Insights

Wine Equalisation Tax and your ERP Software

If your business makes wine, imports wine into Australia or is a wholesaler of wine, your business software or ERP system will have to account for Wine Equalisation Tax (WET). 

This tax is generally intended to be paid on the last wholesale sale of wine, which most commonly is between the wholesaler and retailer. The WET is collected and remitted by wine manufacturers, wine wholesalers, and wine importers to the ATO reporting via an organisation's Business Activity Statement (BAS). Wine retailers normally pay WET to their supplier as part of the purchase price. No input tax credit applies on the WET component of the purchase price.

WET may apply in other circumstances - such as cellar door sales or tastings - where there hasn't been a wholesale sale. WET is also payable on imports of wine (whether or not you are registered for GST).

The application and recording of this tax can be a burden on businesses and not all Business Software or ERP Systems can handle it efficiently.

In MYOB Advanced, customers and suppliers are linked to ‘Tax Zones’ and inventory items are linked to ‘Tax Categories’. This combination allows a business to sell the same inventory item to a wholesaler or via the cellar door using different tax calculation methods- a benefit that allows maximum flexibility. That is, MYOB Advanced can calculate the WET for both wholesale (29% pre-GST) activities and for the cellar door (50% of GST-inclusive method).

History of the Wine Equalisation Tax. 

The WET system was introduced in the year 2000, alongside the rollout of the GST. It was at this point that the sales tax system was repealed, and WET was ostensibly introduced to ensure that the price of wine remained stable (and the government continued to receive its tax revenue) following the introduction of GST. Sales tax at the time on wine was 41% of the value of wine, whereas GST was 10%. WET was initially introduced at 29% (pre- GST) and therefore when GST is applied, the end result is approximately equivalent to the pre-WET sales tax level. Refer below for an example:

 

Wet tax table

 

The structure of the sales tax legislation was effectively inserted into the WET legislation, resulting in many similarities. 

The goal of WET was to apply tax on Australian and imported wine sold / purchased domestically. WET is a self-assessment system, unlike Excise Duty and Customs Duty, which are complex licence and permission systems.

WET is normally applied only once usually falling on the last wholesale portion of the sales process. This is achieved through exemptions and credits.

Basic Principals

WET applies to assessable dealings with wine. 'Assessable dealings' is a defined term within the legislation. Generally:

  • Wholesale sales of wine, 
  • Imported wine, and 
  • Some retail sales and applications for own use.

WET is paid by entities that are registered for GST, or are required to be registered for GST. There is no separate legislative registration requirement for WET. When references are made to WET registration, it refers to the requirement to be registered for GST. Once and individual or organisation is registered or required to be registered for GST, and assessable dealings with wine occur, the ATO must be advised to have a 'WET role' added to their account.

WET is generally paid by wine manufacturers, wholesalers and importers. However, when there is no wholesaler in the sale of the sales chain (for example, a winery that makes retail or cellar door sales to the end consumer), the equivalent of a wholesale selling price is allowed for within WET.

Products

'Wine' is a defined term in the legislation and refers to more than just grape generated wine. Some examples are: 

  • Grape wine, 
  • Grape wine products, Fruit or Vegetable wine,
  • Cider or Perry, 
  • Fermented 'mead', and 
  • Fermented 'sake'. 

Never fear, when a beverage contains more than 1.15% ethyl alcohol by volume, and is not defined under the WET definitions, it is subject to excise duty if manufactured in Australia, or subject Customs duty if it is imported so the ATO and Government will get its share. 

An excellent video prepared by the ATO can be found here:

https://www.ato.gov.au/Business/wine-equalisation-tax/

Being able to calculate the WET taking to consideration Exemptions, claiming WET credits and ensuring that you report accurately to the ATO your liabilities and credits is essential. The right Business software can go a long way to ensuring that this is handled accurately and efficiently. 

Become more agile today

Whilst your business may be unique, many of the mandatory requirements imposed on you are not. MYOB Advanced allows you to manage the details efficiently and effectively, allowing you to focus on the big picture. 

The Star team take the time to understand your business, then use our team's extensive experience and the flexibility of MYOB Advanced to create an ERP solution that has been tailored to your current and future needs.

Star can precisely demonstrate how your new MYOB Advanced software can help your business pivot to meet new opportunities and changing market conditions faster. 

Caveat Emptor

This short insight is intended as a discussion starter and not a tax briefing. It represents general information only that is readily available from The Australian Tax Office or your accountant. This should not be the only source of information you rely upon. This information is correct to the best of our ability at time of writing though may change due to updates by the Government and or ATO. Before making any financial and/or tax decisions, we recommend you consult with an accountant to gain the appropriate advice for your business.