The Australian Taxation Office (ATO) has warned the wine industry not to abuse the system by unfairly claiming hundreds of thousands of tax rebates each year.
The ATO is set to crackdown on winemakers taking advantage of the wine equalization tax (WET) rebate, worth up to half a million dollars (£280,000) to individual producers annually, reported Australia’s ABC.
The rebate is available to small wine producers to help offset the costs of WET and help them maintain sustainable businesses, but there are fears larger producers are taking advantage of the system.
The WET applies to the last wholesale transaction and is currently set at 29%.
Speaking to ABC, wine law firm Finlaysons’ senior associate Matthew Brittingham said some winemakers are unwittingly misusing the system but others are deliberately taking advantage. “From the 2007 year to the 2012 year there was an extra 365 claimants for the WET rebate, which was noted as being interesting given the industry was in a downturn at that time,” he observed.
Brittingham highlighted blending as a potential area for abuse as winemakers who blend are classified as producers and are eligible for the rebate.
He pointed to ‘”blending chains, where a producer might sell to a buyer who in turn sells the wine on again which means there is no tax on the original sale as it is not the last wholesale transaction, “So you can get multiple blending arrangements where a series of people are getting the WET rebate, up to $500,000 a year, and not paying any tax,” he said.
The WET rebate has already raised issues in regards to trading partner, New Zealand, as reported in the drinks business, and, last year, Australia’s largest wine company, Treasury Wine Estates, called for the system to be axed due to the potential for abuse.
Winemakers Federation of Australia chief, Paul Evans, said most small producers are not doing anything wrong. “There are a proportion that are getting caught out on some of the detail,” he suggested.
But Evans also said those who abused the system were typically those with no long-term interest in the industry, saying: “clearly there is also an element in the industry that is speculating off the back of cheap grape prices and setting up commercial arrangements for the express purpose of accessing the rebate.”
The Winemakers Federation of Australia is planning a series of seminars in wine regions around Australia in conjunction with Finlaysons to present seminars on tax compliance.