Private ruling: Wine equalisation tax (WET) - Classification of grape wine product
Published: December 2013

Ruling: Questions 1 & 2 | Summary | Both your beverages meet the definition of a 'grape wine product' for the purposes of the WET Act.

Relevant facts and circumstances: · You are a winery which produces a fruit flavoured grape wine based beverage · You are registered for WET · You provide grape wine to Entity One who blends it with various flavours (such as lemon, orange etc) to produce two products on your behalf. · The various natural flavours are free of alcohol. · You have supplied the recipes for 1000L of finished beverage: · You provided the following points in support of both products being a grape wine product for the purposes of the WET Act: · more than 70% of grape wine is used for each product; · the product is blended with grape wine; and · final alcoholic strength for each product will be over X% but not more than Y%.

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 31-3 | 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 | Excise Tariff Act 1921

Reasons for decision: Summary: Wine equalisation tax (WET) applies to 'wine' as defined in section 33-1 of the WET Act. Section 33-1 of the WET Act provides that 'wine' has the meaning given by Subdivision 31-A. Subsection 31-1(1) in Subdivision 31-A provides that 'wine' means any of the following (emphasis added): (a) grape wine; (b) grape wine products; (c) fruit or vegetable wine; (d) cider or perry; (e) mead; (f) sake. However, 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. Each of the products set out in subsection 31-1 of the WET Act is separately defined in the WET Act. Of relevance in this case, section 31-3 of the WET Act and Regulation 31-3.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations) provide that a 'grape wine product' is a beverage that meets all of the following requirements: · contains at least 700 millilitres (ml) of grape wine per litre; · has not had added to it, at any time, any ethyl alcohol from any other source, except: 1. grape spirit; or 2. alcohol used in preparing vegetable extracts (including spices, herbs and grass), where the alcohol: (a) must only be used to extract flavours from vegetable matter; and (b) must be essential to the extraction process; and (c) must not add more than one percentage point to the strength of alcohol by volume of the beverage; · contains at least X% by volume of ethyl alcohol, but not more thanY% by volume of ethyl alcohol; and · must not have added to it the flavour of any alcoholic beverage (other than wine), whether the flavour is natural or artificial. | Detailed Reasoning - Product One & Two:: You have advised that the combination of the following ingredients is required to produce 1000 litres of your Product One: · water (%) · sugar (%) · flavour 1 (%) · flavour 2 (%), · flavour 3 (%); and · grape wine (%). You have advised that the combination of the following ingredients is required to produce 1000 litres of your Product two: · water (%) · sugar (%) · flavour 1 (%) · flavour 2 (%) · flavour 3 (%); and · grape wine (%). Subsection 31-2(1) of the WET Act and regulation 31-2.01 of the WET Regulations provide that 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) does not contain more than 22% by volume of ethyl alcohol. Subsection 31-2(2) of the WET Act goes on to provide that 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. However, a beverage will cease to be the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes where it is subjected to a further process such as distillation. You have advised that both products comprised of % grape wine. Therefore, on the facts provided, both products meet the first requirement to be classified as a grape wine product. Section 31-3 of the WET Act provides that a beverage must contain at least 700ml of grape wine per litre (70%) before it will qualify as a grape wine product. Section 31-3 of the WET Act and regulation 31-3.01 of the WET Regulations also require that that ethyl alcohol cannot be added unless it is derived from grape spirit or alcohol used in preparing vegetable extracts. You have advised that your recipe for both products contain non-alcoholic flavours that are free of any ethanol. Based on the new facts provided, both products meet the requirements in subsection 31-3(a) and 31-3(d) for a grape wine product. Lastly, a grape wine product is accepted as being a wine provided that the alcoholic strength is more than X% alcohol by volume (av) and not more than Y% av. Both your products will have a final alcoholic strength within this range which fulfils the definition of grape wine under section 31-2 of the WET Act. According to the information provided, your products meet the definition of grape wine product for the purposes of the WET Act.