No. 64

In this edition

Australian Vignerons Update

The inaugural AGM for Australian Vignerons was held on the 23rd November. There was a moderate turnout, as is often the case, and the statutory business was carried out.  Andreas Clark, the CEO of Wine Australia provided an update of where things are going in regard to marketing, research and development, and also in regard to the Wine Australia “Vinsites” mapping project.  Andreas also raised the notion that with increasing costs of Research and Development, and also the demonstrated need for reliable marketing funding that the current static levy to fund these activities means that a conversation needs to be held about levy reform in the near future.

Despite the unanimous vote of support for the initiative to change from Wine Grape Growers Australia to Australian Vignerons, this is yet to translate into financial support for membership from all states and regions.  At this stage it is the regions of South Australian and Western Australia that have shown the leadership and support to drive Australian Vignerons forward.

It was resolved by the interim board of AV that regions would be the “go-to” source for membership rather than state bodies, for several reasons. The main point of difference across the wine community is between the cool and temperate and the warm in land regions, where there are very large differences in production, processing and market segment of the final product.  The ability for members of the Australian Vignerons Council to vote differently on policy issues or the election of board members may be different along such regional lines.

At the board meeting prior to the AGM it was therefore resolved that regions of South Australia represented on the WGCSA would be members, rather than WGCSA having a block vote encompassing all regions of the state, and not drawing such distinction between the different parts of the industry.  This led to some spirited discussion at the meeting about the suitability of such a move.  It is no different, however, to the previous situation where all contributors under the South Australian Grape Growers Industry Fund (SAGGIF) who had not requested a refund of their contribution were automatically deemed to be members of WGGA.  The transfer of membership to representative organisations rather than individuals is the core difference.  It was also made clear at the meeting that until the selection process is started for the independent board, that this is an interim measure, and the allocation of the proportional votes and membership will remain a work in progress.
The financial situation of AV remains a concern, but there are sufficient funds to remain active for the medium term.

Reform to the WET Rebate

 

The announcement on Friday from the government about the reforms to the WET rebate has broadly been welcomed across the wine industry.  It must be recognised that with an industry as varied and geographically diverse as it is in Australia that the impacts of the WET and of the rebate are also varied.  As a result finding a “one size fits all” national policy is challenging.

The result is likely to satisfy most of the stakeholders in the wine industry. These reforms must be compared not with what was in place before 2016, but with the measures that were announced in the 2016 budget.  The result that was announced on Friday is a significant improvement over what was revealed in the budget papers in early May.

The core points are:

  • The rebate cap will remain at $500,000 for an extra year, and will decrease from July 1 2018;
  • The cap will reduce to a maximum of $350,000, not $290,000 as previously planned;
  • There is potential for businesses exceeding the $350,000 rebate cap to qualify for a cellar door grant up to a maximum of $100,000;
  • The rebate will only apply to packaged, branded wine;
  • A producer must own at least 85% of the fruit throughout the winemaking process, from the crusher through to the final product;

The extensive (if not exhaustive) consultation process that the government undertook to include national, state and regional organizations, and to better appreciate how the rebate reform would impact across the wine industry was admirable.  Special thanks must go to Senator Anne Ruston for her part in this.  The process was valuable in itself, and shows what can be achieved when the different parts of this industry unite and openly discuss problems and challenges with a national mind set, and consider the impact on the industry as a whole.  Australian Vignerons travelled to Perth, Hobart, Sydney, Melbourne, and attended the final sessions in Adelaide as part of these tax consultation sessions.

It must be recognised that while the majority of the wine industry is happy with the outcome, it will be disruptive for others. Those who trade in bulk wine for instance, will have one more vintage in 2017 where bulk wine can be made and still attract rebate before the eligibility criteria changes.  This is not an easy situation for some, many who would have identified themselves only as growers of wine grapes many years ago, before transitioning in to wine making.  Many of these businesses were unable to secure contracts of sale for their fruit, and often had previous interest withdrawn immediately before vintage.  Therefore, they felt that they had little choice but to make bulk wine, or risk seeing their fruit fall on the ground unsold.

Australian Vignerons has always maintained that the majority of problems about unwanted outcomes from the previous rebate setting are from bad policy rather than bad people.  There was little if any support across the industry to retain rebate on bulk wine, and a lot of opposition to it.  There was also strong feedback from the ATO that much of the unwanted activity in questionable access to rebates was from bulk wine trade. The outcome for the change in eligibility is therefore a result of the majority view; both from industry participants and from the regulators.

The impact of these reforms must be viewed in the context of comparing it with the budget papers, and considering the plus side of these measures.  The timing of these changes is the best it could have been for the past number of years.  With improvement in global markets, particularly China, increasing demand for wine and a more favorable exchange rate, there is scope for businesses to refocus toward exports in a way that would not have been possible at all several years ago.  This does not mean that developing exports is easy; it just means that it is easier than it has been for some time.  This in turn will hopefully take pressure off a previously overheated domestic market and allow those trading domestically to retain value.

We hope that these measures allow the industry to move into the 2017 vintage with some confidence knowing that for now, the rebate and tax settings are known.

There is a strong desire within many parts of the industry to continue the tax discussion, in particular to examine the taxation regime in its entirety.  The widespread consultation process effectively ended the previous standoffs that had been in place across the Australian industry for so long; where various regions, states, national bodies, companies and individuals focused on “defending their position”, and as such were unable or unwilling to consider alternatives.  If all of these organisations and individuals “stick to their guns”, and refuse to consider alternatives and possibly compromise, there will be no change.  This is what has delayed WET rebate reform for so long.  Hopefully this process has demonstrated that the different industry bodies can come together and that the majority of the wine industry can work in the national interest.

Biosecurity

There has been much happening in regard to biosecurity in the past month.  Andrew attended a biosecurity round table meeting in Canberra between various commodity groups to refresh aspects of biosecurity management, and Mardi Longbottom, the Australian Vignerons Biosecurity Officer, attended 2 days of meetings with Plant Health Australia, in relation to the Emergency Plant Pest Response Deed, and other matters relating to biosecurity management.

There is more work to do in organizing the more collaborative and efficient outcomes that we would all like to see in regard to biosecurity, and to be frank, it is a stretch for the industry to afford this in the current climate.  There is more to do in regard to settling on an overarching strategic approach for the management of biosecurity between national and state bodies, and between industry and government bodies.  It was for that reason that the National Vine Biosecurity Committee has paused until this direction is better determined.  Otherwise, it would be like putting the cart before the horse.

Meanwhile, the commitment to deal with emerging biosecurity issues via the consultative committee on emergency plant pests continues, with issues being raised on a more regular basis than would be desired.  These alerts can contain anything from obscure and seemingly unimportant incursions to others that may be of consideration.  This work is being done with the goal of safeguarding the living asset that the national vineyards represent, and involves the large number of highly professional biosecurity representatives and organisations across Australian agriculture.

Some work is also under way to review the current phylloxera protocols.  There is a massive amount of information that has been compiled in regard to phylloxera, and volunteers have done much of it over many years.  Clearly this is an issue where the expertise of Vinehealth Australia is valuable.  This work in in early stages, and is being done by Mary Retallack.  It is important that the review takes into account the impending work being done with the national phylloxera management plan, so developing protocols will be require careful consideration to ensure that the result is compatible with later work developing the entire plan.

Backpacker Tax
Finally it seems that the backpacker tax issue has been settled. One would hope so.  After much too and fro horse-trading, the government and the Greens have settled on a rate of 15%.  While still higher than many would have preferred, this at least provides some certainty, and is a huge improvement from the 32.5% tax rate proposed earlier.  While this issue is not front of mind for all of AV members, it is certainly important in some regions directly reliant on this valuable source of seasonal labour.This issue has been characterized by some bizarre voting moves in the senate, perhaps best described by Minister Barnary Joyce, and we won’t repeat them here.  However, the original resistance from Treasury to providing a tax rate lower than the 32.5% suggested appears to have been based on a limited understanding of the way the wine industry works.  It would be desirable to have local young people out working in vineyards (and in orchards and on farms as well) but the simple fact is that this does not happen.  It is interesting to read urban – based commentators in the media questioning why we would have a primary production sector that wants to encourage overseas seasonal labour.  There is a clear lack of understanding among the greater population about the situation that exists in primary industry in this country, and this stresses the reason why national advocacy bodies are needed.  Australian Vignerons joined with other bodies in writing to politicians to overturn the punitive tax rate, in response from concerns from our members.

Storm Damage

While this is an issue that is being dealt with admirably be the regional organisations in the affected areas, it is a problem that potentially has national ramifications.  On the 11thof November hail damaged vineyards across South Australia, and Western Victoria and New South Wales.  Some of these vineyards have been heavily affected, with complete crop loss, and others much less affected.  The impact on growers and their families in coping with this disaster is considerable, and it has affected other industries including citrus, stone fruit, almonds and broadacre cropping as well.
Not many of these growers who were covered by hail insurance, firstly due to the cost, and secondly due to some experience with growers having difficulty in accessing a payout even when they have clearly suffered damage.  There are real problems with hail cover, in its poor affordability.  One large grower informed us that many years ago that to cover their entire vineyard for $14,000/ha loss cost him around $23,000 for the year.  This year, insuring for $8,000 /ha loss cost him over $40,000, and he had to wear a 20% excess.  For many this sort of pricing makes it simply unaffordable, and it may be something that advocacy organisations need to work on.

Delivery Docket Books Now Available

In vintage 2016 Wine Grape Council of SA trialed a standardised delivery docket in response to grower requests for a convenient option that can be used when wineries don’t have their own form. The docket books were well received and users said the benefits included saving costs, reducing errors, improving record keeping and communication between growers, wineries and transporters.  WGCSA will again make the delivery dockets available to industry.

The Despatch Docket book contains 25 forms in triplicate, quarantine and label integrity legislation.

The books cost $11 plus postage and can be ordered online from WGCSA