Contact: Gavin Clancy
Deloitte
Communications Manager
+61 3 9208 7759

Contact: Nick Hill
Deloitte
Indirect Tax Partner
+61-2-9322 7350

Contact: John Rawson
Deloitte
Tax Partner
+61-8-8407 7158

Federal Budget changes to the Wine Equalisation Tax (WET) will help to ease the tax burden on many smaller wineries whose long-term financial viability has been under threat, according to Deloitte.

However Deloitte Indirect Tax Partner Nick Hill said the Federal Government had chosen to introduce a rebate for WET, rather than the capped volume-based exemption sought by the Winemakers Federation of Australia.

Under the Budget changes, all wine producers will receive a rebate of up to $290,000 for the 29 percent WET payable on the first $1 million wholesale value of wine sold in each financial year.

The WET was introduced on 1 July 2000 and was designed to prevent pricing adjustments which would have otherwise arisen with the abolition of the 41 percent wholesale sales tax.

Under the Budget changes, the WET concession will be pro-rata in the first year, becoming available on 1 October 2004, with a 2005 revenue impact of $58 million, increasing to $90 million in a full year.

“In this scenario, the government would expect the concession to totally remove the WET burden for a substantial percentage of the wine industry,” Mr Hill said.

“In addition, the rebate mechanism overcomes many of the practical difficulties of implementing a WET exemption, particularly in respect of pricing, and also avoids the differentiation between producers of premium wines and the lower cost brands.

“Each producer will receive a maximum rebate of $290,000 irrespective of the wholesale price of the wine that they supply.”

Adelaide-based Tax Partner John Rawson said the government’s revised WET regime would be welcomed by many smaller, family-based wineries.

“Almost one-half of the wineries in Australia, or 700 out of 1620 wineries, have sales in the $1 million to $5 million bracket,” he said.