Commonwealth Numbered Regulations - Explanatory Statements

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A NEW TAX SYSTEM (WINE EQUALISATION TAX) AMENDMENT REGULATIONS 2005 (NO. 1) (SLI NO 116 OF 2005)

EXPLANATORY STATEMENT

Select Legislative Instrument 2005 No. 116

Issued by authority of the Minister for Revenue
and Assistant Treasurer

            A New Tax System (Wine Equalisation Tax) Act 1999

            A New Tax System (Wine Equalisation Tax) Amendment Regulations 2005 (No. 1)

Section 27-35 of the A New Tax System (Wine Equalisation Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of these regulations is to allow traditional mead products, which previously did not fit the technical definition of mead in the Act and the regulations, to be treated as mead for the purposes of the Act, and thus to be subject to wine equalisation tax (WET) rather than the Excise Act 1921.  Traditional mead products are products which have been manufactured and sold as ‘mead’ in the Australian market for many years.  Being subject to WET allows Australian (and New Zealand) manufacturers to access the WET producer rebate; and WET is much lower than the duty which would otherwise be levied under the Excise Act.

These Regulations regularise the existing practice, and allow mead to be made in the traditional way, whilst limiting what could be added in the production of mead to prevent the formulation of ready-to-drink beverages (RTDs) which could satisfy the revised specifications for mead.  RTDs thus continued to be subject to excise.

In particular:

·                 mead had always been treated as wine for taxation purposes, and therefore not subject to excise;

·                 the Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999 (which introduced the pre-existing definition of mead into the Act) had made clear the intention to include traditional mead products within the WET system;

·                 however, the A New Tax System (Wine Equalisation Tax) Regulations 2000 (the Principal Regulations) had appeared to exclude many traditional mead products;

·                 the Principal Regulations allow the addition of grape spirit or neutral spirit, but do not otherwise allow the addition of substances which add colour or flavour:

-                the new Regulations allow manufacturers also to add fruit or fruit product (in limited quantities) before they ferment the mead; to add caramel after they ferment the mead; and to add herbs and spices at any time;

-                these allowances were subject to the provision that after the addition of the fruit or fruit product, and before fermentation, the mead had to contain not less than 14 per cent by volume of honey.

While formulating this regulation change, Treasury worked closely with the Australian Taxation Office (ATO), and the ATO consulted with affected manufacturers to ensure that existing traditional mead products meet the requirements of the new regulations.

The Regulations are legislative instruments for the purposes of the Legislative Instruments Act 2003.

The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.


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