THE FEDERAL GOVERNMENT has announced a revised WET rebate and eligibility package, providing clarity before Vintage 2017 begins. The previously announced cut to the cap from $500,000 down to $290,000 will be revised to $350,000 with an additional top up grant of $100,000 also set to be introduced.
The revised eligibility criteria for claiming the WET rebate will become ownership of at least 85 per cent of the grapes at the crusher. The cap changes will also be deferred until 1 July 2018, but revised eligibility criteria will be brought forward to this date. There will also be a new mandatory process to ensure the tax liability has been incurred before the rebate is claimed.
Key changes to the Government’s eligibility criteria to protect the integrity of the WET Rebate scheme:
- Eligible producers must own 85% of the grapes at the crusher used to make the wine, and maintain ownership throughout the wine making process;
- The Rebate is limited to branded packaged wine, in a container not exceeding 5L and branded with a registered trademark for domestic retail sale; and
- The Rebate claims must be better linked to the WET being paid.
The new eligibility criteria will apply from 1 July 2018.
Currently, the WET imposes a 29 per cent tax on wine products, separate to the GST, and the capped rebate is available to wine businesses that create growth and jobs in rural and regional Australia.
Senator Anne Ruston, Assistant Minister for Agriculture and Water Resources, said the package of changes reflects the requests from the grape and wine community “almost to the last decimal point”.
“This is a real demonstration that if people can sit down, consult and listen… you can get to a position where everyone agrees,” Ruston said. “There are lots of things we can do to improve the industry by getting the policy settings right.
“This is a fantastic result and we should use it as an example of what we can achieve.”
Both the Winemakers’ Federation of Australia (WFA) and individual wineries have welcomed the news.
“The wine industry has fought long and hard for reform of the WET rebate eligibility criteria. The consultation process driven by Minister Ruston demonstrated the Government’s willingness to listen to industry concerns and deliver a positive outcome,”
said Tony Battaglene, WFA chief executive officer.
“Today’s decision will put an end to uncertainty and put the industry in a stronger long-term position.
“Growers and winemakers can now start the 2017 vintage with clarity about the WET Rebate. We congratulate the Government on their efforts and look forward to working with them to support our great sector.”
Definitive plans for the $100,000 grant will not be finalised before additional consultation, with plenty of time available before the July 2018 start date.
“The focus will be on rewarding those who’ve made significant investments in their region,” Ruston said.
Bill Downie, Gippsland-based winemaker, said it appeared to be an intelligent package.
“It sounds like the message has been heard,” Downie said.
“Change had to happen and people could accept that – as long as the contributions were equitable across the industry. It wasn’t right the some businesses were looking at a situation where they would have gone from claiming hardly any rebate to not being in business any more.
“It is a great result on face value and honestly, congratulations to Senator Anne Ruston – it sounds like she has done really well.”
Battaglene said the return of integrity to the WET rebate has been the main consideration for the WFA and the measures announced deliver on that need.
“An outcome of a cap at $350,000, combined with the acceptance of industry’s eligibility definitions, and the $100,000 grant scheme, is significantly better than the Budget 2016 outcomes and provides a platform for future growth. The revised eligibility criteria also strengthens the industry by recognising alternative business models including emerging winemakers who are making their start,” Battaglene said.
“WFA is very pleased that the Government has reconsidered its decision to reduce the WET rebate cap to $290,000, today announcing it will maintain the cap at $350,000. This rebate is critical to rural and regional communities and jobs, as well as future investment and growth.
“The announcement of the $100,000 grant scheme, focusing on investment at the cellar door and supporting regional growth is also a very positive outcome for small and medium winemakers and reflects industry calls for a re-focus of investment at the local level.
“Critically, the deferral of the rebate reduction to 1 July 2018 will allow the industry more time to adjust.”
Angus McPherson, Treasury Wine Estates ANZ managing director:
“We welcome the Government’s decision to tighten eligibility for the rebate – to remove bulk and unbranded wine from 1 July 2018, and to target winemakers who have invested in the industry from the crush all the way through to the branded product.”
Helen Strachan, Pernod Ricard Winemakers Legal and Corporate Affairs director:
“These reforms are a necessary first step in WET reform, and will go a long way toward addressing the distortionary impacts of the current rebate. We support a continuing focus on growing export demand for premium Australian wine, and are pleased that the Government has maintained its additional funding to Wine Australia.”
In a joint statement from Treasury Wine Estates and Pernod Ricard Winemakers, the companies acknowledged “the significant work undertaken by the Australian Government, particularly Ministers Kelly O’Dwyer and Anne Ruston, in engaging with the wine industry to find practical solutions to the industry’s concerns about the operation of the Rebate”.
Tom Ward, NSW Wine Industry Association president:
“The changes announced are a very positive outcome for small and medium winemakers and reflects industry calls for a re-focus of investment at the local level. Critically, the deferral of the rebate reduction to 1 July 2018 will allow the industry more time to adjust. The announcement of a grant scheme focusing on cellar doors is also seen as a positive step and we look forward to working with Government to ensure industry continues to benefit.”
Ward also praised the role played by Senator Anne Ruston in driving the consultation process.
“This is a complex issue with the potential to harm the industry.” Mr Ward said. “The announcement today is a good compromise and mitigates the overall impact of the changes on those wineries with investment in cellar Door. Wineries can now go into the 2017 vintage with a higher degree of certainty and confidence.”
Bill Moularadellis, Kingston Estate Wines managing director:
“These long awaited reforms are welcomed and are a win for all sectors of the industry especially for independent growers who do not make and sell bulk wine.”
“Large winemakers will now be motivated to purchase grapes at higher and more sustainable prices, rather than rely in part on bulk wine that had been subsidised by the tax payer at 29% of the combined grape and processing cost. This bulk wine subsidy, which has been in operation for a very long time, has been a debilitating influence on our industry. It has significantly delayed the industry’s recovery and can largely be held responsible for the industry’s failure to respond to the oversupply and fully develop our export potential.”
Moularadellis also applauded the extensive consultation and work by Senator Ruston and her team over a very long period of time to achieve these sensible reforms.
“A real opportunity remains for the future however; to provide a tax policy setting that encourages exports rather than the existing policy which continues to provide a significant motivation and advantage for smaller producers to sell locally via a 29% tax rebate on wholesale packaged wine sales.”
Redmond Sweeny, Wines of WA spokesperson, welcomed the changes which were first revealed through The West Australian newspaper.
“I don’t call it a backdown. I call it doing the process properly,” Sweeney told The West Australian.
WA Senator Dean Smith said the original proposal would have been hugely damaging.
“This is a win for smaller, premium producers who will be expected to drive export opportunities provided by Australia’s new export trade agreements,” Smith said.
“The Government’s decision will be a much fairer deal that will protect jobs and grow economic opportunities across regional WA.”
ORIGINAL INTENT OF THE WET REBATE
The rebate was originally intended to assist smaller producers to remain in business, so that diversity in wine styles is maintained and to secure the positive economic impact of wine enterprises in regional communities. The Explanatory Memorandum to the relevant legislation that introduced the current producer rebate system in 2004 stated, “Around 90% of wine producers will be able to fully offset their WET liability by accessing the new rebate. In particular, small wine producers in rural and regional Australia will benefit significantly…” As summarised by the Australian National Audit Office, the rebate was introduced “in recognition of the substantial financial hardship being faced by small rural and regional wineries and aimed to support their viability and consequent capacity to generate employment and wealth in local communities.”
WET REFORM TIMELINE
- Wine Equalisation Tax rebate reform was set to be rolled out as part of the 2015 Federal Budget;
- At that stage, the case for reforms had been agreed to by the WFA, Wine Grape Growers
- Australia (now Australian Vignerons), Wines of Western Australia, South Australian Wine Industry Association, Wine Tasmania, Wine Victoria, the New South Wales Wine Association and Queensland Wine Industry Association, as well as regions including The Riverland, Riverina and Murray Valley.
- Former Senator Sean Edwards, who is involved in winemaking in the Clare Valley, asked his then Coalition colleagues to reject the united position on reform:
- The reform package was cast aside at the 11th hour;
- Behind the scenes a hastily-organised delegation of industry leaders met with Assistant Treasurer Frydenberg in Canberra but were unable to prevent the budget backflip;
- Reforms were then considered as part of a broader Federal Government tax review;
- Changes to eligibility and reductions in the rebate cap, were then announced with the 2016 Budget;
- The industry was not impressed, with the WFA and WGGA (now Australian Vignerons) releasing a joint statement spoke out against the reforms;
- Senator Anne Ruston led another Federal Government consultation process following the 2016 Budget announcement – which culminated in the announcement of a revised package on 2 December 2016.