Private ruling: Wine Equalisation Tax
Published: November 2013
Ruling period: 2013-14 income year
Date scheme commenced: 1 July 2013

Ruling: Q1: Are your products classified as grape wine products as per section 31-3 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) and therefore subject to wine equalisation tax? | A1: Yes.

Relevant facts and circumstances: You are registered for goods and services tax and for wine equalisation tax (WET). You manufacture product one and product two. You purchase low alcohol high sugar wine (LAHSW) from a third party with between 1.15% and 22% by volume of ethyl alcohol. There are no colours or flavours added to the LAHSW. You also purchase low sugar grape juice (LSJ) from various third parties. There are no colours or flavours added to the LSJ and it does not contain any ethyl alcohol. The production method of both product one and product two is as follows: • Warm the LAHSW to allow re-fermentation to commence naturally or add yeast to re-activate fermentation. • Combine the LAHSW with LSJ and ferment to greater than 8% by volume of ethyl alcohol. This produces a base wine product. • The base wine product is then racked and filtered. • Combine unfermented LSJ with a flavour additive. The flavour additive contains grape spirit as a flavour carrier. • Add the unfermented LSJ and the flavour additive to the base wine product. • Product one and product two are again filtered and then bottled. • The final composition of product one and product two is: n Greater than 70% base wine product n Less than 5% unfermented LSJ, and n Less than 5% flavour and various other additives. • Product one and product two will contain between 8% and 22% by volume of ethyl alcohol. There is no other grape spirit or any other form of ethyl alcohol added to either product one or product two.

Relevant legislative provisions: A New Tax System (Wine Equalisation Tax) Act 1999 section 31-1 | A New Tax System (Wine Equalisation Tax) Act 1999 section 31-2 | A New Tax System (Wine Equalisation Tax) Act 1999 subsection 31-2(1) | A New Tax System (Wine Equalisation Tax) Act 1999 subsection 31-2(2) | A New Tax System (Wine Equalisation Tax) Act 1999 section 31-3 | A New Tax System (Wine Equalisation Tax) Regulations 2000, Regulation 31-2.01 | A New Tax System (Wine Equalisation Tax) Regulations 2000, Regulation 31-3.01

Reasons for decision: Summary: Wine is defined in section 31-1 of the WET Act as meaning, grape wine, grape wine products, fruit or vegetable wine, cider or perry, mead and sake and does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol. Each of these beverages is then further defined in the WET Act. Grape wine product is defined in section 31-3 of the WET Act and is subject to certain requirements as specified in regulation 31-3.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations). Accordingly, grape wine product is a beverage that: • contains at least 70% grape wine • has not had added any ethyl alcohol from any other source, except grape spirit or alcohol used in preparing vegetable extracts • contains between 8% and 22% inclusive of ethyl alcohol by volume, and • has not had added to it the flavour of any alcoholic beverage other than wine. Grape wine is defined in section 31-2 of the WET Act and is subject to certain requirements as specified in regulation 31-2.01 of the WET Regulations. Subsection 31-2(1) of the WET Act provides that grape wine is a beverage that is the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. Subsection 31-2(2) of the WET Act provides that a beverage will not cease to be the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes merely because grape spirit, brandy or both grape spirit and brandy have been added to it. However, regulation 31-2.01 of the WET Regulations provides that a beverage will not be grape wine where it contains more than 22% by volume of ethyl alcohol. To produce product one and product two, you blend LAHSW with LSJ and allow fermentation to take place. This produces a base wine product, which comprises greater than 70% of the total volume of each product. As the base wine product is the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes and does not contain more than 22% by volume of ethyl alcohol, it is considered to be grape wine and therefore the requirement for product one and product two to contain at least 70% grape wine has been met. You also add various flavours to product one and product two, which all contain grape spirit. Other than the grape spirit contained in these flavours, there is no ethyl alcohol added to either product one or product two. Based on the facts, we do not consider the flavours added to your products to be the flavour of any other alcoholic beverage and therefore the addition of the grape spirit based flavours to both products does not preclude the products from being grape wine products. As product one and product two contain between 8% and 22% by volume of ethyl alcohol, product one and product two are therefore classified as grape wine products under section 31-3 of the WET Act and are therefore subject to WET.

This notice must not be taken to imply anything about: | • the binding nature of the private advice issued to the applicant | • the correctness of other edited versions. | Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply law in other cases.