Australia to Drop Tax Rebates on Wine

May 5, 2016 Taxation in Australia

CANBERRA – Cheap wine may be a thing of the past in Australia, as the government steps forward to shut the tap on its controversial WET rebate system.

On May 4th the government of Australia announced that the controversial Wine Equalization Tax (WET) system will soon be reformed to remove unforeseen distortions in the local wine market.

The WET system imposes a tax on 29 percent on the wholesale price of wine and several other types of alcoholic drinks.

Currently, wholesalers of applicable drinks are eligible to receive a rebate of up to AUD 500 000 on the WET paid.

The rebate system has faced heavy criticism, as it has allowed large manufacturers to establish temporary wholesale operations which will trade up to the maximum of the rebate before being wound down and replaced with a new temporary wholesaler.

The rebate system has also led to a distortion in the pricing of wine, with cheap, high-alcohol wines becoming disproportionately abundant.

The influx of cheap wine has also drawn the ire of medical experts who have claimed that the WET rebate system leads to excessive consumption of alcohol.

From July 1st 2017 the amount available for the rebate will be slashed to AUD 350 000, to be further cut to AUD 290 000 in the following year.

Photo By: Martin Howard