Australian Wine Taxes and Production

Australia’s wine industry is usually mentioned in discussions of how local winemakers can compete with global producers and still be successful. Through hard work and ingenuity, several pioneering Australians adapted European grape vines and winemaking methods to the Australian climate. They have made it possible to ship fine wines all across the globe. The anecdotal history of Australian winemaking and the labels of millions of bottles of wine are largely shaped by the personal experiences of individual vintners and their ability and persistence in changing their vineyards and wine consumers’ preferences. Customers’ preferences were affected by the stories of vintners. These legends have an important place in Australia’s winemaking history and are on the labels of many bottles.

Wine Production

Like the wine industry, other companies convert raw agricultural goods into completed manufactured products that are sold in large numbers via retail channels. The people at the bottom of the value chain are the ones who make the product. Because many producers offer a similar product, each grower has little negotiation leverage with others farther up the supply chain. Processes such as pasteurizing and packaging bulk milk and milling grain into flour are the next steps in turning raw materials into finished goods. After crushing and fermenting fruit, wine is bottled or stored in barrels[1].

Occasionally, the companies or individuals that create the product are also the ones who make it. Vintners may make wine from all or part of their harvest, or they can sell the finished product to a third party. There are many fewer winemakers in Australia than there are grape growers. If you want to purchase anything from a retail store, you need to find a wholesale distributor[2]. The ultimate sale is then up to the merchant.

In most cases, wholesalers and retailers are the same. The manufacturer may likewise serve as a retailer through “cellar door” sales or online sales. Some of these businesses are involved in international trade.

Wine Taxation

Alcohol use has always been taxed in Australia. Since the wholesale sales tax was repealed, alcohol taxes have been less and less critical in terms of income, notwithstanding legislative adjustments. Alcoholic beverage taxes accounted for $6.0 billion in revenue for the Australian Government in 2014–2015 (0.4 percent of GDP)[3]. Wine equalization tax and excise and excise-equivalent customs duty are two independent taxes under the current taxing alcoholic beverages, both based on volume. Taxes on alcoholic beverages are levied twice. The system was altered to achieve a particular goal rather than adhering to established policies. As a result, the alterations became more complicated.

Initially subject to WST (the value-added tax) in 1974, the price of wine rose steadily until it reached a high of 41 percent in 2000. When GST was adopted on July 1, 2000, the WST was also eliminated. To make up for the money lost due to eliminating the WST, a GST rate of 29% was placed on the final wholesale sale price of wine. Wine producers may be eligible for a WET return of 29 percent of wholesale sales value with a ceiling of $290,000 due to the introduction of the WET rebate in 2004. The rebate cap was increased to $500,000 in 2006, the maximum amount that may be claimed[4].

The Wine Excise Tax (WET) is ad valorem, which means that the tax is based on the wine’s value rather than its volume. Local and imported wine are also subject to this tax, which typically amounts to 29 percent of the wholesale cost. Grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead, and sake are classified as wine by WET. Producers of wine may get up to $500,000 per year in royalties, or 29 percent of authorized wholesale transactions. Winemakers’ WET may be reimbursed up to $500,000 under this program. Value-based wine taxation means that wines with the same alcohol concentration may be taxed at different rates. Producer rebates keep net WET costs low for many smaller wineries[5].

Conclusion

Per capita, Australians have drunk significantly less alcohol throughout the preceding half-century[6]. People prefer spirits and wine over beer. This shift from beer is noteworthy. In the last ten years, wine maturing in barrels has given way to bottled wine. Increased consumer convenience may explain this development. The dramatic fall in wine costs over the preceding decade may be contributing to this trend. This is a U.S. trend. Australia’s alcohol taxation regime is convoluted. Volumetric and ad valorem are two techniques to levy taxes. Tax rates, exemptions, and concessions may be claimed for different commodities. The Australian alcohol taxation system has changed over time, reflecting varying viewpoints on its aims. The system was not formed based on a cohesive set of policy principles; instead, it reflected diverse views on the aims of alcohol taxes when substantial revisions were implemented. See more resources here

On This Day

September 19, 2011[7] – The third and final claim of the WFA regarding tax changes and employment was made. A 34% drop in wine taxes was passed due to the effects on the wine business and its suppliers, both directly and indirectly.

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References

[1] ABARES 2011. Australian wine grape production: projections to 2012-13, ABARES Research Report 11.3, April.

[2] ABS 2010. Australian wine and grape industry, Cat no 1329.0, 7 December

[3] ABS 2011. Consumer Price Index, Australia, Jun 2011, Cat no 6401.0, 27 July.

[4] Australian Vintage Ltd 2018. Annual Report.

[5] Australian Vintage Ltd 2018. Annual Report.

[6] Costello, P. 2014. Budget Speech 2014-15, 11 May.

[7] Grant, B. Gow, G. and Dollery, B. 2011. ‘The proposed ‘wine restructuring action agenda’ and alternative policy options for the Australian wine industry’ University of New England Business, Economics and Public Policy Working Papers, No 2010-2.

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