• Federal Budget 2016 - Other

Decrease in Wine Equalisation Tax (WET) rebate; extension of excise refund scheme

WET amendments

Responding to calls from the industry for reform, changes to the wine equalisation tax (WET) will be introduced in an attempt to strengthen the reputation of Australia’s wine industry.

Effective from 1 July 2017, the WET rebate cap will be reduced from $500,000 to $350,000. This will be further reduced to $290,000 on 1 July 2018. This is not expected to impact smaller wine producers who do not generally claim up to the current $500,000 rebate cap.

Additionally, further eligibility criteria for the WET rebate will be introduced from 1 July 2019, which will restrict wine producers eligible to claim the rebate. These criteria will be drafted subject to further consultation with affected parties.

These changes address concerns surrounding the oversupply of wine and wine grapes in the industry. The reduction in the rebate and restriction in eligibility criteria will also address concerns surrounding multiple claims of the producer rebate by related entities.

To further promote the reputation of the Australian wine industry on the world stage, the Government has stated it will provide $50 million to Australian Grape and Wine Authority over a four year period with the aim of benefiting regional wine producing communities. This funding will be available from 1 July 2016.

Excise refund scheme

In a positive change for distillers, the Government has extended the excise refund scheme to domestic spirit producers.

From 1 July 2016, the Government’s existing excise refund scheme will be extended to producers of whiskey, vodka, gin, liqueur, and low strength fermented beverages (such as non-traditional cider). Breweries eligible for this refund will be able to claim a refund of up to 60% of excise paid up to a cap of $30,000 per financial year.

It should be noted that wine producers who benefit from the WET rebate are not able to claim under the excise refund scheme. Additionally, the refund scheme will not be extended to alcopop producers.

BDO Comment

On a practical level, the cost of wine in Australia will increase as a result of the WET changes as producers attempt to recover costs which they are already failing to meet. Although these changes may address concerns larger wine producers have in relation to an oversupply of Australian wine, it is likely that wine producers looking to grow their business will be most adversely affected.

These changes represent a renewed focus on expanding Australia’s reputation for producing high quality wines. The positive effects of the injection of funding for tourism are outweighed by the negative impacts to smaller producers.

The extension of the excise refund scheme represents support for Australia’s spirit industry which is  similar to rebates provided to wine and beer producers.