The Good, The Bad and The Ugly

The Good 

Treasurer Scott Morrison delivered the 2016 Federal Budget in Canberra on Tuesday evening this week. Buried deep within the papers was the good news industry leaders have been calling for, for several long years.

(For audio-enhanced reading experience…click play)

Wine Equalisation Tax (WET) Rebate policy will be amended:

  • Bulk and unbranded wine will become ineligible for WET Rebates.
  • The WET Rebate will be retained.  Volumetric Tax will remain on the backburner.
  • Wine Australia will be provided with $50 Million over four years to promote Australian wine overseas and very importantly, for promoting wine tourism within Australia.
  • Tougher anti-avoidance measures will be introduced immediately to help deter multiple rebate claims through artificial business structures.
  • The definition of rebateable wine will be toughened to ensure:
    • at the time of transaction the wine must be fit for retail sale
    • packaged in a container of not more than five litres and
    • be labelled with the brand, owned by or licensed to the producer.
  • The definition of an eligible producer will be tightened.  Indications are that a wine producer must own a winery or, be a long term lessee of a winery and must sell packaged, branded wine domestically.
  • Under the new rules claims for the WET Rebate will apply to all wholesale sales not just cellar door sales.
  • Although New Zealand producers remain eligible, the tightening of the definitions on bulk and unbranded wine will diminish the competitive advantage NZ producers have enjoyed for the past decade.
  • The proposed changes will save the government an expected $250M net over the forward estimates after providing for the $50 Million boost to marketing.

The Bad

  • The new eligibility definitions for rebateable wine and eligible producers will not take effect until July 1, 2019.
  • The reforms announced, include plans to reduce the rebate cap from $500K to $350Kin 12 months and then down to $290K by July 2018.  Industry will continue its dialogue with government in relation to these 2 aspects of the reforms.

On balance, a lot more good points than bad.  It would be churlish to be anything but pleased, albeit that the transition period may seem to be too generous.  Legislative amendments will be necessary.  There will be opportunities for further consultation around any negative or unintended impacts.

And the Ugly

They know who they are.  Seldom seen in the arena, they lurk behind the scenes creating mischief, mayhem and misery for many.  They connive, collude, confuse, confound and corrupt.  Spend any time in the cold, clammy, corridors, coffee shops and cafes of Canberra and you may get a glimpse of them, bagging their pieces of silver.  Look beyond.  Rise above.  Move on.

But why so long coming?

Simple. Winemakers and growers could not, or would not, cooperate. Groundhog Day.

It was way back in 2004/05 the National growers body (Wine Grape Council of Australia) took $100K from the Federal Department of Agriculture to get organised.

For too long, winegrowers’ voices had been overlooked in Canberra. Ask Leo. The $100K was put to work. Arduous consultations were conducted in regions across the country. The upshot was a clear consensus: There must be just one industry body of 6,000+ growers and winemakers to develop policy and advocate for the Australian wine industry. A single industry voice! Surely that would mean better policies, more often.

So what happened? Nothing! The new growers’ outfit remained unrepresentative and un-financial. Membership drooped and the Winemakers Federation remained captive to the myopic minority.

That’s why the WET Rebate reforms have taken four years too long. Successive governments have been confounded by the wine industry’s cacophony of voices.

The $100K mentioned above was granted when the Federal government realised the industry’s planting-incentive policy, that should have ceased in 1999/2000, had lingered for at least four years too long, leading to an unimaginable decade-long oversupply of grapes and wine. Poor policy cost the nation, the industry and regional communities hundreds of millions of dollars. The lost opportunities compounded.

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