Private ruling: WET Product Classification
Published: June 2014

Ruling: Q1: Is your product considered wine for the purposes of the WET Act? | A1: No.

Relevant facts and circumstances: • You are registered for goods and services tax (GST) and the wine equalisation tax (WET). • You intend to produce a 'fortified alcoholic beverage' (your product). • You intend to use a variety of wines as a base. • The base wine's alcoholic strength will be within normal alcoholic ranges for wine, depending on the variety and year. • Your product recipe will consist of: • percent base wine; • percent low sugar juice (LSJ) water; and • percent ethanol base (grape spirit) • Both the wine and the ethanol base used were produced through the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. • The wine base will be carbon filtered. • Carbon filtering will be performed at 1-2 grams per litre. • No additional flavours are added. • Once your product has undergone the above process and fortified it will have a final alcoholic strength of xx percent. • Your product does not contain any flavours or additives. • The bottle and label design have not been confirmed.

Relevant legislative provisions: A New Tax System (Wine Equalisation Tax) Act 1999, Subdivision 31-A | A New Tax System (Wine Equalisation Tax) Act 1999, Subsection 31-1(1) | A New Tax System (Wine Equalisation Tax) Act 1999, Subsection 31-1(2) | A New Tax System (Wine Equalisation Tax) Act 1999, Section 31-2 | A New Tax System (Wine Equalisation Tax) Act 1999, Paragraph 31-2(1)(a) | A New Tax System (Wine Equalisation Tax) Act 1999, Paragraph 31-2(1)(b) | A New Tax System (Wine Equalisation Tax) Act 1999, Subsection 31-2(2) | A New Tax System (Wine Equalisation Tax) Act 1999, Section 33-1 | A New Tax System (Wine Equalisation Tax) Regulations 2000, Regulation 31-2.01

Reasons for decision: Summary: Your manufactured product is not considered to be 'grape wine' and therefore does not qualify as 'wine' for the purposes of the WET Act. | Detailed Reasoning - Detailed reasoning: Wine is defined in section 33-1 of the WET Act as having the meaning given by Subdivision 31-A of the WET Act. Subsection 31-1(1) in Subdivision 31-A of the WET Act states that wine means any of the following: • Grape wine; • Grape wine products; • Fruit or vegetable wines; • Cider or Perry; • Mead; • Sake. Subsection 31-1 (2) of the WET Act provides that wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol. Section 31-2 of the WET Act defines grape wine as follows: (1) Grape wine is a beverage that: (a) is the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes; and (b) complies with any requirements of the regulations, made for the purposes of section 31-8, relating to grape wine. (2) A beverage does 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. The regulations referred to in section 31-2 above are the A New Tax System (Wine Equalisation Tax) Regulations 2000 . Regulation 31-2.01 relates to grape wine. It states: For paragraph 31-8(1)(a) of the Act, a beverage mentioned in paragraph 31-2(1)(a) of the Act must not contain more than 22% by volume of ethyl alcohol. The manufacture of your product requires grape wine to undergo carbon filtration in order to create a 'near' clear wine. It will then be fortified with ethanol alcohol and then blended to a LSJ water to reduce the alcoholic strength. The carbon filtering will use between 1 to 2 grams per litre of activated carbon to the white wine. The final alcoholic volume of your product will be xx%. The definition of 'grape wine' is silent on the processes (other than fermentation) that may be used to make wine. Taking a literal interpretation of the provisions, it could be said that any process (other than fermentation) is not specifically allowed. Therefore on a literal reading of the definition, a beverage produced using carbon filtration would not meet the definition of 'grape wine'. However, taking into account the context and underlying intention of the relevant provisions, it is considered appropriate that processes that refine the existing characteristics of a wine will normally be acceptable. Therefore it is acknowledged that some processes other than fermentation may be a necessary part of the traditional grape winemaking process. Such processes may include filtration. However, any such process is only accepted to the extent that the finished product retains the essential characteristics expected of a product that is the result of the complete or partial fermentation of fresh grapes, such as the flavour and aroma compounds. | Detailed Reasoning - Carbon Filtering: You have stated that 1 to 2 grams of activated carbon is added to each litre of white wine base then allowed to settle and filtered off. Information provided to us by the Winemaker's Federation of Australia (WFA) on carbon filtration recommends filtering within the 0.025 to 0.60 grams per litre range to ensure that most of the wine characteristics are maintained. The WFA consider that carbon fining at a rate of 1 to 2 grams would strip much of the characteristics from a wine. Based on this information we assume that the carbon filtering has a significant effect on the colour, aroma and flavour of the base wine. The carbon filtration can be expected to result in a product that is substantially different from a product that could have been produced simply by fermenting grapes. Therefore, the resulting product cannot be said to be the product of the complete or partial fermentation of grapes. Rather, it becomes a product of those further manufacturing steps. Therefore this component (comprising xx% of your final product) is not grape wine. | Detailed Reasoning - Low sugar juice: Low sugar grape juice will make up xx% of the overall beverage being produced. It is produced from crushed grapes that have been subject to a process of vacuum distillation. This process separates the crushed grapes into residual grape concentrate. The condensate is known as low sugar grape juice. This product has neutral characteristics and is effectively colourless, flavourless and odourless. The low sugar grape juice is a product that has as its source fresh grapes and only fresh grapes therefore it is a product derived solely from fresh grapes. However, it has not been subject to any fermentation therefore it is not wine. Therefore this component (comprising xx% of your final product) is not grape wine. | Detailed Reasoning - Grape Spirit: The grape spirit comprising xx% of your final product is also not grape wine. It is no longer the product of the complete or partial fermentation of fresh grapes, it is the product of distillation. Therefore your end product is entirely comprised of products that are not grape wine. It follows that your end product is not grape wine. It is also not a grape wine product. | Detailed Reasoning - Conclusion: Based on the information provided regarding the manufacture of your product, it cannot be said to be the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. Therefore, your product is not considered to be 'grape wine' for the purposes of the WET Act. This product will be classified as an 'other excisable beverage' under the Excise Tariff Act 1921 and subject to excise duty. An excise manufacturer licence is therefore required before you can make this product. Please refer to our website (www.ato.gov.au) for information on how to apply for a licence.

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.