e-alert 58

May 2016

e-alert 58 2

 

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In this edition

  • Rebate Reforms in a Nutshell
  • 2016 Vinnovation Awards
  • Vinehealth appoints new CEO
  • Letter of the month
  • WGGA Sponsorship
  • Winegrape Growers Summit

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Rebates Reforms In A Nutshell

For anyone who has been living under a sheet of tin for the past fortnight, the federal budget contained measures to reform the WET rebate.  As would be expected in such a diverse wine industry, this has created a feeling of “winners and losers”.  The summary of changes has been fairly well described in a report from Riverland Wine as follows:

  • Bulk and unbranded wine will become ineligible for WET Rebates.
  • The WET Rebate will be retained.  Volumetric Tax will remain on the backburner.
  • Wine Australia will be provided with $50 Million over four years to promote Australian wine overseas and very importantly, for promoting wine tourism within Australia.
  • Tougher anti-avoidance measures will be introduced immediately to help deter multiple rebate claims through artificial business structures.
  • The definition of rebateable wine will be toughened to ensure:
    • at the time of transaction the wine must be fit for retail sale
    • packaged in a container of not more than five litres and
    • be labelled with the brand, owned by or licensed to the producer.
  • The definition of an eligible producer will be tightened.  Recent communications from the government stress that this definition is a “work in progress” and will be influenced by industry consultations.
  • Under the new rules claims for the WET Rebate will apply to all wholesale sales not just cellar door sales.
  • Although New Zealand producers remain eligible, the tightening of the definitions on bulk and unbranded wine will diminish the competitive advantage NZ producers have enjoyed for the past decade.
  • The proposed changes will save the government an expected $250M net over the forward estimates after providing for the $50 Million boost to marketing.
  • The new eligibility definitions for rebateable wine and eligible producers will not take effect until July 1, 2019.
  • The rebate cap will reduce from $500K to $350K in 12 months and then down to $290K by July 2018.

Note the following:

  • It has been made clear to WGGA by government that the status quo was never going to be an option.  The rebate was continuing to climb in a static domestic market, and there would soon be a ludicrous situation where the rebate would surpass the tax retained.
  • There is strong evidence that the alternative regime would have involved a volumetric tax combined with a government grant, with a maximum available amount well below the proposed $290K rebate cap.  This would have been a dire outcome for the industry, because:
    • The volumetric tax would have added significant administration burden to all wine producers,
    • While those producing valuable wine might have seen a reduction in tax per bottle (depending on how much retailers passed on), most wine would have increased in price.  Wine would likely have suffered from substitution in the market place by beer and other beverages;
    • A government grant would not have been as “bankable” as the rebate current is when assessing ability to borrow against income, as it is at the whim of government.
    • It is likely that the grants system would have been administered by state governments, which would have added another level of beaurecracy.
  •  The rebate, with its downward pressure on wine and grape prices, has effectively been a handbrake on building recovery in the industry.  This has been a case of enforcing “three backward steps” on producers and growers.
  • Those who have been able to access the rebate have been able to combat this, and take “two steps forward”.
  • Those unable to combat the rebate, such as those involved in export markets, or growers without access to capital to process fruit into wine have been suffering the most.

WGGA recognizes that some producers will be adversely affected by the suggested changes, and places great faith in the impending consultation.  There are some businesses that have been reliant on the rebate for survival.  They have been doing nothing wrong, and nothing illegal.  It is hoped that the resulting combination of injection of market resource, with the reduction in downward pressure on wine and grape prices will result in a positive outcome.

We realize that this is very much a “leap of faith”, but realizing all the points above, we feel that for the government there is really little alternative.  This government deserves credit for tackling the issue where so many in the past have turned a blind eye.  They also deserve credit for trying to find the line of best fit, working to find the best outcome for the most genuine businesses, those that add value to regional areas and the industry as a whole – with the least pain.

WGGA is a national body, and recognizes that this will have different impacts in different regions.  We are continuing to work with government and are committed to the best outcome for this industry.

We also recognize that this issue might have been addressed years earlier had there been greater will to collaborate and for the industry to speak in a united, coherent manner to government.  This serves as a valuable lesson for the future.

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2016 Vinnovation Award

Aimed at supporting and promoting innovative ideas, practices and equipment that can improve vineyard profitability.Applications are open until 15th May 2016

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Vinehealth announces new CEO

Vinehealth Australia has appointed Inca Pearce as their new Chief Executive Officer

Read more

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Letter of the month

How’s things???

We would love to hear from you, send us an email and let us know what is happening (or not happening) in the industry for you at the moment.

Go in the draw to win a monthly prize.

Email us [email protected]

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Become a WGGA Sponsor in 2016-17

Sponsorship opportunities are currently available for the upcoming financial year,  as the peak industry body for winegrape growers in Australia – we can offer you maximum exposure to the industry.

Contact Nikki to discuss possible opportunities on 08 8133 4404 or via email [email protected]

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The 2016 SA Winegrape Growers Summit: Helping winegrape growers plan

The 2016 SA Wine Grape Growers’ Summit is the third annual Summit held at the Adelaide Oval by the Wine Grape Council SA.

This year’s theme is: Helping winegrape growers plan

Read more

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