Money
Issue No. 15 - February/March 2004
Taxing Times
Tax matters — keeping you up to date
ATO on wine tax warpath
Wineries face tougher scrutiny on their tax liability under renewed surveillance by the Australian Tax Office. The ATO is targeting the method with which wineries calculate their GST payments and the wine equalisation tax they pay.
The Wine Equalisation Tax (WET) was introduced in 2000 to supplement the GST to the same level of the previous 41% sales tax on the wholesale price of wine. The wine industry has been concerned that the combination of GST and WET exceeds the sales tax which it replaced.
And the ATO has already trained its sights on wine exports treated as GST—free. Wineries that wrongly assume that all exports of wine are GST—free will come under the ATO microscope.
While the GST law does provide GST relief for exports, it is only conditional relief. Wine will generally only be GST—free if the seller exports it from Australia within 60 days after receipt of any consideration or issue of an invoice.
The ATO will also seek proof from wineries that they are the exporter, not just that the goods were exported, which can be a tricky concept.
If goods are exported within 60 days, but the terms of trade are such that the customer takes possession and then exports the wine, the winery will not be entitled to treat the supply as GST—free.
Wine exporters will also need to be prepared for the ATO to review sales documentation, to test their ability to prove that the export was within the 60—day limit. Some wineries cannot access this information easily.
And it should also be noted that if an export is found not to be GST—free, the export—related exemption for the Wine Equalisation Tax will also not apply.
The ATO will also review whether wineries use an acceptable taxable value by which to apply the Wine Equalisation Tax. For example, wineries should expect the ATO to examine whether the half—retail selling price method had been wrongly applied to taxable wholesa...
