Wine Equalisation Tax for Client Work

Wine equalisation tax (WET) is a value-based tax designed to fall on the last wholesale sale of wine in Australia. For your client’s BAS, identify each taxable dealing and its taxable value before calculating WET, then support every exemption and credit with records.

What Wine Equalisation Tax Applies to

WET applies to defined wine products, including qualifying imported wine. GST is a separate tax, and a wine transaction can carry both. Beer and spirits fall outside WET and have separate alcohol-duty rules.

The Australian Taxation Office (ATO) lists grape wine, grape wine products, fruit or vegetable wines, cider or perry, mead and sake. These beverages must contain more than 1.15% alcohol by volume and meet their category’s other requirements. A bottle labelled cider does not establish that it meets the WET definition.

Before classifying a product, request its ingredients and production specification, alcohol content and any additions after fermentation. Distinguish grape wine from a grape wine product. The distinction affects the valuation methods available for retail dealings. Use the product definitions in WETR 2009/1 when the specification needs closer assessment.

Ask what the client does with the wine. Production, wholesale distribution, cellar-door sales and bottling purchased bulk wine raise different questions. Obtain GST registration details, purchase invoices and stock movements before treating the sales report as the complete WET record.

Find the Taxable Dealing

Assess the event involving the wine, including a wholesale sale, relevant retail sale or application to own use. Making wine alone does not mean charging WET each time stock moves within the business.

For domestic dealings, WET generally requires the client to be registered or required to register for GST. Imported wine has separate customs treatment and can attract WET even without GST registration. Retain import documents separately from the domestic sales workpaper.

Consider this fictional client chain. A producer makes grape wine, sells some through a distributor and sells the rest at its cellar door.

Event	Assessment in the client file	Evidence to retain
Producer sells to a distributor	A valid quote received at or before sale can exempt this dealing from WET	Sale invoice and the distributor’s approved quote
Distributor sells to a bottle shop	The wholesale sale generally attracts WET unless an exemption applies	Invoice showing WET and any claimed exemption
Producer sells directly at the cellar door	The producer’s retail sale needs a notional wholesale value	Retail sales and the valuation calculation
Producer supplies wine for cellar-door tastings	Own use connected with retail sales needs assessment even without sale proceeds	Tasting quantities and the supported valuation
Bottle shop resells unchanged, WET-paid bottles to consumers	The ordinary retail sale generally adds no fresh WET liability	Purchase invoices showing the earlier WET treatment

A retailer that bottles purchased bulk wine has a different result from one reselling unchanged bottles. The later retail sale can attract WET, with a credit potentially available for WET already borne.

Also compare a distributor’s original purchase quote with its later dealings. A purchaser that declared a future taxable dealing can incur WET if it later exports, sells under quote or uses the wine in manufacture. The later transaction’s usual exemption does not resolve that earlier declaration.

Build the Taxable-Value Workpaper

Calculate WET at 29% of the taxable value required for the particular dealing. For an ordinary arm’s-length wholesale sale, the starting value excludes both WET and GST. GST then applies to the WET-inclusive selling price.

In this fictional wholesale transaction, a GST-registered producer sells wine to a bottle shop without a quote. The agreed wine price is $1,000 before WET and GST. Assume no freight, royalty, discount or other adjustment affects that price.

Workpaper line	Calculation	Amount
Taxable value	Supported wholesale price before both taxes	$1,000.00
WET payable	$1,000.00 multiplied by 29%	$290.00
GST base	$1,000.00 plus $290.00	$1,290.00
GST payable	$1,290.00 multiplied by 10%	$129.00
Invoice total	$1,290.00 plus $129.00	$1,419.00

Incorrect: calculating GST only on $1,000 produces $100 and understates GST by $29. Correct: including WET in the GST base produces $129.

Keep the sales contract beside the invoice. Delivery charges can form part of the wine price, while a settlement discount can reduce it. An agent’s commission deducted from proceeds does not itself reduce the selling price. Assess payments for specific marketing services separately from genuine price discounts.

Match the Method to the Dealing

For a producer’s grape-wine retail sales, the half retail price method uses 50% of the full retail price, including WET and GST. A fictional cellar-door sale of $220 therefore has a taxable value of $110 and WET of $31.90. GST within the $220 sale price is $20.

Grape wine can instead qualify for the average wholesale price method. For the matching vintage and grape variety or blend, wholesale sales must be at least 10% by value of that category’s sales during the tax period. Retain the test and weighted-average calculation, not a single convenient wholesale invoice.

Wine other than grape wine uses the half retail price method for these retail dealings. For a producer’s own use connected with retail sales, retain the normal retail price and quantities used. A distributor’s own use of domestically purchased wine bought under quote instead uses the purchase price excluding GST. Do not copy the producer’s tasting method into that distributor’s file.

Record the dealing category beside each calculation. Support any non-arm’s-length value with an arm’s-length comparison. The ATO’s WET guidance explains the different valuation methods and the treatment of prices and adjustments.

Check Quotes, Credits and the Producer Rebate

A quote supports an exemption only when the purchaser is entitled to quote and the quote is effective for that dealing. An ABN printed on an invoice is insufficient evidence by itself.

Check the following before relying on a quote:

1. Confirm the purchaser is GST-registered and has a quoting ground. Grounds include intended wholesale resale, qualifying manufacture or a GST-free supply. Mainly wholesale businesses have an additional resale ground.
2. Retain the approved form with the purchaser’s ABN, both entities’ details and the authorised person’s details, signature and date. Tie it to the wine purchased.
3. Establish that the quote was given at or before the dealing. For a periodic quote, check its coverage and expiry. Its maximum period is one year.
4. For a quote to a producer, inspect the declaration about the purchaser’s intended later dealing. Match any notified change of intention to the purchase concerned.
5. Check whether the supplier bought the wine at a WET-inclusive price. In that case, the purchaser’s quote cannot exempt the supplier’s onward sale.

If a quote is missing, find the original order records and correspondence. Establish whether a quote actually existed at the required time before treating the sale as exempt. A later document cannot simply be backdated to create that history.

Separate the Credit Grounds

A WET credit needs its own entitlement. Common grounds include overpaid WET, an eligible bad debt or a later taxable dealing involving wine on which WET was already borne. Keep the earlier WET amount, subsequent event and credit calculation together.

Ordinary retail purchase of WET-paid wine does not automatically produce a refundable credit. Exporting WET-paid wine also does not create a general recovery right. For a price-reduction credit, establish the applicable ground and any requirement to refund WET passed on to the buyer.

The producer rebate is a specific entitlement within the WET credit system. For domestic producers, assess producer status and the dealing before calculating a rebate. Simply buying bulk wine and bottling it does not make the client a producer for this purpose.

The eligibility file needs evidence of ownership of source product accounting for at least 85% of the wine’s volume throughout manufacture. It also needs the packaging and branding evidence. Containers must generally be suitable for retail sale and hold no more than five litres, or 51 litres for cider and perry. The required trademark must belong to the producer or an associated entity.

For a sale under quote, inspect the purchaser’s declaration that it will incur WET on a subsequent dealing. A declaration of GST-free sale, onward sale under quote or use in manufacture changes the producer’s rebate entitlement.

The producer rebate cap is $400,000 for the 2026-27 financial year. Associated producers share the cap, so review associations arising at any time during the year and aggregate claims. Use the cap applicable to the dealing’s financial year when reviewing earlier periods.

Keep a rebate schedule separate from other credit grounds. Check prior claims and any other WET credit for the same dealing before including a producer rebate. The presence of WET payable does not establish the rebate entitlement.

Reconcile WET to the BAS

Report WET payable at label 1C and WET refundable at label 1D. Keep those totals separate even when an eligible producer rebate equals the WET payable. GST remains in the GST calculation and reporting.

For the fictional $1,000 wholesale sale, assume the client satisfies every rebate condition and has cap remaining. With no other transactions or adjustments, the workpaper carries $290 to 1C, $290 to 1D and $129 of GST to 1A. Reporting zero at both WET labels would conceal the dealing and its rebate.

Account for WET using the client’s GST cash or non-cash method and corresponding attribution period. Own use is attributed to the period in which it occurs. Separate customs WET from the amounts reported through the domestic BAS to prevent duplicate reporting.

Before reviewer sign-off, complete these checks:

• Tie wholesale and retail sales to invoices, then reconcile stock movements to own-use quantities and other disposals.
• Recalculate taxable values by dealing type and explain differences from sales-account totals. Resolve tax-inclusive prices, discounts and valuation-method differences.
• Match every 1D claim to its credit ground and supporting records. Search prior workpapers for the same invoice or dealing to remove duplicated claims.
• Reconcile the 1C and 1D schedules to the WET accounts and BAS separately. Check the GST amount against the WET-inclusive sales calculation.
• Record who resolved each exception and retain the reviewer’s approval with the final schedules. Keep WET transaction and entitlement records for five years.

The BAS reconciliation covers the control-account reconciliation across the activity statement. Use the BAS preparation checklist for the remaining client records.

A missing quote, unsupported credit or unexplained taxable-value difference needs a recorded resolution before sign-off. Request the specific missing document or correct the treatment, then rerun the affected WET and GST totals.