From October 1 last year, something very important happened to the Australian wine industry. Ever since the first 10% wholesale tax was applied to Australian wine in 1983, Australian governments have viewed the wine industry in much the same way that a pagan high priest might contemplate a fatted calf. But from October 1, more than 1700 Australian wineries actually became eligible for some very significant tax relief. Until October 1, all Australian domestic wine sales were subject to a 10% Goods and Services Tax (GST), on top of which there exists the rather inappropriately named 29% Wine Equalisation Tax (WET). As of October 1, WET became exempt for the first A$1 million of domestic sales per winery, which will automatically mean that all bar around 70 of Australia’s 1800 or so wineries are now entirely exempt from WET. Given that the current system is the most punitive in the world and that many of these wineries are operating on an ROI of around 1% or less, the likely savings will mean the difference between survival and bankruptcy for a very large number. The situation facing many small Australian wineries has become so dire that an entirely new and widely pervasive ‘cleanskin’ market has emerged over the last year to trade no-name wines at competitive prices. But, just when the small wineries have made their first successful kill for several lean seasons, the vultures have come a-circling, a mere matter of days after some truth was finally injected into the age-old lie of ‘I’m from the Tax Office and I’m here to help you’. Many on-premise outlets are making a play for ‘their share’ of the rebate. By insisting that the wineries reduce their selling price, these operators are preventing the tax rebate from hitting its mark. Given the present surplus of wine, it will take a brave – and possibly foolhardy – wine producer not to succumb to the threats now being delivered. While others are queuing to take their hard-fought place on the wine lists, any winery that suicidally passes on the benefit to the trade is simply delaying an inevitable crisis.
