Wine producers will be instructed on tax compliance amid an ATO crackdown on rorters exploiting a tax loophole to claim rebates of up to $500,000.
The Winemakers Federation of Australia and wine law firm Finlaysons will be travelling to wine making regions around the country to inform wine makers on how to avoid making the mistake.
Currently some producers are entitled to a rebate to offset the impact of the Wine Equalisation Tax. The Wine Equalisation Tax (WET) is a tax of 29 per cent on the wholesale selling price of wine. It is applied at the last wholesale sale (usually the transaction between the wholesale and the retailer). The retailer will then pass the cost of the WET on to the customer.
The nature of the tax means that some operators have started to produce wine based on volume rather than on value, leading to an oversupply.
The WET collects about $720 million per year from wine producers.
Producers can claim a rebate of 29 per cent of the wholesale value of products subject to the WET up to a threshold of $500,000 a year.
Yet this has led to rorting. The ATO believes that some wine producers are claiming multiple rebates via transactions between their own corporate entities in a bid to exploit the scheme.
Senior associate at Finlaysons, Mathew Brittingham, told the ABC that wine makers that blended wine were classified as producers and were eligible to receive a rebate. However, he warns that some of these operators had been setting up ‘blending chains’ where blends are sent to a person who then on-sells the product again. This practices means there is no tax on the original sale as it is not the last wholesale transaction.
“So you can get multiple blending arrangements where a series of people are getting the WET rebate, up to $500,000 a year and not paying any tax,” Mr Brittingham said.
This has led some wine producers like Treasury Wine Estates to call for the WET and the rebate to be scrapped, although others say the abolition of the scheme will result in many smaller producers going bust.
Winemakers Federation of Australia chief executive Paul Evans said most wine makers were doing the right thing, although some were deliberately out to manipulate access to the rebate.
“There are a proportion that are getting caught out on some of the detail,” he told the ABC. “But clearly there is also an element in the industry that is speculating off the back of cheap grape prices and setting up commercial arrangements for the express purpose of accessing the rebate.”
The seminars hosted by the Winemakers Federation begin in Margaret River on August 8 before moving on to Hobart, Yarra Valley, Riverina the Hunter Valley and other areas.
