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The 2016-17 Budget has brought pleasing news of additional funding for the wine industry and a more inclusionary tax scheme for the spirits industry over night. The Government’s decision to lower the WET rebate cap on the other hand has not been met with the same reception, representing a loss of significant funding to wine businesses with investment in regional Australia. This is coupled with disappointment over the Government’s decision not to remove New Zealand producer eligibility from the separate WET rebate; something that “was not an option” according to Wine Grape Growers Australia Chair, Joanna Andrew.
Wine industry receives $50 million in funding
The Government announced that $50 million in funding will be allocated to the Australian Grape and Wine Authority over the next four years from July 1, to promote Australian wine overseas and wine tourism within Australia.
The funding will benefit regional wine producing communities, as well as help increase wine exports and the opportunities available through free trade agreements.
This news comes at an important time for the wine industry, with wine exports up by 13 per cent in the last 12 months; accounting for around 60 per cent of wine produced in Australia.
Wine Australia* Chair Brian Walsh said, “We welcome this initiative and we look forward to working closely with the grape and wine sector to design and implement the $50 million support package to help boost domestic wine-related tourism and export assistance.
“Wine is a unique, high-quality product created in Australia’s 65 wine regions by highly skilled wine grape growers and winemakers. These new measures will help build regional employment and increase the wine sector’s contribution to the Australian economy.”
*Wine Australia is the trading name of the Australian Grape and Wine Authority
Wine equalisation tax
The Government has addressed the wine equalisation tax in the 2016-17 Budget, following growing pressure from the industry for change to the current system.
Initially the Government plans to tighten the eligibility criteria for the rebate. To do so, the WET rebate cap will be reduced from $500,000 to $350,000 on 1 July 2020 and to $290,000 on 1 July 2018.
In addition and from 1 July 2019, wine producers will have to own a winery or have a long term lease over a winery and sell packaged, branded wine domestically to be eligible for the rebate.
While Winemakers’ Federation of Australia (WFA) President has said that removing the claims for bulk and unbranded wine are important drivers to the industry’s restructure, the industry is disappointed that the Government did not accept its recommendation to leave the rebate cap unchanged. The organisation said that the reduction will have an economic impact on businesses with significant investment in regional Australia.
“With only $50 million back in funds for marketing, this reduction needs much greater scrutiny,” WFA said. “It is not clear how the proposed reduction in the cap will aid the industry in its recovery after years of declining profits.”
Mitchell Taylor, Managing Director of Taylors Wines, added that while he is pleased that the Government has finally taken on the task to reform the WET rebate, “it would have been good to see the reforms on bulk and unbranded wine come in immediately and not phased out in July 2019.”
A similar sentiment was given by Chairman of Australia’s First Families of Wine, Robert Hill-Smith.
“AFFW believes that positive intentions for reform and a move to end distortions have been announced, but feels strongly about the opportunity to press Government further for specifics and rigor around enforceable definitions, earlier phase outs on bulk and unpackaged sales and the New Zealand exclusion,” Hill-Smith said. “In many ways, the original intent of the WET rebate seems to have driven outcomes but there is more to go. We are thrilled that significant funds have been made available to grow demand and reputation via Wine Australia but the year one allocation is too small as the time to invest is now. The baseline knowledge on what to do and where has already been established.”
Distillers eligible for excise refund scheme
In a win for distillers, the Government announced that the excise refund scheme will be eligible to producers of whisky, vodka, gin and liqueurs, as well as producers of low strength fermented beverages such as non-traditional cider from 1 July, 2017.
The refund scheme is currently available to breweries and provides a refund of 60 per cent of excise paid on up to $30,000 per financial year.
President of the Australian Distillers Association, Stuart Gregor told drinks bulletin: “The Australian Distillers Association is delighted with the news. This presents a great opportunity for small distillers to reinvest the rebate into their business; to grow their export markets or invest in another staff member, new product development, more barrels or a piece of equipment.
“This also represents the first time that the Government has recognised the distilling industry in as important document as the Budget. It’s terrific.”
The Distilled Spirits Industry Council of Australia (DSICA) also welcomed the changes to the excise refund scheme, but said more needs to be done.
DSICA Chairman, Michael McShane said, “It’s clear that demand for Australia’s high quality products is growing both overseas and at home, however the complexity and unfairness of Australia’s current alcohol taxation system is putting a handbrake on future investment opportunities.
“The Government’s rebate is welcome relief for the industry but there is further opportunity to release the burgeoning distillery industry from its outdated tax burdens and we look forward to the Federal Government’s continued work on wide ranging tax reform in order to see a level playing field for Australia’s spirit producers.
“Alcohol tax reform will strengthen Australia’s growing distilled spirits industry by unshackling up-and-coming market players and promoting industry innovation and investment.”
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