Wine producer rebate

Sections CV 3 and CV 4 of the Income Tax Act 2004 and sections 3, 4B and 85J of the Tax Administration Act 1994

Changes to the Income Tax Act 2004 and the Tax Administration Act 1994 will enable Inland Revenue to assist in the extension of the Australian wine producer rebate to New Zealand wine producers whose wine is exported to Australia.

Background

Wine equalisation tax is an Australian tax that is charged on wholesale sales of wine in Australia. New Zealand wine that is exported to Australia is also subject to the wine equalisation tax. The tax is paid in Australia either by wine importers or any other wine wholesalers.

In 2004, Australia passed legislation giving a wine producer rebate to Australian wine producers to partially compensate for the wine equalisation tax. Qualifying Australian wine producers are eligible for a rebate of 29 percent of the wholesale value of wine produced, up to a maximum of $290,000 each year. Since New Zealand producers did not receive a similar rebate, it was considered that New Zealand wine would be commercially disadvantaged in the Australian wine market.

The Australian government therefore agreed to extend the wine producer rebate to New Zealand wine producers selling in the Australian market. It was also decided that New Zealand will assist Australia in the administration of the rebate to New Zealand producers.

To extend the rebate to New Zealand producers, legislative changes were required in both countries. The Australian legislation, extending the wine producer rebate to New Zealand producers, received Royal assent on 19 December 2005.

The corresponding New Zealand changes were added to the Taxation (Urgent Measures) Bill by means of a Supplementary Order Paper.

Key features

New section CV 3 of the Income Tax Act 2004 ensures that the wine producer rebate derived by a New Zealand wine producer is included as income for the purposes of that Act.

New section CV 4 enables the Commissioner of Inland Revenue to prescribe regulations for the administration of the wine producer rebate. The regulations will relate to:

• claiming the rebate;
• approval or verification of a NZ wine producer’s entitlement to a rebate; and
• any other matters necessary to give effect to a provision relating to a wine producer rebate in an agreement between the governments of New Zealand and Australia for the avoidance of double taxation and prevention of fiscal evasion.

For the provisions of the Tax Administration Act to apply to the wine producer rebate, the definition of “tax” in section 3(1) of the Tax Administration Act has been amended to include the Australian wine producer rebate.

New section 4B of the Tax Administration Act governs the application of that Act and regulations to the rights and obligations of a person in relation to the wine producer rebate. The Act and regulations apply to the rights and obligations of a person as if:

• claims for approval by a New Zealand wine producer to be a New Zealand participant were an application for registration for a tax imposed by an Inland Revenue Act;
• claims for payment of a wine producer rebate were an application for a refund of tax imposed by an Inland Revenue Act;
• a decision concerning a person’s entitlement to a wine producer rebate were a decision by the Australian Taxation Office concerning an entitlement of the person to a refund of Australian tax;
• a payment to a person of a wine producer rebate was a refund by the Australian Taxation Office of Australian tax.

New section 85J of the Tax Administration Act overrides the general secrecy provisions to enable the Commissioner of Inland Revenue to transfer information to the Australian Taxation Office and the New Zealand Customs Service. The information transferred will be that which is relevant to the claim by a New Zealand wine producer for a wine producer rebate or for the purposes of the approval or verification of an entitlement to the wine producer rebate.

Application date

These provisions apply from 21 December 2005, the date of assent of the Act.