Money

Issue No. 17 - June/July 2004

Tax Matters

keeping you up to date

by John Rawson

The winners and losers of WET

Not every winery is going to benefit from the new wine equalisation tax (WET) rebate.

The WET amendments give a maximum rebate of $290,000, but it comes at a varying cost. This is because the Treasurer’s announcements have not taken into account the cost of the abolition of the various state government liquor licensing subsidies.

The table below illustrates who wins and loses from the Federal Government’s WET amendments. It calculates the benefits that would have been claimed by a South Australian winery, with predominantly retail sales, where WET liability is based upon 50 per cent of retail selling price.

This demonstrates that larger wineries with significant retail sales, such as those made at cellar door, will be paying for the benefits obtained by smaller wineries.

For larger corporate groups with wineries in different legal entities, who therefore could previously access multiple State Government rebates, the detriment is compounded. This will be a significant cost.

The Winemakers Federation of Australia has lobbied for a WET exemption for the first 600,000 litres of sales. This had the support of both large and small players in the industry because smaller wineries would have received significant benefits at a marginal cost to larger players.

Finally, the removal of the accelerated depreciation rates for grapevines will only discourage further investment in the industry. Previously, the costs of establishing grapevines were claimed over a four year period. Now, with the Budget announcements, costs can be claimed over at least eight years.

The Government announcement is a reasonable benefit to smaller players, but the cost to larger players may be significant.