Private ruling: Wine equalisation tax (WET) – wine product classification, fruit or vegetable wine
Date of advice: 6 December 2018
Published: March 2019
Ruling period: 1 January 20XX to 31 December 20XX.
Date scheme commenced: 1 January 20XX

Ruling: Q1: Is your alcoholic fruit beverage a ‘fruit or vegetable wine’ for the purposes of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)? | A1: Yes

Relevant facts and circumstances: You are registered for goods and services tax (GST) and wine equalisation tax (WET). You plan to purchase fresh and concentrated fruit juices from third parties to produce a fruit beverage with an alcoholic content between 8% and 8.25% alcohol by volume. No alcohol, flavours or colours will be added to the beverage. The fresh juices will be made from 100% crushed fruit and may have undergone filtration to reduce the acidity. The frozen concentrates will have undergone a process to remove water from the juice, prior to being frozen. The concentrates will be reconstituted by adding only water. You will combine and ferment 80% various fruit juices, with 20% sugar, yeast and additives such as sulphites (SO2) and citric acid. The additives are to prevent oxidisation and assist with clarification and stabilisation. The added sugar will be fully fermented as part of the process. Further fruit concentrate will be added in the same proportions previously used to reduce the alcohol content by volume. The product will then be subject to fining, filtration, carbonation, bottling and pasteurisation. This should produce a beverage of: ● 62% fermented fruit juice; ● slightly less than 30% fresh and concentrated fruit juices; ● 8% alcohol by volume; and ● less than 0.05% additives. The residual sugar content of the fermented and unfermented fruit juices will be 5% of the final product. Assumptions The fresh and concentrated fruit juices purchased from third parties have not been subject to any process, or had any substance added that; ● gives them colour or flavour; or ● would cause them to no longer be products derived solely from fruit.

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 31-4, | A New Tax System (Wine Equalisation Tax) Regulations 2000 regulation 31-4.01,and | Australia New Zealand Food Standards Code, Standard 2.7.3-2

Reasons for decision: Summary: Section 31-1 of the WET Act states that wine means any of the following: a) grape wine; b) grape wine products; c) fruit or vegetable wine; d) cider or perry; e) mead; f) sake. However, wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol. Each of the above headings is further defined in the WET Act. Having regard to these definitions, your product falls for consideration as a ‘fruit or vegetable wine’ under section 31-4 of the WET Act and the requirements specified in regulation 31-4.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations). Taking into account the requirements of both the WET Act and the WET Regulations, a fruit or vegetable wine is a beverage that: ● is the product of the complete or partial fermentation of the juice or must of: ● fruit or vegetables; or ● products derived solely from fruit or vegetables; and ● has not had added to it, at any time, any ethyl alcohol from any other source, except grape spirit or neutral spirit, as specified in the WET Regulations; and ● has not had added to it, at any time, any liquor or substance that gives colour or flavour (other than grape spirit or neutral spirit as specified in the WET Regulations); and ● contains between 8% and 22% (inclusive) of ethyl alcohol by volume or if grape spirit or neutral spirit has been added, contains between 15% and 22% (inclusive) of ethyl alcohol by volume as specified by the WET Regulations. In order for us to determine whether your product is a fruit or vegetable wine for the purposes of the WET Act and the WET Regulations, we need to consider whether your product meets the requirements listed above. To manufacture your product you ferment various fruit juices, which are all the juice of fruits. During fermentation, 20% or less of the total product is added sugar which is fermented along with the natural sugars contained in the juice. The Commissioner accepts that it is common practice for sugar to be added in the ordinary course of winemaking despite not being explicitly allowed under the legislative definitions. In ATO Interpretive Decision ATO ID 2003/951 Excise Addition of sugar to fruit wine, the Commissioner is of the view that: “The sweetness of a wine is not part of the flavour description of the wine (i.e. the style). Sweetness determines the type of wine rather than the style of wine.” “As the wine industry does not recognise that sugar contributes to the flavour of wine and taking into account the differentiation between sugar and flavour in the Food Standards Code, it is considered that sugar is not a substance that gives flavour within the terms of the definition of a ‘fruit or vegetable wine’. Accordingly, sugar added to a fruit or vegetable wine will not preclude the wine from being subject to WET provided the other conditions for classifying wine as a ‘fruit or vegetable wine’ are met.” The amount of sugar in your product relative to the fermented fruit juice means that the sugar is properly described as an 'additive' and the end product can still be said to be the product of the fermentation of the juice of fruit. After fermentation, various fruit concentrates are added to the alcoholic fermented juice in the same proportions as previously used. The addition of juice concentrate to your product after fermentation still results in your beverage being the product of the partial fermentation of the juice of fruit or products derived solely from fruit. Further, where the concentrate of the same type and percentage as the initial manufacturing step, it is not considered that a substance has been added that gives colour or flavour. The Commissioner accepts that it is common practice that juice and fruit juice products (such as juice concentrate) may be added to fruit wine during production. Although not binding on the Commissioner, it is instructive to refer to Australia New Zealand Food Standards Code, Standard 2.7.3-2 : “‘fruit wine or vegetable wine’ means; (a) a food that: (i) is prepared from the complete or partial fermentation of fruit, vegetable, grains, cereals or any combination or preparation of those foods; and (ii) is not a wine or a wine product; or (b) such a food with any of the following added during production: (i) fruit juice and fruit juice products; …” Throughout the winemaking process, you add in small amounts of additives (such as yeast and fermentation aids) for the purposes of facilitating the fermentation process. These additives comprise less than 0.05% of the total product. The Commissioner does not consider that these additives are substances that give colour or flavour to your product. The Commissioner considers that sugar, yeast and water are not substances that add colour or flavour for the purposes of classifying a beverage as a fruit or vegetable wine under the WET Act. Additionally, the process of carbonation is an accepted winemaking process and will not preclude your product from being considered to be fruit or vegetable wine for the purposes of the WET Act. According to the information provided, your alcoholic fruit beverage meets the definition of fruit or vegetable wine for the purposes of the WET Act.