ATO warning to wine sector

THE Australian Tax Office has fired a warning shot at Australia's wine industry, cautioning growers, producers, wholesalers and retailers to act legitimately in light of the examination of two specific tax arrangements.

Last week, Tax Commissioner Michael D'Ascenzo said the ATO was examining two arrangements, one that attempted to reduce the amount of wine equalisation tax (WET) paid and another that involved claiming the WET producer rebate.

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

The WET is usually charged at 29 per cent of the final wholesale price of wine.

But when an indirect marketer is employed, a half retail price method can be used to calculate a significantly lower WET.

ATO deputy commissioner Tim Dyce explained this method was completely legitimate and when there was a very low mark up on wine it could result in a lower amount of tax being paid.

But, he emphasised that there were a limited number of companies whose operations were currently being investigated.

While he couldn't identify any specific organisations he did highlight that the estimated tax savings are very significant.

"I can't give you exact figures because we're still getting to the bottom of it but it's certainly in the millions," Mr Dyce said.

"And at this stage it's not widespread, it's certainly confined."

There have been reports Woolworth's discount liquor stores Dan Murphy's set up a wholesaler or indirect marketer within its distribution chain to access the half retail price method.

Woolworth's spokesperson Luke Schepen said his company was still assessing the alerts. "What we're doing is giving a very early warning shot," Mr Dyce said.

"There are some ways of doing this that we are not happy about."

Wine Industry Association of WA president John Griffiths is concerned the government would remove the WET producer rebate.

"If the WET rebate is removed it will destroy the Australian wine industry as the majority [of producers] would claim all of the WET back," Mr Griffiths said.