Commonwealth Numbered Regulations - Explanatory Statements

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A NEW TAX SYSTEM (WINE EQUALISATION TAX) AMENDMENT REGULATIONS 2000 (NO. 1) 2000 NO. 364

STATUTORY RULES 2000 No. 364

Issued by the Authority of the Assistant Treasurer

A New Tax System (Wine Equalisation Tax) Act 1999

A New Tax System (Wine Equalisation Tax) Amendment Regulations 2000 (No. 1)

Section 27-35 of the A New Tax System (Wine Equalisation Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required to give effect to the Act.

Section 31-8 of the Act provides that the regulations may specify requirements for types of wines. Sub section 31-2(1)(b) specifies that regulations may be made relating to grape wine.

The purpose of the regulations was to apply a limit to the permitted alcohol content of grape wine so that it does not exceed 22% alcohol by volume.

The Act came into effect on 1 July 2000. This legislation was introduced for the purpose of maintaining price relativity of alcoholic beverages following the abolition of the wholesale sales tax and the introduction of the goods and services tax.

The Act specifies which alcoholic beverages are covered by the wine tax. Alcoholic beverages covered by the Act are not subject to excise duty. Any alcoholic beverage not specifically covered by the WET Act is subject to excise duty.

The different treatment of alcoholic beverages as either excisable products or as subject to WET can have a significant impact on the pricing and therefore commercial viability of alcoholic beverages.

The definition of grape wine in the Act allows the addition of grape spirit and/or brandy to provide for such products as ports and fortified wines. However, there was no upper limit specified for the amount of alcohol by volume.

The Australian wine industry is governed by the provisions of the Distillation Act 1901 and the Food Standards Code for fortified wines. Sub-section 59(1)(a) of the Distillation Act 1901 specifies that Australian wine shall not be fortified so that it contains more than 23% by volume of alcohol. Standard P4 of the Food Standards Code states that fortified wine must contain at least 150 ml/L (15%) and not more than 220 ml/L (22%) of ethanol at 20 degrees. The effect of this is that the Australian wine industry is restricted to a fortification level not exceeding 22% of ethyl alcohol by volume.

Imported wine is not subject to these restrictions. The Customs Tariff follows the definition of wine as stated in the Act, which does not restrict the amount of ethyl alcohol by volume. This could have allowed the possible importation of 'wine' fortified to an extremely high level by the addition of grape spirit and/or brandy. This product would have attracted import duty at the general rate of 5% and would have been subject to the 29% WET.

Such importation could have resulted in the Australian wine industry being disadvantaged, and the outcome is contrary to the tax reform intent in relation to the taxation treatment of alcoholic beverages. An Australian manufactured product consisting of grape wine and added grape spirit and/or brandy containing above 22% of ethyl alcohol by volume would be considered to be a spirit and would be subject to excise duty at rates of either $48.99 or $52.46 per litre of alcohol. These excise duty outcomes are much higher than the total of customs duty and WET that would apply to equivalent imported products. The regulations correct this anomaly and ensure that Australian manufacturers are not commercially disadvantaged.

The regulations provide that grape wine must not contain more than 22% by volume of ethyl alcohol.

The regulations commenced on gazettal.