02/04/2009 - 10:07

ATO warns wine sector of tax loophole

02/04/2009 - 10:07

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The Australian Tax Office has issued a warning to the wine industry about attempts to reduce the amount paid under the wine equalisation tax (WET).

The Australian Tax Office has issued a warning to the wine industry about attempts to reduce the amount paid under the wine equalisation tax (WET).

Tax Commissioner Michael D'Ascenzo has warned the Office is examining two arrangements that try to lower the amount paid under the tax, or to claim 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.

Under one arrangement, a wine retailer uses a marketer to buy wine from suppliers in an effort to reduce their WET liability.

"The wine retailer then sells the wine through its retail outlets as an agent for the marketer," the ATO said in a statement.

"The marketer calculates the liability for WET using the half retail price method rather than on the wholesale selling price which results in a lower tax liability."

The other arrangement involves grape growers entering a contract with a winemaker to convert their produce into wine.

Under the contract, the grower retains the rights to the produce until the wine is sold through a pre-arranged sale to the winemaker.

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

"Taxpayers who have entered into such an arrangement who disclose their involvement to the Tax Office before they are contacted for an audit will be entitled to a reduction in any penalties that may apply."

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