WET rebate eligibility will be tightened and $50 million provided to the wine industry for marketing over the next four years, the Federal Government announced in the Budget last night.
The Government will provide the funding to the Australian Grape and Wine Authority to “promote Australian wine overseas and wine tourism within Australia to benefit regional wine producing communities”.
Under the tightened eligibility criteria for the rebate, a wine producer must own a winery or have a long-term lease over a winery and sell packaged, branded wine domestically. This is expected to be a contentious issue, as some of Australia’s most dynamic young wine brands have no winery.
“The final details on the tightened eligibility criteria, including the definition of a winery, will be resolved through further consultation,” Senator Ruston said.
The announcements were met with a mixed response on social media last night. “Very interested in definition of ‘winery’… surely vineyard and winery,” someone tweeted. Someone else tweeted, “This idiocy will put about 80 percent of West Australian small producers out of business.” And this from another wine producer, “Misinformed and ill conceived”. Someone else tweeted, “If it is just winery, then most of Tasmania is ineligible.”
The funding will be provided from 1 July.
“This will open the way to make the most of new opportunities through free trade agreements and will increase current wine exports, which constitute around 60 percent of wine produced in Australia,” Assistant Treasurer Kelly O’Dwyer and Assistant Agriculture Minister Anne Ruston said in a joint statement.
“The Turnbull Government is putting the wine industry in a stronger, long-term position by making a record investment in international and domestic wine promotion.”
“The wine industry has called for reform of the WET rebate based on their concern that it has moved beyond the original intent and is being gamed by some to the detriment of the wine industry,” Minister O’Dwyer said.
“The wine industry has been a strong advocate for changes to the WET rebate. The Government has listened, consulted and acted,” Senator Ruston said.
“As a first step, the Government will prioritise introducing additional integrity measures. The associated producer provisions will be amended to help deter artificial business structuring and multiple rebate claims.”
The WET rebate cap will be reduced from $500,000 to $350,000 on 1 July 2017 and to $290,000 on 1 July 2018. Tightened eligibility criteria will be introduced to apply from 1 July 2019.
Wine Australia chair Brian Walsh said, “The grape and wine sector brings together agriculture, sophisticated production and tourism and it is a vital part of the rich fabric of regional Australia.
“We welcome this initiative and we look forward to working closely with the grape and wine sector to design and implement the $50 million support package to help boost domestic wine-related tourism and export assistance.
“Wine is a unique, high-quality product created in Australia’s 65 wine regions by highly skilled winegrape growers and winemakers. These new measures will help build regional employment and increase the wine sector’s contribution to the Australian economy.”
Wine Australia will coordinate a range of initiatives to help regional wine producers and export-focused businesses to continue to grow.
The Winemakers’ Federation of Australia (WFA) and Wine Grape Growers Australia (WGGA) have welcomed the $50 million over the forward estimates – to grow demand and accelerate recovery of the nation’s grape and wine industry.
“We are pleased government has listened and responded to our industry recovery strategy and the need to provide these additional funds,” WFA president Tony D’Aloisio said.
“However, just as important for the industry as the injection of funds was, the change to the eligibility criteria and this change should come into effect immediately and not wait three years as proposed. The anti-avoidance measures should also come into effect immediately.
“The industry sees removing the claims for bulk and unbranded wine as important drivers to industry’s restructure and we believe these changes need to happen now rather than later to assist in returning the industry to profitability.”
The Government did not accept that the rebate cap remain unchanged, as WFA had proposed.
“It has proposed a progressive reduction to $350,000 and then $290,000 from 1 July 2019. This reduction will have an economic impact of removing some $300 million over the forward estimates for businesses with significant investment in regional Australia,” Mr D’Aloisio said.
“With only $50 million back in funds for marketing, this reduction needs much greater scrutiny. It is not clear how the proposed reduction in the cap will aid the industry in its recovery after years of declining profits.
“With a more favourable exchange-rate environment and the benefit of Free Trade Agreements with our major trading partners in Asia, the investment of $50 million over the forward estimates to grow markets could have a significant impact on demand.
“However while we are pleased government has listened and responded to industry’s recovery plan and the need to provide much-needed additional funds for marketing, promotion and regional development, significant questions remain over reducing the rebate cap and the delay in removing eligibility for bulk and unbranded wine.”
Wine Grape Growers Australia chair Joanna Andrew welcomed government’s support for the grape and wine sector, but echoed Mr D’Aloisio’s concerns.
“Doing nothing was not an option and government has begun a reform process that we hope will translate into better returns for growers and across the supply chain,” Ms Andrew said.
The Budget has not removed New Zealand producer eligibility from the separate WET rebate.
“While the announced changes will also apply to NZ claimants, this is another area the Australian industry will continue to pursue with government,” Mr D’Aloisio said.
Both organisations said they would be consulting their members and State and regional associations on these proposals and continue to engage with the government.
What do you think about WET rebate changes? Email here.