Aussie winemakers urge government to cork $99 million tax loophole for overseas producers

Australian winemakers are calling for the federal government to close a tax loophole that has allowed New Zealand winemakers to receive close to $100 million in rebates between 2005 and 2012.

As the Australian winemaking industry bands together to find new ways to get their wines into the homes of Australian consumers, members of the sector have spoken out about the “abuse” of the wine equalisation tax rebate, which was originally designed to assist regional winemakers.

The wine equalisation tax rebate is a value-based tax on the last wholesale price of wine. Producers can receive a rebate of up to $500,000.

The rebate was originally designed to support small Australian producers, but The Australian reports New Zealand winemakers received $99 million from the rebate between 2005 and June 2012.

In 2011-12, 205 New Zealand claimants received $25 million from the rebate, a $4 million increase from the year before.

New Zealand producers are able to access the rebate as a result of close economic ties between Australia and New Zealand. However, The Australian reports winemakers in other countries may also be eligible for the rebate if they register for GST in Australia.

John Angove from Angove Family Winemakers in South Australia told SmartCompany the rebate has been “very widely abused” in recent years, with New Zealand producers in particular taking advantage of the rebate.

“It’s unfortunate our competitors are getting the benefit of something that was initially targeted at the Australian winemakers in regional areas,” says Angove.

“From a commercial point of view, the rebate has been absolutely essential to the survival of some Australian wineries,” he says.

But Angove, who is an executive councillor of the Winemakers Federation of Australia (WFA), says it appears the ATO is now “picking up on the abuse”. “It needs to be tidied up and head back to what it was originally designed for,” he says.

Peter Gniel, general manager of government affairs for WFA, told SmartCompany the federation has been working on a plan to ensure the Australian wine sector “maintain[s] its global competitiveness … [and] to boost profitability led by a step-up in global marketing and promotion of Australian wine”.

“This plan recommends responsible reform to the rebate to ensure it continues to deliver its original policy intent of supporting small and medium wine businesses and regional communities,” says Gniel.

“These measures include stopping New Zealand winemakers from claiming a rebate of up to $500,000 every year for the wine they sell in Australia,” he says.

Gniel says closing the loophole would provide savings of at least $25 million, which could then be put towards promoting local wines.

“The federation will continue to work with government on developing a responsible wine tax reform package that will help the industry during a difficult period of transition and recovery,” says Gniel.