Introduction
Alcohol is a staple element of the Australian culture with our wines being renowned globally. In Australia, alcoholic beverages are taxed based on their alcohol content whereas for wine it is a flat rate irrespective of the content. In an earlier article, we gave you a few steps on How to Start Your Own Winery and one of the tax implications was the WET tax. Since the inception of the Goods & Services Tax (GST) in 2000, the government introduced the Wine Equalisation Tax (WET) to abolish a previous sales tax on wine of 41%. This article will focus on WET.
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What is it and who pays it?
It is a tax that applies if you make wine, import wine into Australia or sell it by wholesale. WET is a tax of 29% of the wholesale value of wine. It generally applies if you are registered or required to be registered for GST. In addition, you will need to register for WET using the ATO Business Portal. This will allocate WET labels and credits on your Business Activity Statement (BAS) which you want to take advantage of.
Applies during the last wholesale of the wine, usually between wholesaler and retailer. So the WET aspect becomes part of the retailer’s cost base and therefore passed onto the end consumer. There are some exemptions to those that have to pay WET:
- GST-free supplies
- Buying under quote (quoting your ABN when purchasing)
The ATO outlines how much you have to pay here – WET payments. This is an example of how much a wholesaler would charge a retailer.
| 1 dozen wine | $120.00 |
| WET = 29% of $120.00 | $34.80 |
| Sub total | $154.80 |
| GST = 10% of $154.80 | $15.48 |
| Total | $170.28 |
WET Credits
Credits are available if you:
- Paid in error or overpaid WET
- Liable to pay WET when it has already been paid
- Wrote off bad debts that included WET you had paid
- Entitled to wine producer rebates
The producer rebates are credits of the WET amount paid on a dealing with wine, or amount of WET they would have paid on the dealing if the buyer did not quote their ABN. To claim this producer rebate there are different criteria that apply depending on when the winemaking process started. There are two options that ATO outlines:
Important to note that a producer must do one of the following:
- Manufacture wine
- Provide source product to a contract winemaker, at all times you own the source product & produced wine.
Reporting
As you need to register for the tax, you will need to report it on your BAS for that relevant period. Because of that it will be helpful to consult a Business Taxation Lawyer who can guide you through that process and ensure you are making use of the credits available to your business.
Conclusion
If you are looking to get started in the wine business and understand the tax implications you should get in touch with a Business Formation Lawyer. They will assist in the initial stages of your setup and make certain that you have everything in place to be a success.
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