Wine equalisation tax rebate

Budget Review 2016–17 Index

Rob Dossor

Wine is taxed differently to other alcoholic beverages in Australia. It has its own tax, the Wine Equalisation Tax (WET).[1] The WET is imposed at the rate of 29 per cent on the wholesale value of wine.[2] All other alcoholic beverages are taxed on their alcohol content.[3] This generally makes the tax on wine, on a ‘standard drink’ basis, less than other alcoholic beverages.[4]   

The WET is designed to be paid at the last wholesale point of sale, which is usually the sale by the wholesaler to the retailer.[5]

The WET is also unusual due to the large, widely available rebate for eligible wine producers. [6] Eligible producers must:

  • manufacture the wine from grapes, other fruit, vegetables or honey they produce or purchase
  • provide the grapes, other fruit, vegetables or honey to a contract winemaker to be made into wine on their behalf or
  • subject their wine to a process of manufacture —for example, manufacturing finished wine from raw wine, or blending wines to make a commercially distinct wine.[7]

Exported wine is now liable for the WET.[8]

Producers can currently claim a rebate of up to $500,000.[9] The rebate is estimated to have cost the budget $330 million in 2016.[10]

Some commentators are concerned that the WET rebate is being rorted.[11] The ATO has conducted a number of investigations into rorting but no changes to the rebate have been made (other than to increase the rebate level).[12]

In March 2015 the Government released the Re:think tax discussion paper.[13] Several submissions to the discussion paper called for reforms to the WET rebate (as well as the WET generally).[14] In August 2015, the Government released the Wine Equalisation Tax Rebate discussion paper which sought to ‘better inform discussion and analysis of the WET rebate as part of the Tax White Paper process and ongoing government policy development’.[15]

Criticisms of the WET rebate

The Winemakers Federation of Australia (WFA) is a vocal critic of the WET rebate and calls for it to be reformed.[16] The WFA is concerned that the WET rebate is compromised ‘on three fronts’, including:

  • the ability of brokers, intermediaries and uncommercial arrangements to access the entitlement
  • the role of the rebate in delaying the correction of the supply/demand imbalance by underpinning the conversion of uncommercial grapes into bulk wine and ultimately low-equity cleanskins and home brands and
  • the ability of New Zealand entities to access the entitlement on unfair preferential terms. [17]

The WFA made a number of recommendations including:

  • that the rebate should stop going to unintended recipients
  • remove the eligibility of bulk and unbranded wine to gain access to the WET rebate over four years
  • abolish the application of the scheme to New Zealand producers and
  • encourage consolidation by introducing transitional rebate measures to allow the second rebate on mergers of two businesses entitled to the rebate. [18]

Senate inquiry

A Senate inquiry into the Australian grape and wine industry was established in March 2015 to look into, among other things, the impact and application of the WET rebate on grape and wine industry supply chains.[19] The Committee heard evidence from a large number of sources that the WET rebate is working against the profitability of the Australian wine industry and agreed that reform is urgently required.[20]

In its report, the Committee agreed that widespread rorting and misapplication of the WET rebate was also taking place.[21] The Committee recommended ‘that the Government phase out the current [WET] rebate over five years, allocating the savings to a structural adjustment assistance program for the industry including an annual grant to genuine cellar door operators to support their continued operation’.[22]

2016–17 Budget changes

The WET rebate measures announced in the 2016–17 Budget are modest. They will:

  • reduce the WET rebate cap from $500,000 to $350,000 on 1 July 2017, and to $290,000 on 1 July 2018.
  • better target assistance and reduce distortions in the wine industry and
  • provide $50 million over four years to the Australian Grape Wine Authority (AGWA) to promote tourism within Australia, and Australian wine overseas. [23]

Importantly, the WET rebate changes will tighten eligibility criteria, making it a requirement that producers must either own a winery or have a long-term lease over a winery, and sell packaged, branded wine domestically.[24] It is estimated that these measures will have a $250 million gain to the budget over the forward estimate period.[25] Amendments will be required to legislation to give effect to the change in the WET rebate cap and the eligibility criteria.

The Government says it will prioritise the introduction of additional WET rebate integrity measures.[26] No further details are available around the proposed changes at this stage.

[1].          Australian Taxation Office (ATO), ‘Wine Equalisation Tax’, ATO website.

[2].          Ibid.

[3].          ATO, ‘Excise rates for alcohol’, ATO website.

[4].          A Mitchel, ‘The case builds for alcohol tax reform’, The Financial Review, 30 June 2014, p. 26.

[5].          ATO, ‘Wine Equalisation Tax’, op. cit.

[6].          ATO, ‘Producer rebate’, ATO website.

[7].          Ibid.

[8].          ATO, ‘Wine Equalisation Tax’, op. cit.

[9].          Ibid.

[10].       Treasury, Tax Expenditures Statement 2015, Canberra, January 2016, p. 102.

[11].       P Dutton (Minister for Revenue and Assistance Treasurer), Government introduces further improvements to the tax system, media release, 25 May 2006; and S Evans and E Tadros, ‘Policy to investigate wine tax rorts’, Australian Financial Review, 1 February 2014, p. 4.

[12].       Ibid.

[13].       Australian Government, ‘Re:think: tax discussion paper’.

[14].       R Dossor, ‘Wine taxation’, Flagpost, Parliamentary Library blog, 3 August 2015.

[15].       Australian Government, ‘Wine equalisation tax rebate’, discussion paper, August 2015, p. 1.

[16].       C England, ‘Wine rebate’s bad taste: industry fears over WET ‘exploitation’’, Adelaide Advertiser, 16 January 2016, p. 65.

[17].       Wine Federation of Australia and Wine Grape Growers Australia, Submission to wine equalisation tax rebate, discussion paper, September 2015, p. 3.

[18].       Ibid.

[19].       Senate Rural and Regional and Affairs and Transport Committee, Inquiry into the Australian grape and wine industry, The Senate, Canberra, February 2016, p. 1.

[20].       Ibid., p. 34.

[21].       Ibid.

[22].       Ibid.

[23].       Australian Government, Budget measures: budget paper no. 2: 2016–17, 2016, p. 43.

[24].       K O’Dwyer (Minister for Small business and Assistance Treasurer) and A Ruston (Assistance Minister for Agriculture and Water Resources), Wine equalisation tax rate–improving integrity and growing exports, media release, 3 May 2016.

[25].       Australian Government, Budget paper no. 2: 2016–17, op. cit., p. 43.

[26].       Ibid.


All online articles accessed May 2016. 

For copyright reasons some linked items are only available to members of Parliament.

© Commonwealth of Australia

Creative commons logo

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to

This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.