Warning over WET move

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The Murray Pioneer Tuesday April 7, 2009.

Small regional businesses, such as boutique wineries, will lose out under the Federal Government's proposal to slash the Wine Equalisation Tax (WET) rebate.

The prediction was made by Democrats MLC David Winderlich, who says the Government is trying to make small business pay for its “excessive spending”.

“On one hand they're saying they'll look after small business, on the other they're upping their taxes,” he said.

“This move will devastate small wineries throughout the Barossa Valley, Clare Valley, McLaren Vale and the Riverland, adding to the pain felt from the economic crisis.”

Winderlich urged the Government to reconsider its opinion regarding the rebate, and was keen for Mike Rann to get involved.

“We call on the Premier to stand up for our wineries and small business,” he added.

Last week tax commissioner Michael D'Ascenzo warned the wine industry that the Australian Taxation Office is examining two arrangements that attempt to reduce the amount of WET paid, or to claim the WET producer rebate.

“We know these arrangements are in the market and are warning winegrowers, producers and retailers to be cautious about entering into these arrangements as they may be ineffective under the law,” Mr D'Ascenzo said.

The two arrangements are:

1. Use of uncommercial indirect marketing arrangements to reduce WET.

2. Uncommercial contract winemaking arrangements to claim the WET producer rebate.

D'Ascenzo said under the first arrangement, a wine retailer uses an interposed (and non-arms length) marketer to buy wine from suppliers in an attempt to reduce their WET liability.

The wine retailer then sells the wine through its retail outlets as an agent for the marketer. The marketer calculates the liability for WET using the half retail price method rather than on the wholesale selling price which results in a lower tax liability.

Under the second arrangement, D'Ascenzo said growers enter into a contract with a winemaker to convert their produce into wine.

He said under the contract the grower retains the rights to the produce until the wine is sold via a pre-arranged sale to the winemaker.

The grower attempts to claim the WET producer rebate which is only available to producers, not growers.