Indirect taxes
Wine equalisation tax (WET)
Wine equalisation tax is a 29% tax on the wholesale value of wine sold in Australia, with a producer rebate available to eligible wine makers, and it applies on top of GST.
The wine equalisation tax, known as WET, is a federal tax on the wholesale value of wine and certain wine-based products sold in Australia. The rate is 29% of the wholesale value. It was introduced alongside GST to replace earlier wholesale taxes, and it applies in addition to GST, which is charged at 10% on the sale.
WET applies to wine, and to products such as sparkling wine, fortified wine, cider and perry, as well as some other fermented products. It does not apply to beer or spirits, which are taxed under the excise system instead. It generally applies when wine is sold at wholesale, when it is imported, or when a producer sells directly to the public, for example through a cellar door, in which case the wholesale value is calculated using a notional wholesale price.
The tax is usually payable by the wine maker, wholesaler or importer, depending on where in the supply chain the tax first arises. Registered businesses report WET on their BAS alongside GST. Retailers buying wine from a wholesaler in the normal course generally do not pay WET separately, because it is built into the price they pay. In some cases a business can buy wine free of WET by quoting its ABN and registration details, with the tax then charged later in the chain.
Eligible wine producers can claim a rebate of WET, up to a cap set by legislation. The cap and conditions are subject to change, so check ato.gov.au for current details. The rebate is intended to support smaller producers, and conditions apply, such as having an Australian Business Number, being registered for GST, and meeting requirements about manufacturing the wine. Rebates are claimed through the BAS or through a rebate application, depending on the situation.
WET interacts with GST in a layered way. GST is calculated on the price including WET, so the tax effectively applies to a tax-inclusive base. Registered businesses can generally claim GST credits on purchases of wine for resale, and WET paid on purchases as part of the price is not separately creditable, though in some cases a WET credit may be available for certain transactions, such as exports.
Common mistakes include forgetting that cellar door sales are caught, mixing up WET with excise on beer and spirits, and overlooking the rebate. This is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A registered winemaker sells wine to a retailer at a wholesale price of $10,000 excluding taxes. WET is 29% x $10,000 = $2,900. GST is then charged at 10% on the price including WET, being 10% x ($10,000 + $2,900) = $1,290, if the WET is included in the sale value on which GST applies. The retailer pays $14,190 in total.
Practical tips
- Remember WET is separate from the excise on beer and spirits and applies only to wine and similar products.
- If you make wine, check whether you qualify for the producer rebate and what the current cap is.
- Cellar door and direct sales are generally caught by WET using a wholesale value, so do not overlook them.