ALONG with its $50-million commitment to the wine industry on budget night, the Turnbull government announced its plan to strengthen the integrity rules for the Wine Equalisation Tax rebate starting July 1, 2019.
Minister for Small Business Kelly O’Dwyer and Assistant Minister for Agriculture and Water Resources Anne Ruston announced the government would tighten the eligibility criteria for the rebate and reduce the cap wine producers can claim from $500,000 to $350,000 by July 1, 2017. It would be lowered again to $290,000 starting July 1, 2018.
This move is an effort to deter opportunists who game the system with artificial business structures and multiple rebate claims. Under the tightened eligibility criteria, a wine producer must own a winery or have a long-term lease over a winery and sell packaged, branded wine domestically.
Bulk and unbranded wine will also be excluded, and new criteria would restrict access to those with a significant interest in a winery. The federal government says details on how it defines a ‘winery’ will be resolved through consultation with the industry.
There are different models of productions used in the industry by wine companies and getting this definition right is critical for smaller producers. Unlike beer and spirits that are taxed based on volumetric alcohol content, wine is taxed based on value. External factors such as climate, disease and drought can impact seasonal vintage and profitability, even more so for smaller winemakers than winemakers with larger operations. The rebate is a way to reduce liability, and is critical to small wineries.
In Victoria, the rebate has reduced the liability for many small wine producers, providing them with an opportunity to produce quality wine by taking risks with new varietals, styles and even wine tourism experiences. Never before has there been a time when we will rely on this innovation to move our industry forward. The move away from a commodity style market and the intensity of competition from wine making countries around the world dictates that we must innovate if we are to continue to exist and thrive. The loss of this innovation could be a key unintended consequence of the new government direction on the rebate, as the capital to reinvest in small businesses and undertake the cycle of risk and reward may disappear. We must get the eligibility criteria right.
Chair, Wine Victoria