooled grapes are then manufactured into grape wine.
Facts
An entity invests in a wine MIS.
Under the MIS agreement each entity leases a vinelot in a specific location and with contractual rights in regard to the ownership of the grapes grown thereon.
The entity's grapes are pooled with other investors' grapes (and grapes purchased from elsewhere if required) and the investors' agent arranges for the grapes to be manufactured into grape wine under contract.
The investors' agent arranges for the sale of the wine on behalf of all the investors.
Each year, the investor is credited with a proportion of the wine that results from the overall project. Each investor's proportion is determined in accordance with the area of vinelots they have leased.
As wine is sold, the quantity of wine credited to each investor is proportionately reduced.
If in a particular year not all of the wine is sold, each grower carries over a proportion of the collective wine as their trading stock.
The grape wine is rebatable wine.
Reasons for Decision
Subsection 19-5(1) of the WET Act provides:
- 1)
- You are entitled to a *producer rebate for *rebatable wine for a *financial year if you are the *producer of the wine and:
- (a)
- you are liable to wine tax for a *taxable dealing in the wine during the financial year; or
- (b)
- you would have been liable to wine tax for a dealing in the wine during the financial year had the purchaser not *quoted for the sale at or before the time of the sale.
The entitlement to the producer rebate is subject to certain other factors that are not relevant to this issue.
'Producer' (of rebatable wine) is defined in section 33-1 of the WET Act as:
producer
, of *rebatable wine, means an entity that *manufactures the wine, or supplies to another entity the grapes, other fruit, vegetables or honey from which the wine is manufactured.
In the wine MIS, the grapes from all the vinelots leased by investors are pooled before being manufactured into wine. Where necessary the grapes harvested from the vinelots are supplemented by purchased grapes.
The question that needs to be answered is whether a quantity of the resulting wine, allocated to an investor in proportion to the area of vinelots they lease, can be said to be the wine that was manufactured from the grapes supplied.
When the relevant part of the definition of producer is read in conjunction with subsection 19-5(1) of the WET Act the following is the result:
You are entitled to a *producer rebate for *rebatable wine for a *financial year if you are the entity that supplies to another entity the grapes from which the wine is manufactured and: ...
The wine that is being referred to is the wine that resulted from the grapes that were supplied.
This is further emphasised when paragraphs 19-5(1)(a) and 19-5(1)(b) of the WET Act are considered. These paragraphs both use the definite article 'the', so it is not indeterminate wine that is being referred to, rather it is specifically the wine that was manufactured from the grapes supplied. It follows that, in order to be eligible for a producer rebate, the investor must have provided the grapes that were used to manufacture the actual wine upon which the investor was liable to pay wine tax (or would have been liable to pay wine tax in the absence of quoting).
In the case of the wine MIS the grapes from an individual investor are not separated from other grapes. All the grapes are pooled together and wine is produced. The actual wine that resulted from a particular investor's grapes is not able to be identified. The investor does not meet the definition of producer because there is no wine that can be identified as the specific wine manufactured from the specific grapes supplied by the investor. Additionally, any wine tax payable by the investor (or any wine tax that would have been payable by the investor had the purchaser not quoted) is based on their allocation of a proportion of the wine made from the collective grapes pooled from all the vinelots. Therefore, it cannot be established that the wine sold by a particular investor was manufactured from grapes supplied by that investor.
Therefore, an investor in a wine statutory MIS is not the producer of the wine where the investor's grapes are pooled with those of other investors and the pooled grapes are then manufactured into grape wine.
Date of decision: 26 August 2009
Legislative References:
A New Tax System (Wine Equalisation Tax) Act 1999
subsection 19-5(1)
paragraph 19-5(1)(a)
paragraph 19-5(1)(b)
section 33-1
Keywords
Wine equalisation tax
WET producer rebate
ISSN: 1445-2782