1998-99

The Parliament of the Commonwealth of Australia

house of representatives

A NEW TAX SYSTEM (WINE EQUALISATION TAX) BILL 1999

Explanatory Memorandum

(Circulated by authority of the
Treasurer, the Hon Peter Costello, MP)

ISBN:  0642 391734

Table of contents
General outline and financial impact	1
Chapter
1.	Wine Equalisation Tax Overview	3
2.	Wine		7
3.	Assessable Dealings		9
4.	Key Concepts		19
5.	Exemptions		25
6.	Taxable Values		27
7.	Quoting – General		37
8.	Quoting – Grounds		41
9.	Credits		45
10.	Miscellaneous		59
11.	Commencement and Application	63
12.	Regulation Impact Statement	65

General outline and financial impact
Wine Equalisation Tax
The A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill) introduces a wine tax on assessable dealings and importations of wine made on or after 1 July 2000. The new wine tax replaces the existing wholesale sales tax (WST) that applies to wine and similar alcoholic beverages, and is introduced to ensure that, following the introduction of the goods and services tax (GST), the price of wine remains stable.
The wine tax applies to wine including fruit and vegetable wine, cider, perry, mead and sake.
A system of quoting is designed to avoid the tax becoming payable until the last wholesale sale.
Date of effect: The WET Bill will apply from the date of Royal Assent (the effect being that wine tax will apply to all assessable dealings in wine made on or after 1 July 2000).
Proposal announced: The Government announced the proposal in Tax Reform: not a new tax, a new tax system: The Howard Government’s Plan for a New Tax System on 13 August 1998.
Financial impact: The effect of the wine tax on revenue cannot be separately identified from that of the GST and other tax reform measures. Since the wine tax will replace the existing WST treatment of wine, it is not expected to increase or decrease revenue to any significant extent.
Compliance cost impact: Refer to the Regulation Impact Statement included in this explanatory memorandum.
Application: To coincide with the commencement of the GST and the abolition of the WST from 1 July 2000, the wine equalisation tax will apply to all assessable dealings in wine made on or after 1 July 2000. 

Chapter 1
Wine Equalisation Tax Overview
Overview
1.1		The broad aim of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill) is that the wine tax should be imposed on the last wholesale sale of wine in Australia. If wine is not the subject of a wholesale sale (for example, because it is sold by retail by the manufacturer), then the law seeks to impose tax on the appropriate retail sale or use of the wine. Tax is imposed on the wholesale selling price of wine. If wine is not sold by wholesale, alternative values are used. Tax is imposed at the rate of 29%.
Structure of the law
1.2		Wine tax will be imposed on assessable dealings with wine, unless an exemption applies. If the dealing is taxable, tax will be calculated on the taxable value of the dealing. Tax will be imposed at the rate of 29%. If the wine, or some input to the wine, has already been taxed, then a credit for that earlier tax will reduce the tax payable on the later dealing. Goods and services tax (GST) will also apply to almost all assessable dealings in wine. The wine tax is calculated on the GST exclusive value of the wine in most cases.
1.3		An assessable dealing may be exempted from tax because one of the parties to the dealing has made a quote. There are general grounds for quoting. Registration relates to registration under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Assessable dealings
Wholesale sale
1.4		The most common assessable dealing will be a wholesale sale. A wholesale sale of wine will be taxable even if the wine has been taxed previously (although there will be a credit for the earlier tax). This ensures that tax is imposed on the final wholesale sale.
Retail sale
1.5		There will also be a number of situations where retail sales of wine will be assessable dealings. These will usually involve retail sales of wine which have not yet been taxed. However, there are several types of retail sales of wine (that have borne tax) which the law will seek to tax again. This ensures that wine is taxed on a full wholesale value.
Application to own use
1.6		The third class of assessable dealing will be application to own use of wine. Most commonly, this term means a use of wine after it has passed through the marketing chain - although its precise meaning is wider. As with retail wine, an application to own use will be an assessable dealing if the wine has not yet been taxed or, if it has been taxed, if the law regards the earlier taxable dealing as not having recouped the full wholesale sale value of the wine.
Local entry
1.7		A local entry of wine at the customs barrier will also be an assessable dealing.
Exemptions
1.8		If an exemption applies to an assessable dealing, wine tax will not be imposed on that dealing. There will be 4 categories of exemption:
	the dealing is a supply that is GST-free (eg. wine that is exported);
	there is a quote given in respect of the dealing;
	the dealing is a customs dealing covered by one of the specified items in Schedule 4 to the Customs Tariff Act 1995; and
	there is a local entry of wine that has been taxed while in bond. 
Taxable value
1.9		Wine tax will be calculated on the taxable value of an assessable dealing. The most common taxable value is the price for which the wine is sold by wholesale. If the assessable dealing is not a wholesale sale, then there are alternative taxable values which will apply. The most common alternative taxable value is the notional wholesale selling price of the wine. Wine which is taxable at the customs barrier has a taxable value equal to the GST importation value of the wine.
1.10	Sometimes, not all the costs of wine are reflected in their taxable value. When this happens, there will be additional amounts specifically included in the taxable value. A royalty paid separately by the taxpayer is a situation where an additional amount will be added.
Rate of tax
1.11	Wine tax will be imposed at the rate of 29%.
Credits
1.12	There will be a range of situations in which credits will be available for tax paid on wine. Tax may have been overpaid on wine or paid when there was no liability. Alternatively, tax may have been paid on wine but the wine may again be the subject of an assessable dealing. In these cases, the law will provide a credit for the tax previously paid. 
1.13	A registered entity may claim credits as a reduction in the entity’s GST liability. An entity that is not registered or required to be registered may claim credits as a direct refund.
Collection and recovery
1.14	Entities that engage in taxable dealings (other than the local entry of imported wine) will be required to add the wine tax to net amounts under the GST Act. Entities that import wine will, generally, be required to pay the tax at the time of the customs dealing.
Quoting
1.15	Quoting is a mechanism to relieve or defer tax on wine to a later assessable dealing. If a quote is made in respect of an assessable dealing, then the quote will be an exemption, but only for that dealing. 
1.16	Only an entity that is registered or required to be registered for GST and satisfies a quotation ground may quote an Australian Business Number for a dealing with wine.

Chapter 2
Wine
What does the wine tax apply to?
2.1		The wine tax will be applied to dealings in wine. Wine includes any fruit or vegetable wine. [Subsection 31-1(1)] Grape wine is defined in section 31-5. 
2.2		The wine tax also applies to dealings in cider, perry, mead and sake in the same way that it applies to wine. [Section 27-1]
2.3		The concept of wine is not exhaustively defined in the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill). An essential character test will be used to determine whether a beverage is wine or cider etc for the purposes of the provisions. 
2.4		The essential character tests have been established by the Courts in cases such as Thomson Australia Holdings Pty Ltd v Federal Commissioner of Taxation 88 ATC 4916 and Deputy Federal Commissioner of Taxation v Rotary Offset Press Pty Ltd 71 ATC 4170; 1971 45 ALJR 518.
Davies J. said in Thomson Australia Holdings at 4917:
‘…the task of the court is to determine the essential character of the goods, what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are…’
2.5		Designer drinks will not meet the essential character test for wine and will not be taxed under the wine tax.
2.6		Certain beverages are specifically excluded from the concept of wine. These are:
•	beverages that do not contain more than 1.15% by volume of ethyl alcohol;
•	beer [defined at subsection 31-1(4)];
•	spirits, liquers or spirituous liquors; or 
•	beverages containing beer, spirits, liquer or spirituous liquors. [Subsection 31-1(2)]

Chapter 3
Assessable Dealings
Assessable dealings
3.1		This Chapter describes those acts, operations and transactions with wine which will be taxable under the wine tax. They are referred to as assessable dealings. Assessable dealings are dealt with in Part 2 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill) and in the Assessable Dealings Table.
3.2		Under the wine tax, assessable dealings with assessable wine will be taxable unless an exemption applies. Only acts, operations or transactions with wine which are assessable dealings will be taxable.
3.3		An assessable dealing for which no exemption is available will be known as a taxable dealing.
Structure of assessable dealings
3.4		There are four broad kinds of dealing which, in certain circumstances, will be an assessable dealing. These dealings are:
•	sale;
•	application to own use (AOU);
•	local entry; and
•	removal from customs clearance area.
3.5		To be an assessable dealing, the dealing must occur at a time when the wine is in Australia, although the dealing itself can occur anywhere in the world.
Sale
3.6		There are two kinds of sale: wholesale and retail. Generally, most wholesale sales will be assessable dealings but only certain types of retail sales will be assessable dealings. In general terms, a wholesale sale will be any sale to an entity that purchases wine for the purposes of resale. A retail sale will be defined as any sale that is not a wholesale sale.
3.7		Sale will be defined essentially to have its ordinary meaning, but will specifically include both barter and exchange. In this context, exchange could include an exchange of wine for other wine or for the provision of services. [Division 5, Assessable Dealings Table: AD1a to AD2b]
3.8		If the purchaser of wine uses the wine before the time that title passes, then the time of first use by the purchaser is to be treated as the time of sale. This provision is designed to ensure that the time of sale cannot be deferred, for wine tax purposes, beyond the time of first use. [Section 5-10]
Wholesale sale [Assessable Dealings 1a, 1b and 11b]
3.9		The general design of the wine tax law is that the tax should fall on the last wholesale sale.
3.10	There will be three situations in which a wholesale sale will be an assessable dealing:
•	if the sale is of Australian wine manufactured by the seller in the course of any business carried on by the seller [AD1a];
The manufacture does not have to occur in the course of carrying on a manufacturing business. The carrying on of any business will be sufficient to satisfy the test. Moreover, there will be no requirement that the sale must be made in the course of any business.  
•	if the sale is of Australian wine and the seller did not manufacture the wine [AD1b]; and
•	if the sale is of imported wine. [AD11b]
3.11	The net effect is that the only wholesale sale of assessable wine that will not be an assessable dealing will be a sale of Australian wine manufactured by the seller otherwise than in the course of any business.
Example: A person who manufactures wine at home as a hobby and may, from time to time, sell some of that wine to a retailer.
Retail sale [Assessable Dealings 2a to 2e]
3.12	A retail sale is any sale that is not a wholesale sale. While the majority of retail sales will not be assessable dealings (mainly because the wine would already have been the subject of a wholesale sale that was an assessable dealing), there will be five situations in which a retail sale will be an assessable dealing.  These are:
•	a retail sale of Australian wine manufactured by the seller in the course of carrying on any business [AD2a];
•	a retail sale of wine obtained under quote [AD2b];
•	a royalty inclusive sale [AD2c];
•	an indirect marketing sale [AD2d]; and
•	a sale of wine which has not previously passed a taxing point, provided that, in the case of Australian wine, the seller did not manufacture it. [AD2e]
‘Australian wine’ manufactured by the seller [AD2a]
3.13	The conditions attaching to this sale are identical to the conditions attaching to the wholesale sale of wine manufactured by the seller. The reason for making this sale an assessable dealing is that there would not have been an earlier wholesale sale that would have been the subject of an assessable dealing. Without this dealing, the wine would not be taxable. The wine must have been manufactured by the seller in the course of a business.
Wine obtained under quote [ADs 2b, 12b]
3.14	Any retail sale of wine obtained under quote will be an assessable dealing. If an entity obtains wine under quote then any subsequent retail sale of the wine by that enitity will be an assessable dealing. If no exemption applies at the time of that sale, then the entity will be liable to pay tax. 
3.15	There will be a separate definition of ‘obtain wine under quote’. In broad terms, it will cover 3 situations:
•	Where an entity obtains wine that is exempted from tax on the assessable dealing because the entity quotes.
•	Where an entity purchases wine that has borne tax but the seller has excluded the tax from the purchase price on the basis of the quote (the sale would not have been an assessable dealing because it is a retail sale of tax-paid wine).
•	Where an entity obtains wine tax-paid but obtains a credit on the basis that the entity could have quoted.
Retail sale: Royalty-inclusive sale  [ADs 2c, 12c]
3.16	There will be a special approach to the taxation of dealings with wine by entities that have paid a royalty in connection with the wine. A general principle of the law is that expenditure of this kind should be included in the taxable value of the wine. 
3.17	Royalties paid before the last assessable dealing with wine will be covered by the special taxable value rules for royalty payments. If that payment is made after that time, then the payment of the royalty will be included in the value of any retail sale or application to own use of the wine.
3.18	A royalty-inclusive sale will occur if the following conditions are met:
•	The sale must occur in the course of a business carried on by the seller.
The reason for including a business test is to broadly match the dealing with dealings by the physical manufacturer of wine. In those cases, the manufacturer will not be liable unless the manufacture occurs in the course of a business.
The dealing will apply to both Australian wine and imported wine.
•	The sale is not covered by another category of assessable dealing.
If the sale is covered by another assessable dealing, then the taxable value of that dealing would include all the costs incurred in connection with the manufacture of the wine.
•	The seller must incur a royalty, that is paid or payable, in connection with the wine.
	Any royalty payable in connection with wine will be covered. 
•	The seller must pay a royalty at or before the time of the sale, or might reasonably be expected to incur such royalty after that time. Alternatively, the royalty must be incurred by an associate of the seller or by any entity (except the manufacturer) under an arrangement with either the seller or the associate of the seller. [Section 5-15]
Retail sale: Indirect marketing sale
3.19	These are sales pursuant to certain arrangements that have the technical, but generally artificial, effect of converting what would have been a wholesale sale into a retail sale. As a consequence, the taxing point in the marketing chain is pushed back so that it applies to the sale to the entity who is ‘really’ the wholesaler, rather than the sale by that entity.
3.20	This arrangement eliminates the ‘real’ wholesaler’s profit margin from the sale value of the wine and the wine tax payable is, accordingly, that much lower. As that tax saving can be transferred, in whole or in part, to the consumer, those who engage in these arrangements can achieve an unfair competitive position in the market place. The law will treat these sales according to their true nature as retail sales. The retail sale will be a separate assessable dealing and its taxable value will be the notional wholesale selling price of the goods. [AD2d and 12d]
3.21	There will be an indirect marketing sale if the sale occurs in either of the following circumstances:
•	the sale must be made by the seller through another entity, other than an employee of the seller, who is acting for the seller under an arrangement to that effect; or
•	the sale must be made from premises that are:
	used by an entity, other than the seller, mainly for making retail sales of wine; and
	are held out to be the premises of, or premises used by, that other entity.
3.22	The dealing will not apply if the seller is the manufacturer of the wine. This is because there is no one in the marketing chain behind the manufacturer to push the taxing point back to. Regardless of whether the sale is by retail or wholesale, the law will bring the wholesaler’s profit margin into the taxable value of the wine.
Untaxed wine sale
3.23	Wine may be acquired tax-free by an entity in circumstances where no sale or application to own use is involved. The most common example of this is where wine is manufactured for the entity by a contract winemaker from grapes supplied by the entity.
3.24	There are other ways in which goods may be acquired tax-free by an entity. For example, transfers of goods by court order (no sale, lease or application to own use is involved), which can be common in company mergers and group restructurings.
3.25	To cover this situation the wine tax will make all retail sales of wine assessable dealings (known as an untaxed wine sale), unless any of the following conditions is satisfied:
•	the goods were obtained under quote; 
•	the wine has previously passed through a taxing point; or
•	the sale is an indirect marketing sale.  
Wine will only be taken to have previously passed a taxing point if:
•	the wine has been the subject of an earlier taxable dealing;
•	the wine was the subject of an earlier assessable dealing but tax did not become payable on it because the entity concerned could not be taxed or was entitled to an exemption arising outside the wine tax law; or
•	the wine has been subject to sales tax within the meaning of the Sales Tax Assessment Act 1992. This provision ensures that an entity is not taxed under the Sales Tax Assessment Act 1992 and the wine tax on the same wine.
[AD2e and AD12e]
3.26	If the goods are Australian wine that was manufactured outside of any business and acquired tax-free from the manufacturer and then sold again, then the second sale will be an assessable dealing (provided that the wine has not previously been applied to own use).
Application to own use
3.27	Application to own use (AOU) in Australia will be the last point at which wine can be the subject of an assessable dealing. Once wine has been applied to own use in Australia it will, with the following exceptions, no longer be assessable wine and no longer taxable.
3.28	Application to own use includes, in broad terms:
•	consumption;
•	gifts;
•	transferring property in wine under a contract that is not a contract of sale;
•	the grant of any right or permission to another entity to use the wine; and
•	using wine as materials in the manufacture, or other treatment or processing of wine.
The definition will exclude a sale and anything done with imported wine before it is locally entered.
3.29	An application to own use will only be an assessable dealing if it happens at a time when the wine is in Australia. 
3.30	There will be four situations in which an application to own use will be an assessable dealing:
•	an AOU of Australian wine manufactured by the applier in the course of carrying on any business; [AD3b]
•	an AOU of wine obtained under quote; [AD3c and AD13c]
•	a royalty-inclusive AOU of wine; [AD3d and AD13d] and
•	an AOU of wine which has not previously passed a taxing point and which is not covered by any other assessable dealing. [AD3a and AD13a]
3.31	Each of these situations is identical to the corresponding situation for retail sales. The only difference is that there will not be an AOU that corresponds to an indirect marketing sale.
Local entry
3.32	Local entry is a dealing that applies only to imported wine. In general terms, ‘local entry’ can be described as an act or activity that takes imported wine out of the control of the Collector of Customs. The most common local entry will be an entry for home consumption under the Customs Act 1901. Under the WET Bill, these will be known as ‘formal local entries’.
3.33	Other acts or activities under the Customs Act 1901 will also be treated as local entries under the Bill and will be known as ‘deemed local entries’. Formal and deemed local entries are distinguished because there can be more than one entry for goods. If this happens, there will be rules governing which entry will take priority (see paragraphs 3.36 – 3.37).
3.34	Importation will not be an assessable dealing under the new law. It will be a precondition to a local entry, in all cases. This dealing will also be known as a customs dealing.
Formal local entries 
3.35	These are:
•	an entry for home consumption given to a Collector of Customs under subsection 71A(6) of the Customs Act 1901; and 
•	an advance entry for home consumption under subsection 71A(7) of the Customs Act 1901.
Deemed local entries 
3.36	These are listed in the law in table form. [Local Entry Table ]
Priority of multiple local entries 
3.37	Goods can often be the subject of more than one entry. In particular, an entry can be withdrawn and a second entry made. The rules as to which of the multiple entries takes priority are set out in the Table below.
Time of local entry if wine entered for home consumption before importation
3.38	If wine is deemed to be entered for home consumption under the Customs Act 1901 before importation, the local entry is taken to occur immediately after the time of importation. [Section 5-35]
Reductions in wine tax for some importations that are free of customs duty
3.39	If a taxable dealing is a customs dealing and a proportion of the value of the wine is not liable to customs duty under Schedule 4 of the Customs Act 1901, the amount of wine tax on the dealing under subsection 5-5(3) is reduced by the same proportion as the reduced customs duty. [Section 5-40]
Priority of local entries
Earlier entry	Later entry	Priority	
1.  Formal entry	Formal entry	The later entry, unless the tax on the later entry is less than the tax on the earlier entry (in which case, the earlier entry takes priority)	
2.  Formal entry	Deemed entry	Deemed entry	
3.  Deemed entry	Formal entry	Deemed entry	

Removal from a customs clearance area
3.40	This is a dealing which will be limited in its application to wine (airport shop wine) which is the trading stock of an inwards duty-free shop at an Australian international airport. It applies to both Australian wine and imported wine, as both kinds of wine are sold from airport shops. [Definitions of ‘airport shop goods’ and ‘inwards duty-free shop’ – section 33-1, and AD4b and AD14b]
Definition of ‘relevant traveller’
3.41	A ‘relevant traveller’ will have the same meaning as in section 96B of the Customs Act 1901. A relevant traveller is defined as a person who has arrived in Australia on an international flight as a passenger, or member of the crew of an aircraft. The person must also not have been questioned by a Customs officer about goods carried on that flight. [definition of ‘relevant traveller, section 33-1]
Liability of a relevant traveller 
3.42	The purpose of this dealing is to impose a liability on a relevant traveller for any wine purchased from an airport shop. This will ensure that the wine will be taxable if, when added to the wine in the traveller’s personal baggage, it exceeds the traveller’s exemption limit. This will be achieved by the assessable dealing: removal of goods from a customs clearance area. 
3.43	A relevant traveller who purchases wine from an airport shop must pass through a customs clearance area before exiting the terminal. This is the same point at which wine imported by the traveller as personal baggage will be deemed to be entered for home consumption, so, the exemption can be applied against all the value of all the traveller’s wine.
Customs clearance area
3.44	This will be any place set aside for the performance of functions under the Customs Act 1901.  For example:
•	questioning passengers disembarking from an aircraft;
•	examining the baggage of those passengers; or
•	as a holding place for passengers. [definition of ‘customs clearance area’, section 33-1]
Proprietor’s liability
3.45	Under the wine tax, these dealings will be dealt with as follows:
•	The sale by the proprietor to the relevant traveller will be an assessable dealing by the proprietor. In the case of Australian wine it will be a retail sale of wine acquired under quote [AD 2b]. In the case of imported wine it will be a retail sale of wine not previously taxed [AD 12e]. However, because the goods will be exempt if they are sold to relevant travellers, the dealing will not be taxable. 
•	The sale by the proprietor to a person who is not a relevant traveller will also be an assessable dealing (identical to the dot point above except that the sale will be taxable).
•	The AOU by the proprietor will be a taxable assessable dealing - either of Australian wine acquired under quote [AD3c] or imported wine which has never been taxed [AD13a].
3.46	The proprietor’s liability will not be part of the assessable dealing of removing goods from a customs clearance area.  

Chapter 4
Key Concepts
Key Concepts
4.1		This Chapter discusses a number of key concepts that appear throughout the law, and which do not fall exclusively within any separate part of it. 
4.2		The concepts discussed in this Chapter are:
	Application to own use (AOU)
	Australia
	Borne wine tax
	Goods and services tax (GST)-free
	Manufacture and manufacturer
	Obtain wine under quote
	Entity
	Wholesale sale
Application to own use
4.3		An AOU of assessable wine at a time when the wine is in Australia will be, in certain circumstances, an assessable dealing.
4.4		There are various types of AOU:
•	consuming wine;
•	giving wine away;
Example:  A winery supplies free tasting of its wine.  The supply of the wine for tasting will be an AOU by the winery.
•	transferring property in wine under a contract that is not a contract for the sale of wine.
[Division 5: Assessable Dealings Table AD3a to AD3d]
Australia
4.5		The significance of Australia in the law is that references to a dealing with wine can only be an assessable dealing if the wine is in Australia at the time of the dealing.
4.6		The definition of Australia has the meaning given by section 195‑1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). 
4.7		The meaning of Australia in the GST Act also includes certain offshore installations attached to the seabed of waters adjacent to Australia. These installations are deemed, under the Customs Act 1901, to be part of Australia. Consequently, the installations (and any wine on them) is treated as imported at the time of attachment. Movements of wine between the installations and other parts of Australia will not involve the import or export of wine.
Borne wine tax and wine tax borne
4.8		The purpose of this definition is to identify situations in which particular entities are taken to have borne tax on wine. Tax will be borne by an entity in 2 situations:
•	the entity has become liable to tax on an assessable dealing (unless the entity is entitled to a credit, in which case the amount of tax covered by the credit is not counted); and
•	the entity has purchased the wine for a price that included tax (unless the entity has had any of that tax refunded or credited, in which case the amount of tax covered by the credit is not counted).
The term is used frequently in the law, particularly in the credit rules. [Subdivision 31-C]
GST-free
4.9		The A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill) provides a quotation ground for an entity that intends to make a GST-free supply of wine. GST-free supplies are contained in Chapter 3 of the GST Act. These include exports, supplies made in the context of a medical service, supplies for religious services, however, the supply of wine in connection with a child care service is excluded.
Manufacture
4.10	The concept of manufacture will be a key element of the definition of Australian wine, one of the two classes of wine that can be assessable wine. It will also be a key element of the descriptions of several assessable dealings with wine, although manufacture by itself will not be an assessable dealing. [Defined in the Dictionary, section 33-1]
4.11	The term is intended to be interpreted according to its ordinary meaning, as modified by a number of inclusions and exclusions to the definition.
4.12	The definition of manufacture includes production. Manufacture and production are often used interchangeably, although production is often thought to be the wider term. The inclusion of production in the definition is to remove any suggestion that there are production processes that are not within the general meaning of manufacture.
4.13	Manufacture also includes the combination of parts or ingredients to produce something that is commercially distinct from the parts or ingredients, and treatment of food for human consumption.
Manufacturer
4.14	The term manufacturer means the entity that manufactured the wine. The term will not be restricted to an entity that carries on the business of a manufacturer. [Section 33-1]
4.15	An employee who manufactures wine in the course of employment will not be regarded as the manufacturer of the wine - the employer will be the manufacturer.
4.16	An entity will be regarded as the manufacturer of particular wine even if the entity does not own some, or all, of the materials from which the wine is made.
Obtain wine under quote
4.17	The concept of obtaining wine under quote is an important element of several assessable dealings. As a general principle, if an entity obtains wine for a tax-exclusive price on the basis of a quotation of an Australian Business Number then the entity should be liable to tax on that wine if the entity deals with it otherwise than in accordance with an exemption. This will be achieved by making any sale, or application to own use, of wine obtained under quote an assessable dealing. [Division 13]
4.18	If an entity quotes in circumstances in which they are not entitled to quote, the entity will nevertheless be regarded as obtaining the wine under quote. Consequently, they will also be liable to tax on any subsequent sale or application to own use of the wine. [Section 13-25]
4.19	There will be 3 situations in which an entity will be treated as having obtained wine under quote:
The entity quoted on a purchase of the wine
For the wine to be treated as having been obtained under quote, one of two further conditions must be satisfied:
•	the sale must have been an assessable dealing (and it must have been freed from tax by reason only of the quote); and
•	if the sale was not an assessable dealing (eg. because it was a retail sale of wine that had already borne tax) then the seller must have excluded tax from the selling price on the basis of the purchaser’s quote.
The entity quoted on a customs dealing of the wine
In this case, the customs dealing must be an assessable dealing that is freed from tax only because of the quote.
The entity has obtained wine tax paid and has then obtained a credit for the tax on the basis that the entity could have quoted on the wine.
For example, an entity that intends to make GST-free supplies of wine will be entitled to a credit under CR2 because the entity paid wine tax even though it was entitled to quote for the purchase. [Paragraph 13‑5(1)(d) and Section 17-5]
Entity
4.20	The wine tax law applies to entities. Entity has the same meaning as the GST Act in section 195-1. Entity means any of the following:
•	an individual;
•	a body corporate;
•	a corporation sole;
•	a body politic;
•	a partnership;
•	any other unincorporated association or body of persons;
•	a trust; and
•	a superannuation fund.
Wholesale sale

4.21	Most wholesale sales of assessable wine will be assessable dealings. Wholesale sale is generally defined in the Dictionary to mean a sale to an entity that buys the wine for the purpose of resale.
4.22	However, the general meaning is modified to exclude a sale from one retailer to another retailer or wholesaler to accommodate a temporary stock shortage The exclusion will be limited to wine from a retail store or a retail section of a store. If the sale is to a manufacturer, the wine must be of a kind that is usually manufactured by the manufacturer. [Section 33-1]

Chapter 5
Exemptions
Overview
5.1		This Chapter describes the general situations in which assessable wine which is the subject of an assessable dealing will not be taxable. These situations are referred to as exemptions and are dealt with in Division 7 of Part 2 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).
5.2		The basic structure of the law is that assessable wine which is the subject of an assessable dealing will be taxable unless one of the exemptions applies.
What are the general categories of exemption?

5.3		There will be three general categories of exemption:
•	there is a supply of wine which is goods and services tax (GST)‑free, other than for child care; [Section 7-5]
•	there is a quotation in respect of the dealing; [Section 7-10]
•	a miscellaneous exemption applies. [Section 7-15, Section 7-20]
Exemption 1: The assessable dealing is a supply of wine that will be GST-free
5.4		GST-free supplies are covered in Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). One of the supplies of wine that will be GST-free is wine that is to be exported. Other supplies that will be GST-free include supplies of wine for religious services (Subdivision 38-E) and supplies in relation to treatment in hospital (section 38-20). [Section7-5]
Exemption 2: There is a quotation in respect of the dealing
5.5		There will be an exemption whenever a quotation is made in respect of an assessable dealing, at or before the dealing time. This exemption is available for every kind of assessable dealing except an application to own use. [Section 7-10]
What is quotation?
5.6		Quotation is a mechanism that will prevent wine tax being payable on an assessable dealing (other than an application to own use). The purpose of quotation is to defer taxability to a later assessable dealing or to give effect to a full exemption from wine tax for a particular supply of wine. The only form of quotation will be the quotation by a registered entity of their Australian Business Number.
5.7		Quotation will be authorised for dealings with assessable wine that are not assessable dealings (for example, a retail sale of wine tax-paid wine). The effect of quotation in this context will be to authorise the seller to exclude wine tax from the selling price and to claim a refund of the wine tax from the Commissioner of Taxation (Commissioner).  
Consequences of quotation
5.8		If the quoter does not intend to satisfy a quotation ground at the time of quoting, but still quotes, then the quoter will be guilty of an offence. This will not, of itself, impose a liability to wine tax on either the quoter or the entity receiving the quote. However, anything that the quoter does with the wine after acquiring it will constitute an assessable dealing. If, at the time of that later assessable dealing, an exemption does not apply then the dealing will be taxable. 
5.9		Quoting is covered in more detail in Chapters 7 and 8.
Exemption 3: Miscellaneous Exemptions
5.10	There will be two other exemptions:
•	if the dealing is a customs dealing that is an importation of wine covered by item 17, 18A, 18B, 18C, 21, 23A, 23B, 24, 25A, 25B, 25C, 32A, 32B, 33A, 33B or 34 in Schedule 4 to the Customs Tariff Act 1995; [Section 7-15] or
•	if the wine has previously been taxed while in bond. This exemption applies only to a dealing that is a local entry. [Section 7-20]

Chapter 6
Taxable values
Overview
6.1		This Chapter describes the value to be assigned to wine that is the subject of a taxable dealing. These values will be known as taxable values. The amount of wine tax payable on assessable wine will be calculated by multiplying the taxable value by the wine tax rate, 29%.
6.2		Taxable values are dealt with in Division 9 in Part 2 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).
6.3		The approach of the law will be to:
•	give to each assessable dealing a general taxable value;
•	in some cases, where the taxable value is the notional wholesale selling price, specify how to work out the notional wholesale selling price;
•	in other cases, add to the taxable value, where applicable, certain additional amounts; and
•	in certain situations, replace the general taxable value with a taxable value that is calculated by agreement with the Commissioner of Taxation (Commisioner).
6.4		In working out the taxable value, any rebate, refund or other payment or credit made by a State or Territory in respect of the wine is to be disregarded. [Subsection 9-5(4)]
Example: Assume a wholesaler sells wine for $100 (excluding wine tax and goods and services tax (GST)). The wine was previously (prior to August 1997) subject to a lower rate of State liquor franchise fee. The State in which the wholesaler resides decides to pay a rebate of $2. The $2 rebate from the State is to be disregarded in determining the taxable value of the wine. As a result, despite the rebate, the taxable value of the wine does not change and the wine tax payable would still be $29.
6.5		The final taxable value calculated after following these steps will be the value on which wine tax is payable.
6.6		Additionally, the amount of the taxable value will be capable of adjustment by the general non-arm's length dealings provision. [Section 27-10]
Normal taxable values
6.7		Each assessable dealing will attract a normal taxable value. In most cases, this will be the value on which wine tax will be calculated. The normal taxable values are set out in the table below, together with the assessable dealing to which they apply. [Subsection 9-5(1) and Assessable Dealings Table]
Normal Taxable Values Table
ASSESSABLE DEALING	TAXABLE VALUES
	
AD1a	Wholesale sale by the manufacturer	the price (excluding wine tax and GST) for which the wine was sold	
AD1b and AD11b	Wholesale sale by non-manufacturer	the price (excluding wine tax and GST) for which the wine was sold	
AD2a	Retail sale by the manufacturer	the notional wholesale selling price	
AD2b and AD12b	Retail sale by non-manufacturer - wine obtained under quote	the notional wholesale selling price	
AD2c and AD12c	Royalty-inclusive sale
	the amount that would be the notional wholesale purchase price if the manufacturer had incurred the eligible royalty costs	
AD2d and AD12d	Indirect marketing sale	the notional wholesale selling price	
AD2e and AD12e	Untaxed wine sale by non-manufacturer of the wine	the notional wholesale selling price	
AD3a and AD13a	Untaxed wine application to own use (AOU) by non-manufacturer	the notional wholesale selling price	
AD3b	AOU by the manufacturer of wine	the notional wholesale selling price	
AD3c and some AD13c cases

Some AD 13c cases	AOU by non-manufacturer of wine obtained under quote
	- the purchase price (excluding GST) if the wine was purchased under quote
- in other cases the notional  wholesale selling price
- if wine was locally entered by the applier: the GST importation value	
AD3d and AD13d	Royalty-inclusive AOU	the amount that would be the notional wholesale purchase price if the manufacturer had incurred the eligible royalty costs 	
AD4b and AD14b	Removal of airport shop wine	the amount for which the wine was purchased by the relevant traveller	
AD10	Local entry	the GST importation value	
Notional wholesale selling price
6.8		The general scheme of the wine tax legislation is to impose wine tax on the last wholesale sale of wine. A wholesale sale means a sale to an entity who purchases for the purpose of resale.
6.9		Where a retail sale is made by a manufacturer of wine or an entity holding a tax free stock of wine, for example, a wholesaler of wine, the wine tax legislation requires wine tax to be paid on a taxable value equivalent to the notional wholesale selling price of the wine. The same taxable value applies where a manufacturer applies wine to its own use.
6.10	In the wine industry, retail sales by a wine manufacturer are a regular occurrence. Sales by cellar door and by mail order are the most common retail sales. Wine is also regularly applied to the manufacturer’s own use when tastings are given at cellar door or promotional work is undertaken. Accordingly, many manufacturers are required under the wine tax legislation to determine a notional wholesale selling price.
6.11	An entity has the choice of using two methods when working out the notional wholesale selling price for a taxable dealing that is either:
•	a retail sale of grape wine; or
•	an AOU connected with retail sales of grape wine.
[Subsection 9-25(1)]
The half retail price method
6.12	This method is used unless you have chosen to use the average wholesale price method. Under this method the notional wholesale selling price is 50% of the price of the sale. [Subsection 9-35(1)]
6.13	Price has the meaning given in section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). This is essentially the amount of money (without any discount for the amount of GST payable on the supply), paid for the wine.
Example: An entity makes retail sales of grape wine at $140 per dozen. The taxable value is calculated as ($140 less 50% = $70).
6.14	For a taxable dealing that is an AOU connected with retail sales of grape wine  the notional wholesale selling price using this method is 50% of the price for which you would sell the wine if it were a retail sale. [Subsection 9-35(2)]
Example: An entity uses wine for tastings given at the cellar door.  Retail sales of the wine are made at $140 per dozen. The taxable value is calculated as ($140 less 50% = $70).
6.15	The half retail price method is also used as the notional wholesale selling price for a taxable dealing that is either:
•	a retail sale of wine that is not grape wine; or
•	an AOU connected with retail sales of wine that is not grape wine.
[Section 9-30]
The average wholesale price method
6.16	For a taxable dealing with grape wine that is a retail sale or an AOU connected with retail sales of grape wine, you may choose to use the average wholesale price method if, at least 10% by value of all your sales of grape wine that:
•	is of the same vintage as the grape wine to which the dealing relates; and
•	is produced from the same grape varieties, or the same blend of grape varieties, as the grape wine to which the dealing relates;
are wholesale sales. [Subsection 9-25(3)]
6.17	The average wholesale price method is worked out using the weighted average of the prices (excluding wine tax and GST) for wholesale sales that you have made of grape wine that:
•	is of the same vintage; and
•	is produced from the same grape varieties, or the same blend of grape varieties; 
during the tax period in respect of which you are liable to pay wine tax on the retail sale or AOU. [Section 9-40]
Example: If, during a tax period, 70% of the wholesale sales of grape wine of a particular vintage and variety are made to a distributor at $80 per dozen, and the remaining 30% to hotels and restaurants at $90 per dozen, the weighted average price of all wholesale sales during the tax period is:  (70% x $80)  +  (30% x $90)  =  $83 per dozen.
Notional wholesale selling price for other dealings
6.18	The notional wholesale selling price in all other situations is the price (excluding wine tax and GST) for which you could reasonably have been expected to sell the wine by wholesale under an arm’s length transaction. [Section9-45]
Additions to taxable value
6.19	The normal taxable value of assessable dealings will be increased in certain circumstances. Additional amounts will be added to the taxable value of assessable dealings with wine which:
	are in a container which has not been the subject of a taxable dealing [Section 9-65];
	are subject to an associated royalty payment [Section 9-70];
	occur while the wine is in bond under Customs control. [Section 9-75]
6.20	These additions to taxable value are set out in the Additions to Taxable Values Table. 
6.21	The additional amounts will not be added if they would otherwise be included in the taxable value.
Additions to Taxable Values Table
Type of dealing	Addition to taxable value	
1.  Wine packed in a container and sold by wholesale	So much of the value of the container as is recouped in the sale of the contents	
2.  Any other assessable dealing where wine is packed in a container	So much of the value of the container as might reasonably be expected to be recouped under a notional wholesale sale of the contents	
3.  An assessable dealing with wine for which there is an associated royalty payment	The amount of the associated royalty, to the extent that it is otherwise not included in the taxable value	
4.  Any assessable dealing that occurs while wine is in the control of Customs	Any duty of customs or excise that is payable on the wine	
Addition 1: The container component
6.22	If assessable wine is the subject of an assessable dealing while it is in a container, then the value of the container will be included in the taxable value of the assessable dealing with the contents. The value to be attributed to the container (the container component) will vary depending on the nature of the assessable dealing with the contents. If the container is used more than once then the value may be included more than once.
6.23	The taxable values that will apply to containers are discussed below.
If the assessable dealing is a wholesale sale
6.24	The container component will be so much of the value of the container as is recouped in the sale of the contents.  Generally, there will be no need to add a container component to the taxable value of the contents, as the contents would usually be sold for a single price that includes a recoupment component for the container. [Subsection 9-65(2])
If the assessable dealing is not a wholesale sale
6.25	The container component will be so much of the value of the container as might reasonably be expected to be recouped if the assessable dealing with the contents was a wholesale sale. [Subsection 9-65(3)]
Addition 2 : Associated royalty component
6.26	In certain circumstances, the value of any royalty that is paid or payable in connection with wine will be included in the taxable value of the wine. If a royalty is paid or payable in connection with a triggering event for wine, such as:
•	the manufacture of wine;
•	the importation or local entry of wine; or 
•	a sale of wine;
then that part of the royalty that is paid in relation to the wine will form part of the taxable value for any assessable dealing with the wine. [Section 9-70]
6.27	Some royalties relate to other matters such as the use of a trade name. Where a royalty is paid for something other than wine it does not form part of the taxable value.
6.28	A royalty may be paid as a lump sum or as a fixed or variable amount per article. A lump sum is generally apportioned over the number of goods produced and sold under the royalty agreement. In calculating the taxable value it is only the part of the lump sum royalty that is apportioned to each article that will be included. 
6.29	Eventually all the lump sum royalty will be recouped and included in the taxable value of wine. In the event that the full lump sum of the royalty is not recouped, eg. insufficient sales, then the unrecouped portion is not taxable. It simply remains as an unrecouped expense of selling the wine. [Subsection 9-70(1)]
Addition 3 : Assessable dealings with goods in bond
6.30	The amount of customs duty applicable to wine would be included in the taxable value of wine when it is entered for home consumption. Therefore, it is necessary to include this amount in the taxable value when an assessable dealing occurs while wine is in bond which is before the wine is entered for home consumption. [Section 9-75]
Payments of wine tax
6.31	Wine tax amounts that you are liable to pay to the Commissioner are to be added to your net amount for GST. [Section 21-5]
Attribution rules for wine tax
6.32	The wine tax amounts payable by you are attributable to the same tax period or tax periods as they would be for GST if the supply is a taxable supply. If the supply is not a taxable supply, you attribute the wine tax payable as though the supply were a taxable supply. The attribution rules for GST are in section 29-5 of the GST Act. [Subsection 21-10(1)]
6.33	If you are liable to wine tax on a taxable dealing that is not a supply (eg an AOU), the wine tax payable is attributable to the tax period in which the time of the dealing occurs. [Subsection 21-10(2)]
Agreement with the Commissioner of Taxation (Commissioner)
6.34	The Commissioner may enter into an agreement with you to determine a method of calculating a taxable value or values for particular taxable dealings. The manner of calculating the taxable value or values of the wine that is specified in the agreement will apply to all assessable dealings with that wine and will override all the taxable value provisions. [Section 9-10]
Miscellaneous Rules Affecting Taxable Value
6.35	There are also three miscellaneous rules that will affect the taxable value of assessable wine.
Taxable value excludes wine tax and GST
6.36	Where the taxable value of an assessable dealing relates to the price, this will not include any amount of wine tax that has been paid on that assessable dealing or GST payable on the supply. Where the taxable value is the purchase price this will exclude the amount of GST. [Assessable Dealings Table, AD1a, AD1b, AD3c]
The arm's length rule
6.37	Under the law there will be an automatic rule that will apply to all taxable values. If a taxpayer, or an associate, is a party to a non-arm's length transaction then the taxable value of the wine will be recalculated to reflect a price for which the wine could reasonably have been expected to be sold, or purchased, under an arm's length transaction. This rule also extends to transactions that are not directly involved in the calculation of liability. [Section27-10]
6.38	If a taxpayer is able to sell wine under an arm's length transaction at a low price because of having bought the wine under a non-arm's length transaction at a reduced price then the taxable value of the wine must be increased to an arm's length price.
6.39	The onus is on the entity making the sale to ensure that wine tax is paid on an arm's length taxable value. 
Apportionment of amounts
6.40	If wine and other goods are packaged and sold together for one inclusive price, then the goods will be treated separately for the purpose of calculating the taxable value. The value for each item will be the value for which that item could reasonably have been expected to have sold for separately. [Section 27-15]
Example 1: A gift pack containing a bottle of wine and a set of wine glasses is sold by wholesale for one inclusive price of $125 (before GST). The wine has a taxable value of $50 and the set of glasses has a taxable value of $75. The goods would be treated separately to calculate the taxable value of the wine and the total amount of wine tax payable would be $14.50 = ($50 x 29%).

Chapter 7
Quoting – General
Overview
7.1		This Chapter describes the general rules relating to quoting. The matters discussed in this Chapter are dealt with in Part 3 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).
7.2		Chapter 5, Exemptions, should be read before commencing this Chapter.
What is quoting?
7.3		Quoting is a mechanism to relieve or defer tax on wine to a later assessable dealing, or to give effect to a complete exemption from tax for the wine.  Quoting can have different effects, depending upon the circumstances. A quote:
•	will allow an exemption on an assessable dealing;
•	will allow a vendor of wine who has already borne wine tax on those wine dealings to sell them for a wine tax-exclusive price - the vendor would then be entitled to a credit of the wine tax excluded from the sale price; Wine Tax Credit Table, CR 6;
•	or, an entitlement to quote, will be a key pre-condition to several of the grounds for credits under the new law;
•	will impose a liability to wine tax on the quoter for any retail sale or application to own use of the wine (as assessable dealings with wine obtained under quote - ADs 2b, 3c, 12b and 13c), unless an exemption applies to that later dealing.
When will quoting be allowed?
7.4		Broadly, there will be four conditions governing when, and if, an entity can quote, all of which must be satisfied.
Condition 1
7.5		An entity can only quote for a sale or a customs dealing (ie. local entry or removal from a customs clearance area).
7.6		Quoting will not be available for an application to own use (because there would be no-one to quote to).
Condition 2
7.7		The quoter must be:
•	in the case of a sale - the purchaser; or
•	in the case of a customs dealing - the entity that makes the local entry or removes the wine from the customs clearance area.
Condition 3
7.8		The quote must be made at or before the time of the dealing, and in the form and manner approved by the Commissioner of Taxation (Commissioner).
Condition 4
7.9		The quoter must intend to satisfy one of the specified grounds for exemption. Alternatively, the quoter makes the quote in special circumstances authorised by the Commissioner. [Section 13-10]
Quoting an Australian Business Number (ABN)
7.10	The quote of an ABN will be essentially no more than that: the quoter will notify the other party to a dealing that the quoter is the holder of a particular ABN (which they will cite), and that the number is being quoted in respect of the particular dealing. [Section 13-20]
7.11	The grounds for quoting an ABN are set out in Chapter 8.
Quoting an ABN not compulsory
7.12	Under the law, quoting an ABN will be optional. Entities entitled to quote their ABN may choose not to quote.  
7.13	An entity that is entitled to quote an ABN, but that does not, will be entitled to a credit for the wine tax paid. Wine Tax Credit Table, CR2.
Effects of incorrect quoting
7.14	There are a number of situations in which an entity may incorrectly quote. These are:
•	an entity quotes, but there is no entitlement to quote;
•	an entity quotes other than in accordance with the form and manner approved by the Commissioner (or the quote occurs after the dealing time); or
•	an entity makes a quote that is false or misleading.
7.15	The effects of a quote in any of these circumstances are:
•	The entity will be treated as having acquired the wine under quote. Consequently, any sale or application to own use by the quoter with the wine will be an assessable dealing; [Paragraph 13-25(a)]
•	If the supply of wine is an assessable dealing, the entity receiving the quote (the supplier) will not be liable to wine tax. However, the supplier will not be exempted from liability if the supplier had reasonable grounds for believing that the quote was ineffective. [Paragraph 13-25(b) and Section 13-30]
7.16	If the quote was made to a supplier of tax-paid wine, the supplier will be entitled to a credit for any wine tax excluded from the sale price as a result of the quote, unless the supplier had reasonable grounds for believing that the quote was ineffective. [Wine Tax Credit Table, CR6 and Section 13-30]
7.17	If the supplier had reasonable grounds for believing that the quote has been incorrectly made the quote will not exempt the supplier from liability on the dealing. Alternatively, if the supply of wine is from wine tax-paid stock (and is not an assessable dealing), the supplier will not be entitled to a credit on the supply. [Section 13-30] 
7.18	In this case, a supplier may still be entitled to a credit if the supplier can establish that the quote was in fact a fully effective quote (ie. a quote that is effective without the assistance of section 13-25). [Wine Tax Credit Table, CR3]
7.19	In any case where an entity incorrectly quotes, they will also be guilty of an offence of improper quoting. [Section 13-35]
Reasonable grounds
7.20	A quote will not be effective if the entity receiving the quote has reasonable grounds for believing any of the things set out in the paragraph 7.14 above titled ‘Effects of incorrect quoting’. This is an objective test. The only relevant consideration is whether or not there are reasonable grounds for the quotee to believe that the quote is improperly made. This means that the provision may apply even where the quote has in fact been made correctly. If that happens the entity receiving the quote will be entitled to a credit for any wine tax paid, but excluded from the sale price on the basis of the quote. [Wine Tax Credit Table, CR3]
Example
Reasonable grounds exist for believing that a quote is improperly made.  Despite being fully aware of these grounds and believing the quote to be made improperly, an entity accepts the quote.  However, contrary to the entity’s belief, the quote was properly made.  The quote will nevertheless be ineffective (although the quotee will be entitled to a credit under CR3). [Section13-30]

Chapter 8
Quoting – Grounds
Overview
8.1		This Chapter describes the general grounds on which an entity may quote an Australian Business Number (ABN) in respect of an assessable dealing.  The grounds for quoting are dealt with in Part 3 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).
Grounds for quoting an ABN
8.2		There will be 4 general grounds for quoting an ABN. The grounds will apply if the quoter intends to:
•	Ground 1: Sell the wine by wholesale or indirect marketing sale.
•	Ground 2: Sell the wine by any kind of sale, and the quoter is mainly a wholesaler.
•	Ground 3: Use the wine as a material in manufacture or other treatment or processing.
•	Ground 4: Make a supply of wine that will be goods and services tax (GST)-free.
[Section13-5]
Quotation Ground 1
8.3		The quoter intends to sell the wine by wholesale or indirect marketing sale. [Paragraph 13-5(1)(a)]
8.4		This ground will apply to any entity that wishes to acquire wine for wholesale sale or indirect marketing sale, regardless of whether they sell wine mainly by wholesale or retail. As the wholesale sale will be an assessable dealing the purpose of the ground is to defer wine tax to that point.
8.5		This ground will apply only to wine that is definitely intended for wholesale or indirect marketing sale. The ground will not apply to allow an entity to quote in respect of a mixed stock of wine where some are for wholesale sale and others are not (and they cannot be separately identified).
Quotation Ground 2
8.6		The quoter intends to sell the wine by wholesale or retail, and the quoter is mainly a wholesaler. [Paragraph 13-5(1)(b)]
8.7		An entity will be ‘mainly a wholesaler’ if they make wholesale sale or indirect marketing sales of wine (or both) and those sales account for more than 50% in value of all the entity’s sales of wine. The entity will have the option of determining whether this test is met over the 12 months before the time of the quotation, or is reasonably likely to be met over the next 12 months. The value of the wine will be the amount for which it is sold. [Subsection 13-5(2)]
Quotation Ground 3
8.8		The quoter intends to use the wine as a material in manufacture or other treatment or processing, whether or not it relates to or results in other wine. [Paragraph 13-5(1)(c)]
8.9		An example of a situation covered by this ground would be an entity that uses wine to make wine vinegar. The wine could be purchased by the entity free of wine tax. The wine vinegar would not be subject to wine tax as it falls outside the definition of wine in section 31-1.
Quoting Ground 4
8.10	The quoter intends to make a supply of wine that will be GST‑free. [Paragraph 13-5(1)(d)]
8.11	This ground will allow an entity to quote for wine, if the wine is intended for supply in circumstances that will be GST-free (eg. wine to be exported).
Additional quoting ground
8.12	An entity may also quote in circumstances that fall outside the quoting grounds discussed above if the entity has received special authorisation from the Commissioner of Taxation (Commissioner).
8.13	The Commissioner will have a discretion to allow quoting in ‘special circumstances’. The discretion allows the Commissioner to authorise a registered entity to quote their ABN, in special circumstances in which the entity would not otherwise be entitled to quote. [Section 13‑10]
Periodic quoting
8.14	Periodic quoting allows an entity to supply a single quotation for all their exempt purchases in a period, where that period does not exceed one year. This provides purchasers who are permitted to quote, the flexibility to supply a single quotation to each supplier to cover all their purchases of wine for periods up to one year. [Section 13-15]
8.15	The periodic quotation will be required to be in the form and manner approved by the Commissioner and be made at or before the time of the first dealing. [Section 13-20(1)]
Why is the period limited to one year?
8.16	The limitation reflects the normal maximum period business has indicated is used in most supply contracts. However, the main reason is to ensure that purchasers are able to focus on their responsibilities with respect to quoting and their liabilities on the wine they buy under quotation.

Chapter 9
Credits
Overview
9.1		This Chapter describes the general situations in which a credit will be available for wine tax that has been borne on wine. The term credit will embrace both refunds obtained directly from the Commissioner of Taxation (Commissioner) and reductions in the entity’s net amount of goods and services tax (GST) payable in a GST return. Credits are dealt with in Part 4 of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill). The credit entitlement grounds are set out in the Wine Tax Credit Table in section 17-5.
What is a credit?
9.2		The law will provide an entitlement to a credit if wine tax is overpaid on a transaction, if more wine tax is payable on the wine than the law intends, and in some other circumstances.
9.3		There will be two methods of obtaining credits:
Reductions in GST net amount
9.4		This will be an amount that an entity will be entitled to deduct from the net amount of GST payable by them during a payment period. An entity that is registered or required to be registered can only claim credits in this manner. [Subsection 17-10(1) and section 21-15]
Direct refunds
9.5		This will be a direct payment to the entity claiming the refund. These payments will be obtained by applying directly to the Commissioner. This will only be available to an entity who is not registered and not required to be registered. [Subsection 17-10(2)]
Categories of credits
9.6		There will be 5 broad categories of credit grounds under the new law:
•	credits for overpaid wine tax;
•	credits to avoid wine being taxed twice;
•	export-related credits;
•	import-related credits; and
•	credits for bad debts.
How does the passing on condition apply?
9.7		A number of credit grounds require that the amount of the credit available will be limited to the amount that the claimant has not passed on to some other entity. Wine tax will be considered to be not passed on if an entity has passed wine tax on to another entity, but has refunded the wine tax to that other entity before making a claim for the credit. [Section 33-1, definition of passed on]
What does borne wine tax mean?
9.8		A number of credit grounds will require that the claimant must have previously borne wine tax on the wine which is the subject of the dealing. An entity will have borne wine tax on wine where the entity:
•	has become liable to wine tax on an assessable dealing with the wine but not to the extent that the tax has been the basis of a wine tax credit; or
•	has purchased the wine for a price that included wine tax.
[Section 31-10]
Example:  An entity purchases wine by wholesale for a total price of $141.90 of which $29 is the amount of wine tax included in the price of the wine and shown on the sales invoice (GST is 1/11 of 141.90 = $12.90). The entity has not received a refund or credit for any part of the $29. The amount of wine tax borne on the wine by the purchaser will be $29.
Credits for wine tax overpaid
Credit Ground 1: Wine tax overpaid
9.9		The claimant has paid an amount as wine tax that was not legally payable.
9.10	These overpayments may occur in a number of different circumstances, including:
•	the amount was not legally payable because:
•	the particular dealing was not an assessable dealing;
•	an exemption applied to the dealing;
•	the taxpayer made an incorrect calculation; and
•	liability had not fully crystallised at the time of the payment.
Example:  An entity pays wine tax on a wholesale sale under AD1a. The taxable value of the assessable dealing is the price (excluding wine tax and GST) for which the wine was sold. The price is subsequently reduced because of a prompt payment discount which the entity gives to the purchaser. The entity is entitled to a credit for the amount of wine tax overpaid, to the extent that it was not passed on to the purchaser.
Mistake of law
9.11	The common law rule is that money paid voluntarily to Government under a mistake of law is irrecoverable. In some circumstances, a taxpayer may have made a wine tax payment which may be described as money paid voluntarily under a mistake of law. CR1 will override this common law rule, because it will apply to an amount paid as wine tax that was not legally payable.
9.12	There is a requirement that the wine tax has not been passed on.
Credits to avoid wine being taxed twice
9.13	There will be circumstances where wine is either directly or indirectly subjected to wine tax more than once. There will be 5 credit grounds to deal with the following situations:
•	failure to quote an Australian Business Number (ABN) - CR2;
•	where a fully effective quotation is made ineffective - CR3;
•	avoiding the same wine being taxed twice - CR4;
•	ensuring exemption where the latest assessable dealing of the taxpayer is non-taxable - CR5; and
•	where wine tax excluded from the sale price of tax-paid wine sold to quoting purchasers - CR6.
9.14	Note that wine tax is not payable on the retail sale or application to own use of wine that has been taxed under the wholesale sales tax. [Paragraph 5‑25(3)(c)]
Credit Ground 2:  Failure to quote an ABN
9.15	Wine tax has been borne by a registered entity who was entitled to quote an ABN.
9.16	There are two situations covered by this credit ground. The first is where the claimant was entitled to quote on a dealing, but did not quote. The second is where the claimant was entitled to quote but the quote was not accepted by the entity to whom it was given. The claimant will be entitled to a credit if they have borne wine tax on that dealing, to the extent that they have not passed on that wine tax. 
Credit Ground 3:  Providing credits where a fully effective quotation is made ineffective
9.17	The claimant has become liable to wine tax on an assessable dealing (or has lost an entitlement to a credit under CR6) because a fully effective quotation which that entity had accepted was rendered ineffective by virtue of section 13-30. The supplier in these circumstances will now have a retrospective liability to pay wine tax on the dealing concerned.
9.18	This ground will apply in the following situation:
•	where a supplier of wine has accepted a quotation of an ABN in respect of an assessable dealing with wine;
•	the quotation is made ineffective because of section 13-30. This could include, for example, where there were reasonable grounds to believe that the purchaser was not authorised to quote, or did not quote in the form and manner approved by the Commissioner; and
•	nevertheless, the quote is and was a bona fide quote.
9.19	This ground will enable the supplier to obtain a credit for the amount of the wine tax payable on the dealing.
9.20	A credit will also be available in these circumstances where the supplier has lost a credit entitlement under CR6 as a result of the quote being ineffective because of section13-30.
Example:  A retailer makes a wine tax-free sale of wine for $110 out of wine tax-paid stock to a registered entity who quotes an ABN. The retailer is entitled to claim a credit from the Commissioner under CR6 for the amount of the wine tax excluded from the price for which the wine was sold to the registered entity (ie. $29). The retailer has not passed the $29 on to any entity. Note: the wine tax is applied to the GST exclusive value of the wine ie $110 x 1/11 = $100.
An objective assessment of the dealing suggests that the quote is rendered ineffective under section13-30 because there were reasonable grounds for the quote being refused. Thus the retailer loses his entitlement to a credit under CR6, as the dealing can no longer be treated as having been a sale to a quoting purchaser.
Subsequently, the facts reveal that the quote was a bona fide quote.
The retailer is entitled to a credit for an amount of $29, because the quote can be treated as valid and the retailer has not passed that amount of wine tax on.
Credit Ground 4: Avoiding the same wine being taxed twice
9.21	The claimant has become liable to wine tax on an assessable dealing in respect of wine, but has borne wine tax on the same wine before the time of that dealing.  
9.22	The law will impose a wine tax liability each time there is an assessable dealing with assessable wine, provided no exemption applies. The system of quotation is intended to ensure that, by the time wine ceases to be assessable wine, wine tax will only have been paid on one assessable dealing. However, there will be cases in which liability to wine tax may be incurred twice on the same wine. This credit ground is necessary to prevent that wine being taxed twice in these circumstances.
Credit Ground 5:  Ensuring exemption where the latest assessable dealing is non-taxable
9.23	The claimant is the taxpayer for an assessable dealing with wine that is non-taxable, and the claimant has borne wine tax on the same wine before the time of the assessable dealing.
9.24	The purpose of this credit ground is to ensure that, if a taxpayer has borne wine tax on wine (for example, purchasing it for a tax-inclusive price), then that amount of wine tax can be credited to the taxpayer when the taxpayer has an assessable dealing with that wine that is non-taxable. An example of a subsequent assessable dealing with tax-paid wine would be a wholesale sale. The credit ground will not apply if the wine has been taxed while in bond, and the later assessable dealing is a local entry. That local entry will not be taxable because there will be an exemption for wine that previously has been taxed in bond.
9.25	The exemption for a local entry of wine taxed in bond is set out in section 7-20.
Credit Ground 6:  Wine tax excluded from sale price to quoting purchasers
9.26	Wine tax has been excluded from the sale price of tax-paid wine sold to a purchaser who quotes.
9.27	This ground will provide a mechanism for allowing entities to quote or to obtain wine for a tax-exclusive price from a seller, such as a retailer, who holds wine tax-paid stock. It will enable unregistered entities to obtain a refund from the Commissioner if they sell tax-paid wine at a wine tax-free price to a quoting purchaser.
9.28	There is no specific requirement that the wine tax has not been passed on. However, the amount of the credit will only be the amount of the wine tax excluded from the sale price to the quoting purchaser.
Credit Ground 7:  Avoiding double tax in respect of containers
9.29	This credit ground is designed to avoid double tax in respect of containers.
9.30	Sometimes, a container and its contents will be regarded as separate goods at the time of the assessable dealing with the contents. This credit ground provides a credit for any wine tax borne on a container in its own right that subsequently has its value included in the taxable value of its contents.
9.31	There is no specific requirement that the wine tax has not been passed on.
Credit Ground 8:  Return of defective wine
9.32	The claimant has borne wine tax on wine used for the purpose of replacing other wine because of defects in the other wine on which the claimant has already been liable for wine tax.
9.33	A credit under this ground will be subject to the condition that if the claimant later sells the defective wine which was replaced, then the claimant will be liable to pay an amount in accordance with the formula set out in section 17-35. This formula will operate to clawback the amount of the original credit to the extent that the claimant has recouped some or all of the wine tax borne on the replacement wine by later selling the defective wine which was replaced.  
9.34	There is no specific requirement that the wine tax has not been passed on.  
Export-related credits
9.35	As exports are one of the categories of supply that are GST-free, exports of wine should not be subject to wine tax where it is exported as assessable wine. This is to ensure that wine which has not been applied to own use in Australia is able to be sold on the international market at prices which do not directly include wine tax.  
9.36	The third broad category of credit grounds are export-related credits. The 4 credit grounds which deal with the relief of wine tax on exported wine are as follows:
•	wine tax excluded from the sale price of tax-paid wine sold to a purchaser for export otherwise than as accompanied baggage - CR9;
•	wine tax borne directly on assessable wine that is exported - CR10;
•	wine tax excluded from the sale price of wine exported by eligible Australian travellers as accompanied baggage - CR11; and
•	wine tax excluded from the sale price of wine to be exported by eligible foreign travellers - CR12.
Credit Ground 9: Wine tax excluded from the sale price of tax-paid wine sold to a purchaser for export
9.37	The claimant has excluded wine tax from the sale price of tax-paid wine sold to a purchaser who, at the time of the sale, had the intention of exporting the wine (otherwise than as accompanied baggage).
9.38	This ground will allow entities, such as a retailers who hold tax-paid stock, to sell wine for export for a tax-exclusive price to an entity that quotes their ABN.
Credit Ground 10: Wine tax borne directly on assessable wine that is exported
9.39	The claimant has borne wine tax on wine which the claimant has exported while the wine is still assessable wine.
9.40	This credit ground will relieve exports from any direct wine tax burden. Under this ground a credit is available for an entity in the following circumstances:
•	the claimant has borne wine tax on wine;
•	the claimant has personally exported the wine; and
•	the wine was assessable wine at the time of export.
9.41	This credit ground will only be available to the entity who actually exports the wine, either by taking the wine with them out of Australia or by arranging the export of the wine by an independent carrier, such as an international shipping or air-freight agent. 
Credit Ground 11:  Wine tax excluded from the purchase price of wine exported by eligible Australian travellers
9.42	The claimant has sold wine for a wine tax-exclusive price to an eligible Australian traveller in accordance with the prescribed rules for export sales, and the traveller has subsequently exported the wine.
9.43	This credit ground will operate where vendors sell tax-paid wine for a wine tax-exclusive price in the following situation:
•	the claimant has sold wine to an eligible Australian traveller;
•	the sale was in accordance with the prescribed rules for export sales;
•	the selling price excluded some or all of the wine tax previously borne by the claimant on the wine; and
•	the wine has been exported by the purchaser within the time, and in the manner, prescribed by the regulations.
Eligible Australian traveller
9.44	This term will be defined in the regulations that will be made for the purposes of this definition.
9.45	The rules for export sales will be prescribed by the regulations setting out the conditions to be complied with for these types of sales.  
9.46	If the vendor holds wine stock tax-free and makes a sale to an eligible Australian traveller, then that sale will be an assessable dealing. This sale will be taxable, (but will generally be offset by the credit) as there is no exemption for sales to eligible Australian travellers who intend to export the wine as accompanied baggage. Accompanied baggage will mean wine that is exported on a flight or voyage on which the owner of the wine is a passenger. [Section 33-1, definition of accompanied baggage]
9.47	There is no requirement that the wine tax has not been passed on.
Credit Ground 12:  Wine tax excluded from the purchase price of wine to be exported by eligible foreign travellers
9.48	The claimant has sold wine for a wine tax-exclusive price to an eligible foreign traveller in accordance with the prescribed rules for export sales.
9.49	This credit ground will operate where vendors sell tax-paid wine for a wine tax-exclusive price in the following situation:
•	the claimant sold wine to an eligible foreign traveller;
•	the sale was in accordance with the prescribed rules for export sales; and
•	the selling price excluded some or all of the wine tax previously borne by the claimant on the wine.
9.50	This ground will effectively apply where the wine is intended to be exported as accompanied baggage by an eligible foreign traveller who is departing Australia on an international air or sea voyage. The prescribed rules for export wine will ensure that a credit entitlement will only arise where the correct procedures have been followed at the point of sale to ensure that the purchaser is a bona fide overseas visitor. 
Eligible foreign traveller
9.51	This term will be defined in the regulations that will be made for the purposes of this definition.
9.52	The rules for export sales will be prescribed by the regulations that will set out conditions which must be complied with in order for a credit to be available where tax-paid wine has been sold at a wine tax-exclusive price to eligible foreign travellers for export.
Import-related credits
9.53	There will be two credit grounds relating to imported wine as follows:
•	destruction of imported wine - CR13; and
•	drawback of customs duty where imported wine is exported while still assessable wine - CR14.
Credit Ground 13:  Destruction of imported wine
9.54	The claimant has become liable to wine tax on a local entry, but the claimant has rejected the wine for non-compliance with the sale contract and the wine has been destroyed under Customs' supervision. 
9.55	This credit ground will operate in those rare cases where the following four conditions are satisfied:
•	the claimant has become liable to wine tax on a local entry of wine that was imported under a contract of sale;
•	the claimant rejected the wine for non-compliance with the contract;
•	the wine was destroyed under Customs' supervision; and
•	the Commissioner is satisfied that the destruction is or would be grounds for remission of customs duty on the wine.
9.56	Grounds for rejecting wine for non-compliance with the contract of sale could include defective wine or wine which does not meet the contract description. 
9.57	It will be a requirement that the Commissioner is satisfied that the customs duty paid on the importation of the wine will be remitted because of the destruction. In the case of non-dutiable wine, the Commissioner must be satisfied that if customs duty had been paid on the wine, then that duty would have been remitted by Customs as a result of the destruction of the wine.
Credit Ground 14: Drawback of customs duty on imported wine
9.58	The claimant is an importer who is entitled to a drawback of customs duty on the wine on which wine tax was paid.
9.59	This ground will operate to provide a credit in those cases where:
•	drawback of customs duty has been allowed in respect of certain wine under section 168 of the Customs Act 1901; or
•	if the wine is non-dutiable, the Commissioner is satisfied that a drawback of duty would have been allowed if the wine had been liable to duty.
9.60	A drawback of customs duty will be allowed where imported wine is exported without being used in Australia. In this context, wine which has only been used for the purpose of being inspected or exhibited will not be treated as having been used in Australia (see Customs Regulation 129).
Credits for bad debts
Credit Ground 15: Bad debts
9.61	The claimant has paid wine tax on a taxable dealing with wine and some or all of the amount owed to the claimant in respect of that dealing is subsequently written off as a bad debt.
9.62	This credit entitlement will apply where a claimant has paid wine tax on an assessable dealing such as a sale and the claimant has subsequently written off some or all of the price for which the wine was sold.
9.63	Section 17-30 will provide for a clawback of the credit proportionate to the extent to which the bad debt was later recovered.
General rules for obtaining a credit
What are the general entitlements to credits?
Methods of claiming credits
9.64	There will be two methods of obtaining a credit.
Reduction in GST net amounts
9.65	This will be an amount that a taxpayer will be entitled to deduct from the net amount of GST payable by them during a tax period. An entity that is registered or required to be registered can use this method to claim credits. [Subsection 17-10(1)]
Direct refunds
9.66	This will be a direct payment to the entity claiming the credit. These payments will be obtained by applying directly to the Commissioner. This method is only available for an entity that is not registered and not required to be registered. [Subsection 17-10(2)]
Direct refund procedures
9.67	Offset against other liabilities:  The Commissioner will be able to apply the credit against any outstanding wine tax liabilities of the claimant before paying as a refund the remaining amount of the credit [Section 17-20]
9.68	Minimum monetary claims:  Refunds will not be available for amounts totalling less than $200. Individual claims may be aggregated to reach the minimum amount. This new requirement is necessary to reduce the likely administrative costs of processing large numbers of small refund claims from a much larger group of potential claimants than exists under the existing law. [Section 17-15]
9.69	There will be no minimum monetary limit for credits claimed as subtractions from GST net amounts.
Additional requirements
9.70	Additional requirements regarding the operation of the direct credit provisions will be as follows:
•	Claims for direct credits will be required to be made in a form approved by the Commissioner, and will be required to be accompanied by such supporting evidence as the Commissioner requires. [Subsection 17-10(2)]
•	There will be a provision to ensure repayment by the claimant of excess or overpaid credits. This will cover cases not only where refunds have been incorrectly overpaid by the Commissioner, but also where credits have been improperly deducted from the GST payable in respect of a GST return. The amount of the excess will be treated as if it were wine tax due and payable, and due for payment at the time when it was overpaid or deducted. [Section 17-25]
Agreements relating to calculation of credits
9.71	In almost all situations it is expected that the actual amount of any wine tax credit will be able to be determined from the records of the particular entity. However, if a situation arises where there is difficulty in determining the amount of credit the Commissioner may enter into a section 17-40 agreement with any entity regarding a method of calculating the amount of a wine tax credit. Such agreements will override the legislation.
9.72	Section 17-40 does not allow the Commissioner to authorise a wine tax credit to be granted where the circumstances of that credit are not covered by one of the credit grounds listed in the Wine Tax Credit Table. [Section17-5] The credit grounds listed in this Table are a complete list of the situations where an entitlement to a wine tax credit arises.
Within what time limits must credit claims be made?
9.73	All claims for credits will be required to be made within 4 years of the time when the credit entitlement arises. [Subsection 17-10(3)]
Objections against credit decisions
9.74	The provisions of the Taxation Administration Act 1953 concerning rights to object against refund decisions will apply. [Section 17-45]

Chapter 10
Miscellaneous
Overview
10.1	This Chapter describes several miscellaneous provisions which will be necessary to enable the new wine tax legislation to operate effectively. These matters are dealt with in Part VI of the A New Tax System (Wine Equalisation Tax) Bill 1999 (WET Bill).
Application of Bill to cider, perry, mead and sake
10.2	The WET Bill applies to cider, perry, mead and sake in the same way that it applies to wine (other than grape wine).
10.3	In determining whether a particular product is classified as cider, perry, mead or sake the essential character of the product is relevant. The essential character of a product derives from the basic nature of the product, from what they are, though composition, function and other factors necessarily play a part. The essential character is determined by an objective identification of the product.
Wholesale wine invoices
10.4	Where a taxable wholesale sale of wine is made and an invoice is issued, the taxpayer must show the amount of wine tax on that invoice. [Section 27-5]
10.5	The law will not require an entity to show wine tax on a retail sale even where there is a liability to pay wine tax on the retail sale, eg. where a manufacturer sells wine by retail. An entity will be able show the amount of wine tax included in a retail sale of wine but only the amount of wine tax that has been paid should be shown. 
Special provision for non-arm’s length transactions
10.6	There will be a special provision in the law to prevent a wine tax benefit from being obtained by being a party to a non-arm’s length transaction. [Section 27-10]  Two conditions that must be established in order for the provision to apply are:
•	a taxpayer (or an associate of the taxpayer) must have been a party to the non-arm’s length transaction; and
•	if the transaction had been at arm’s length, then either the taxpayer’s liability to wine tax would have been increased or an entitlement to a credit would have been reduced.
10.7	The second condition will be satisfied if it would be reasonable to expect that the liability or entitlement would have been different had the transaction been at arm’s length. In addition, the liability or credit entitlement can relate to any transaction, not just the non-arm’s length transaction.
10.8	If both these conditions are satisfied, then the taxpayer’s liability to wine tax, or entitlement to a credit, will be assessed on the basis of the liability or credit that would have applied if the transaction had been an arm’s length transaction. 
Example
An entity purchases wine at a non-arm’s length price under quote.  The wine is then sold to an arm’s length party at a deflated value because of the low purchase price.  The later sale is caught because it is linked to a non-arm’s length transaction.
10.9	The arm’s length provision will operate automatically without the need for the Commissioner to exercise any discretion. The parties to a transaction will be required at all times to ensure that wine is sold at an arm’s length price. Where the wine is not sold at an arm’s length price the law will operate to apply an arm’s length price to the sale or other taxable dealing.
Liability for a non-arm’s length dealing
10.10	A taxpayer who has dealt with wine at a non-arm’s length price will be liable to pay the wine tax underpaid from the time payment for wine tax is due on the dealing. [Subsection 27-10(2)]
Apportionment of amounts
10.11	If wine and other goods are packaged and sold together for one inclusive price, then the goods will be treated separately for the purpose of calculating the taxable value. The value for the wine will be the value for which the wine could reasonably have been expected to have sold for separately. [Section 27-15]
Commonwealth and Commonwealth entities not liable for wine tax
10.12	Under the Constitution, liability to wine tax cannot extend to the Commonwealth or to a defined category of a Commonwealth entity. To ensure that Commonwealth entities are also effectively covered by wine tax, a notional liability to wine tax and a notional entitlement to wine tax credits will instead apply to them. [Section 27-20]
Cancellation of exemptions from wine tax
10.13	This provision expressly overrides an existing Commonwealth law which otherwise would provide an exemption from liability to wine tax. [Section 27-25]
Regulation power
10.14	The Governor-General will be authorised to make regulations prescribing matters that are either required or permitted by the Act to be prescribed, or that are necessary or convenient to be prescribed for carrying out or giving effect to the Act. [Section 27-35]
10.15	In particular the regulations may make provision allowing wine to be brought into Australia on a temporary basis, without the payment of wine tax. [Paragraph 27-35(2)(a)]
General anti-avoidance provisions
10.16	Division 165 of the GST Act, the general anti-avoidance provisions, applies to amounts of wine tax payable. This is achieved by incorporating wine tax payable on taxable dealings in wine into the net amount under Division 17 of the GST Act. However, wine tax on importations of wine is not incorporated into the net amount but is generally paid with customs duty. Section 23‑10 expressly states that Division 165 of the GST Act applies to amounts payable upon an importation of wine as if it were payable under the GST Act. 
•	Division 165 of the GST Act will operate to deter avoidance schemes that are designed to obtain GST benefits by taking advantage of GST law in circumstances other than that intended by GST tax law.
•	The general anti-avoidance rules will only apply to negate any GST benefit under a scheme if it can be established that the dominant purpose for entering into the scheme or principal effect of the scheme is to give an entity any such benefit.
[Section 23-10]
Application of the Criminal Code
10.17	The Criminal Code will apply to all offences under the WET Bill. [Section 27-30]
Administration, collection and recovery
10.18	Provisions relating to the administration, collection and recovery of amounts of wine tax are contained in Part VI of the Taxation Administration Act 1953. [Section 2-35]  Taxpayers who engage in taxable dealings will be required to calculate the wine tax payable on those dealings and add it to their net GST amount for the tax period. [Section 21-5]
10.19	The only exception to the above is if wine tax is payable on a local entry of wine, or a removal of wine from a customs clearance area, then the wine tax will generally be payable at the time of the customs dealing. [Section 23-5]
10.20	Wine tax payable on wine removed from a customs clearance area or on a local entry of wine will generally be required to be paid at the same place and in the same way as Customs duties are payable.
Registration
10.21	There will not be a separate registration requirement in the wine tax law. An entity that is registered or required to be registered for GST purposes will be affected by the wine tax law if they have assessable dealings which are covered by the wine tax law. [Section 33-1, definition of registered]

Chapter 11
Commencement and Application
Introduction
11.1	This Chapter discusses the commencement and special application rules of the law. The rules dealt with are:
	commencement provisions;
	application of the law to the external Territories;
	application of the law outside Australia;
	application of the law to things that happen before the new law starts; and
	application of the law to the States and Territories.
Commencement Provisions
11.2	The law will commence on1 July 2000.
Application of the law to the external Territories
11.3	The law will not extend to Australia’s external Territories. As a consequence, wine brought to an external Territory from a place outside Australia will not be imported into Australia at that time but wine brought to Australia from an external Territory will be imported into Australia. Similarly, a dealing with wine when it is in an external Territory will not be an assessable dealing for wine tax purposes. 

Application of the law outside Australia
11.4	The law will extend to acts, omissions, matters and things that occur outside Australia. However, this rule will be displaced by any contrary intention in the law. 
Example 1:  Company X makes a wholesale sale of wine that is in Australia at the time of the sale, but the sale is entered into in New Zealand (and both parties are in New Zealand at the time of the sale). The law will apply to the sale, even though it is entered into outside Australia.
Example 2:  Company Y makes a wholesale sale of wine that is in New Zealand at the time of the sale, but the sale is entered into in Australia (and both parties are in Australia at the time of the sale). The law will not apply to the sale because it will be an essential element of every assessable dealing under the law that the wine be in Australia at the time of the assessable dealing.
Application of the law to things that happen before the law starts
11.5	The law will apply to acts and omissions that happen before the law comes into operation. 
11.6	The main purpose of these provisions is to ensure that a course of conduct (or omission) does not fall outside the law (and the existing wholesale sales tax law) simply because one of the elements of the course of conduct happens before the law starts.
Example:  Company A manufactures wine before the law starts, but sells the wine by wholesale after the law has started. The wholesale sale will be an assessable dealing under the wine tax law.  
Application of the law to the States and Territories
11.7	The new law will bind the States, the Australian Capital Territory and the Northern Territory. This means that they will be liable to tax on most assessable dealings with wine (unless an exemption applies). 
Note:  Each of the Wine Tax Imposition Bills will ensure that wine tax is not imposed on any property belonging to a State.

Chapter 12
Regulation Impact Statement (RIS)
Policy objective
12.1	The Government announced the proposal in Tax Reform: not a new tax, a new tax system: The Howard Government’s Plan for a New Tax System on 13 August 1998 (ANTS).
12.2	The Government has decided that, from 1 July 2000, wine will become subject to a wine equalisation tax (WET) to replace the difference between the current wholesale sales tax (WST) and the proposed goods and services tax (GST). For the purposes of the WET, wine includes fruit and vegetable wine, cider, perry, mead and sake. The WET will be levied at such a rate that the price of a typical four litre cask of wine need only increase by the estimated general price increase associated with indirect tax reform; ie 1.9%. A representative bottle of wine has been estimated to increase in price by about 3% in meeting the price objective on a four litre cask.
12.3	This RIS will deal with:
•	A New Tax System (Indirect Tax Administration) Act 1999;
•	A New Tax System (Wine Equalisation Tax and Luxury Car Tax Transition) Act 1999;
•	A New Tax System (Wine Equalisation Tax Imposition - Excise) Act 1999;
•	A New Tax System (Wine Equalisation Tax) Bill 1999; 
•	A New Tax System (Wine Equalisation Tax Imposition - Customs) Act 1999; and
•	A New Tax System (Wine Equalisation Tax Imposition - General) Act 1999.
12.4	The purpose of a taxation RIS is to examine implementation options arising from a Government policy decision. Accordingly, the RIS is based on the policy design of the WET, outlined below, and focuses on the best ways to implement the policy within the policy objectives.
12.5	The implementation of the WET will occur against the background of the removal of WST and the implementation of the GST.
Implementation of policy
12.6	The tax is levied at the wholesale level, with tax being paid on the value of the goods at the last wholesale sale. Levying the tax on the wholesale value achieves the relative price impacts on cask and bottled wine outlined in ANTS.
12.7	The WET policy objectives can only be implemented by carrying across the appropriate liability provisions of the WST as they are applicable to wine. This will ensure that the principles underlying the WET are familiar and concepts underlying the legislation well accepted.
Quotation
12.8	A quotation system is required to ensure that WET is only paid on the last wholesale sale, in line with the policy decision in ANTS. The Australian Business Number registration system will be used as the basis for quotation for the WET.
12.9	Quoting for WET‑free purchases has been aligned with the treatment for GST‑free supplies. The WST concept of exempt persons being eligible to purchase wine WET‑free is not consistent with the GST concept of the GST‑free supply of goods. Continuing a separate institution‑based quotation system developed under the WST is not required for a wholesale level tax on one product only.
12.10	The WET will be integrated with the registration requirements for the GST. This will be simpler and more consistent for business.
Assessment of impacts (costs and benefits)
Impact groups
Business
12.11	The WET continues taxable value and quoting concepts that businesses are familiar with from the WST. Exports of wine will be WET‑free.
Government Agencies
12.12	The Government will also be affected by this measure, in particular, the Australian Taxation Office (ATO) and the Australian Customs Service (ACS). However, because the WET will utilise the same administration framework as the GST and the WST it is replacing, the net impact of this measure is expected to be small.
Consumers
12.13	Consumers will be relatively unaffected by the WET. The price of wine is expected to increase by around the general price impact of tax reform, ie. 1.9%.
Analysis of costs and benefits
Compliance costs
12.14	The WET carries across the basic structure of the WST so the practical change for taxpayers is minimal and less complex than under the WST. Some changes have been made to the exemption and quoting arrangements to simplify and improve the administration of the WET and make it consistent with the GST.
12.15	Businesses should incur minimal, if any, additional implementation costs for the WET alone, as current WST systems and accounting will accommodate the WET. Businesses that obtain wine WET‑free for GST‑free supply, such as hospitals and providers of religious services, will not have a need for WET accounting systems as there will not be a need to remit WET. 
12.16	The WET will not impose separate payment arrangements on taxpayers as the GST payment arrangements will be utilised. 
12.17	Businesses will be able to claim a credit for the difference between the WET and WST for stock on hand on which WST has been paid. The credit will be offset against their GST liability. Many businesses already undertake an annual stocktake and will not incur any additional cost. 
12.18	Businesses should not incur any additional recurrent compliance costs for the WET. 
Administration costs
12.19	All WET taxpayers are GST payers and will be included in the field coverage for GST.  The WET will cover a relatively small number of substantial entities in terms of turnover etc., and a large number of small manufacturers. The costs that the ATO expects to incur in administering the WET are set out in the following table.
COST TYPE	YEAR (1999/2000 PRICES)	

Business line resource costs
   Salary
   Administrative funds
   Corporate flow-ons
Total administrative costs	1999-2000
$000

$700
$150
$950
$1,800	2000-2001
$000

$700
$150
$950
$1,800	2001-2002
$000

$700
$150
$950
$1,800	2002-2003
$000

$700
$150
$950
$1,800	
Impact on Government revenue
12.20	The revenue from the WET is expected to be similar to collections that would have been made from the WST on wine. The number of taxpayers will be largely unchanged. 
12.21	The measure is expected to raise $595 million in 2000-01; $695 million in 2001-02; and $724 million in 2002-03.
Consultation
12.22	Consultations have been undertaken with the wine industry on factual information required to implement the WET policy as outlined in ANTS.
Conclusion
12.23	The implementation of the WET in accordance with the ANTS policy can only be achieved by a wholesale value tax. The familiar concepts of the WST have been incorporated into the WET to simplify the introduction of the WET to the wine industry. The opportunity has been taken to incorporate quotation for the WET within the GST framework.
12.24	The Treasury and the ATO will monitor this measure, as part of the whole taxation system, on an ongoing basis. In addition, the ATO has consultative arrangements in place to obtain feedback from professional and business associations through other taxpayer forums.