Getting the balance right on WET

Along with its $50 million commitment to the wine industry on Budget night, the Turnbull Government announced its plan to strengthen the integrity rules for the Wine Equalisation Tax (WET) rebate starting July 1, 2019.

Minister for Small Business, the Hon Kelly O’Dwyer MP and Assistant Minister for Agriculture and Water Resources, Senator the Hon Anne Ruston announced the government would be tightening the eligibility criteria for the WET rebate and reducing the cap wine producers can claim from $500,000 to $350,000 by July 1, 2017, and lowering it again to $290,000 starting July 1, 2018.

According to the Ministers the reforms are projected to save the federal government $300 million over four years and move the scheme back to its original intent of supporting small wine producers and regional communities. This move is an effort to deter opportunists who game the system with artificial business structures and multiple rebate claims.

Under the tightened eligibility criteria, a wine producer must own a winery or have a long-term lease over a winery and sell packaged, branded wine domestically.

Bulk and unbranded wine will also be excluded, and new criteria would restrict access to those with a significant interest in a winery.

The federal government has advised that final details on how it defines a “winery” will be resolved through consultation with the industry.

There are different models of productions used in the industry by wine companies and getting this definition right is critical for smaller producers.

Unlike beer and spirits that are taxed based on volumetric alcohol content, wine is taxed based on value. External factors such as climate, disease and drought can impact seasonal vintage and profitability, even more so for smaller winemakers than winemakers with larger operations. The rebate is a way to reduce liability, and is critical to small wineries.

In Victoria, the WET rebate has reduced the liability for many small wine producers, providing them with an opportunity to produce quality wine by taking risks with new varietals, styles and even wine tourism experiences.

Never before has there been a time when we will rely on this innovation to move our industry forward. The move away from a commodity style market and the intensity of competition from winemaking countries around the world dictates that we must innovate if we are to continue to exist and thrive.

The loss of this innovation could be a key unintended consequence of the new government direction on the WET rebate, as the capital to reinvest in small businesses and undertake the cycle of risk and reward may disappear. 

We must get the eligibility criteria right.

Wine Victoria will continue to engage with the Winemakers Federation of Australia, Wine Grape Growers Australia and our political leaders on this issue and make the case for access to this important level of support where the best benefit can be gained to support our industry well into the future.

 

Damien Sheehan

Chair, Wine Victoria