Private ruling: Classification of a wine based product
Published: January 2013
Ruling period: 1 July 2012 to 30 June 2013
Date scheme commenced: Not applicable

Ruling: Q1: Is the wine based product that you will use in the production of certain beverages a 'wine' for the purposes of Subdivision 31-A of the A New Tax System (Wine Equalisation Tax) Act 1999 (the WET Act) and therefore subject to WET? | A1: No | Q2: Is the wine based product that you will use in the production of certain beverages an 'other excisable beverage' for the purposes of the Excise Act 1901 (the Excise Act) and therefore subject to excise? | A2: Yes

Relevant facts and circumstances: 1. You intend on using a wine based product (your product) in the production of certain beverages. 2. The recipe of your product is as follows: a. Combine fruit concentrate syrup to reverse osmosis water. 3. Your product contains less than 8% alcohol. 4. The reverse osmosis process is as follows: a. Wine is introduced into the reverse osmosis plant, which separates out a stream of wine derived water (reverse osmosis water) from the other components of the wine b. The wine derived water is then passed through another set of membranes, which extracts the alcohol from the wine derived water c. The final extracted alcohol, is then mixed with pure filtered water. 5. It is only the reverse osmosis water, being the permeate stream, that is used in the manufacture of your product. 6. The wine used in the manufacture of the reverse osmosis water is table wine that has been produced from fresh grapes and it will not be distilled. 7. Your product is also not distilled. 8. The fruit concentrate syrup contains no alcohol. 9. There is greater than 70% of reverse osmosis water in the final product.

Relevant legislative provisions: A New Tax System (Wine Equalisation Tax) Act 1999 Subdivision 31-A | A New Tax System (Wine Equalisation Tax) Act 1999 Section 5-5 | 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 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 | Excise Act 1901 | Excise Tariff Act 1921 Schedule

Reasons for decision: Summary: No, your product is not a wine and is therefore not subject to WET. | Detailed Reasoning - 1. Classification of your product under the WET Act: Section 5-5 of the WET Act imposes a liability to WET on specified dealings with wine. 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% alcohol by volume. Each of these beverages are then further defined. Having regard to these definitions, your product falls for consideration as either grape wine or a grape wine product. | Detailed Reasoning - Grape wine: Grape wine is defined in section 31-2 of the WET Act. Section 31-2 of the WET Act states: (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. Regulation 31-2.01 of A New Tax System (Wine Equalisation Tax) Regulations 2000 states that a beverage mentioned in paragraph 31-2(1)(a) of the WET Act must not contain more than 22% by volume of alcohol. The primary statement in the definition of grape wine is that the beverage is the product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes. The other parts of the definition are subsidiary, as they only qualify that statement. When wine is passed through a reverse osmosis process, it is split into two streams called the permeate stream (reverse osmosis water) and the retentate stream. Both streams contain alcohol and both streams are usually accepted by the ATO as being grape wine, as long as the stream contains more than 1.15% alcohol. In any case, both streams are considered to be products derived solely from the complete or partial fermentation of fresh grapes. Your product will be manufactured by combining fruit concentrate syrup with reverse osmosis water. The wine used in the manufacture of the reverse osmosis water is table wine that has been produced from fresh grapes. Although the reverse osmosis water itself is considered to be grape wine for the purposes of the WET Act, the addition of fruit concentrate syrup to your product means that your product is not the product of the complete or partial fermentation of fresh grapes or the complete or partial fermentation of products derived solely from fresh grapes. Your product is therefore not grape wine as defined in section 31-2 of the WET Act. | Detailed Reasoning - Grape wine product: Grape wine product is defined in section 31-3 of the WET Act. Section 31-3 of the WET Act states: Grape wine product is a beverage that: (a) contains at least 700 millilitres of *grape wine per litre; and (b) has not had added to it, at any time, any ethyl alcohol from any other source, except: (i) grape spirit; or (ii) alcohol used in preparing vegetable extracts (including spices, herbs and grasses); and (c) contains at least 8% by volume of ethyl alcohol, but not more than 22% by volume of ethyl alcohol; and (d) complies with any requirements of the regulations, made for the purposes of section 31-8, relating to grape wine products. In regards to grape wine products, regulation 31-3.01 states: (1) For paragraph (d) of the definition of grape wine product in section 31-3 of the Act, this regulation prescribes requirements for grape wine products. (2) A grape wine product must not have added to it the flavour of any alcoholic beverage (other than wine), whether the flavour is natural or artificial. (3) The ethyl alcohol used in preparing vegetable extracts, mentioned in subparagraph (b)(ii) of the definition: (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. Paragraph 31-3(a) of the WET Act requires that a grape wine product contain at least 700 millilitres (or 70%) of grape wine per litre of product. As your product is comprised of greater than 70% reverse osmosis water (as outlined earlier, reverse osmosis water is considered to be grape wine) this requirement has been met. Paragraph 31-3(b) of the WET Act requires that no ethyl alcohol from any other source, except grape spirit or alcohol used in preparing vegetable extracts, be added to the product. As the fruit concentrate syrup does not contain alcohol, the addition of the syrup does not exclude your product from being a grape wine product under paragraph 31-3(b) of the WET Act. Paragraph 31-3(c) of the WET Act requires that the grape wine product contain at least 8% by volume of ethyl alcohol but not more than 22%. As your product will contain less than 8% by volume of ethyl alcohol, this requirement has not been met. Your product is therefore not a grape wine product as defined in section 31-3 of the WET Act. Your product is therefore not a wine for the purposes of Subdivision 31-A of the WET Act and is not subject to WET. | Summary: Yes, your product is an other excisable beverage and is therefore subject to excise. | Detailed Reasoning - Detailed reasoning: The Schedule to the Excise Tariff Act 1921 (Excise Tariff Act) defines an 'other excisable beverage' as any beverage containing more than 1.15% by volume of alcohol, but not beer, wine or brandy. As outlined previously, your product is not a 'wine' as defined in the WET Act. Your product is also not a 'beer' or 'brandy' as defined in the Schedule to the Excise Tariff Act. An other excisable beverage is classified as either: · an other excisable beverage not exceeding 10% by volume of alcohol, or · an other excisable beverage exceeding 10% by volume of alcohol. Other excisable beverages not exceeding 10% by volume of alcohol generally include: · pre-mixed spirit based drinks, and · fermented products that are not beer or wine. The Macquarie Dictionary defines beverage in the noun form as: any kind of drink, other than water, especially a hot drink or an alcoholic drink. A drink, as a noun, is defined as: 9. any liquid which is swallowed to quench thirst, for nourishment, etc.; a beverage. | Detailed Reasoning - 10.: a. alcoholic beverages. b. a measure of an alcoholic beverage. Accordingly, a beverage for excise purposes is a drink that contains alcohol that may be swallowed. Your product is therefore a beverage. As your product contains more than 1.15%, but not more than 10%, by volume of alcohol, your product is classified under the Schedule to the Excise Tariff Act as an other excisable beverage not exceeding 10% by volume of alcohol. Excise is payable on your product at tariff item 2 of the Schedule to the Excise Tariff Act. As of 1 August 2012, the rate of excise payable on your product under the classification 'an other excisable beverage not exceeding 10% by volume of alcohol' is $75.17 per litre of alcohol. There will be new excise rates that apply from 1 February 2013.

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