Wine industry seeks tax break

THE Western Australian wine industry is united in its commitment to change the current tax system as it relates to wine, according to president of the Wine Industry Association of WA and founder of Leeuwin Estate Winery, Denis Horgan. Industry groups including the Swan Valley and Regional Winemakers Association, The Margaret River Wine Industry Association and the Wine Industry Association of WA are using the Federal election campaign to lobby the two major political parties in an attempt to bring changes to the current tax system.

Principal among the industry’s aims is an exemption from the wine equalisation tax (WET) for the first 600,000 litres of wine sold by wine producers within Australia.

WET is a value-based tax, which is levied at the wholesale level at a rate of 29 per cent. This means the tax is paid on the value of the goods at the last wholesale sale. As a means of assisting small to medium wine producers, a rebate of 14 per cent applies to cellar door sales and mail order sales up to a wholesale value of $300,000 per year. The Federal rebate, combined with the existing State-based subsidy scheme for wine producers of 15 per cent of the wholesale value of cellar door, mail order and Internet sales to unlicensed people, means that wholesale sales up to $300,000 are effectively WET free.

But Howard Bromley, executive officer of the Swan Valley and Regional Winemakers Association and the Swan Valley Marketing Association, believes the current policy makes it uneconomical for small producers to sell wine other than from their cellar doors. Removal of the WET for wineries selling under $600,000 of wine per year is a must, he says.

“Frankly, this WET is pricing Swan Valley and other Australian small to medium producers out of their most important market, that being Australia,” Mr Bromley says. “As a consequence, (WET) is threatening their financial viability.”

He says while the Labor Party’s recent announcement of an exemption of the WET for producers of 50,000 litres of wine was laudable, the level and basis on which the exemption was proposed is flawed, as it is based on production rather than sales.

Mr Horgan says Labor’s release stated that the exemption will be delivered through a tax rebate, indicating the tax would need to be paid and then claimed back.

“This in no way would reduce the very onerous compliance costs associated with the WET,” he says.

“Labor also proposed to cut out the so-called exemption at 50,00 litres, thereby condemning small producers to a poverty trap and provided an enormous disincentive for them to expand beyond that level.”

The WA association believes the exemption should be extended to cover the first 600,000 litres of wine sold within Australia.