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May 10, 2013

I’m sure you’re all familiar with the fact that, from 10 December 2012, changes to the wine producer rebate came into effect, writes Grapegrower & Winemaker business columnist Melanie Reddaway.

Producers who buy wine for blending or further manufacture must now reduce the amount of their rebate claim by any earlier amount of rebate attributable to the wine. “Yep, old news,” I hear you saying. Good-oh, I’m not going to bore you with a rehash. However, now that the changes have had a few months to take effect and transactions are starting to filter through to BAS calculations, I thought it might be useful to work through a few points that have come up in my discussions with SME wineries dealing with the real-world application of the changes.

Important point 1 – The vendor must exhaust their claim entitlement first.  I’ve harped on in other columns that gross profit should be calculated exclusive of WET rebate, but it’s still an obvious reality that the price of a bulk wine parcel should be calculated with reference to whether or not there is a producer rebate entitlement claim attached to it. I can foresee small businesses preferring to pay a premium for a parcel they plan to use for further manufacture, provided the vendor notifies them that there is a full entitlement to producer rebate attached to the wine. This is because it will be much easier administratively. It’s shaping up to be a nightmare to keep track of how much producer rebate one should claim. If you top up a parcel of your own wine with a parcel of wine that someone else has already claimed the rebate on, you may need to keep track of that claim through various production stages and several years, before you finally sell off the bottled stock and realise your partial entitlement to the producer rebate.  It would be much simpler to blend your wine with a parcel that has a full rebate entitlement attached to it, and just know that over the next several years, as the resultant bottled product is sold, it is entitled to a full producer rebate. However, at this stage, the ATO is not seeing it this way and has instructed wine producer that they must exhaust their own wine producer rebate entitlement before they start notifying purchasers of wine parcels that they will not claim the producer rebate and therefore the wine has a full entitlement to the producer rebate attached to it.

(Watch this space for a change to this rule — I think this would be a simple way for the ATO to allow the industry to lift some of its administrative burden.)