Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
eXCISE tARIFF AMENDMENT (2009 MEASURES No. 1) BILL 2009
customs tARIFF AMENDMENT (2009 MEASURES No. 1) BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by authority of the Treasurer, the Hon Wayne Swan MP and the
Minister for Home Affairs, the Hon Brendan O'Connor MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Increased tax on certain alcoholic beverages 5
Chapter 2 New definition of beer 9
Chapter 3 New definition of grape wine product 15
Chapter 4 Chilean originating goods 21
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|RTD |ready-to-drink beverage |
|WET |wine equalisation tax |
General outline and financial impact
Increased tax on certain alcoholic beverages
These two Bills amend the Excise Tariff Act 1921 and the Customs
Tariff Act 1995 to increase the excise and excise-equivalent
customs duty rate applying to certain alcoholic beverages not
exceeding 10 per cent by volume of alcohol from $39.36 per litre of
alcohol content to $66.67 per litre of alcohol content.
The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and the
Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 were
originally passed by the House of Representatives on
25 February 2009 but were negatived by the Senate on 18 March 2009.
Date of effect: 27 April 2008.
Proposal announced: On 26 April 2008, excise and customs notices
were published in the Commonwealth Government Special Notices
Gazette No. S87 and No. S88, respectively.
Financial impact: These measures will have the following revenue
implications:
|Revenue |2007-08|2008-09|2009-10|2010-11|2011-12|
|Australian |Nil |$31.79m|$254.68|$259.89|$264.96|
|Taxation | | |m |m |m |
|Office | | | | | |
|Australian |Nil |$36.65m|$144.26|$109.61|$132.94|
|Customs | | |m |m |m |
|Service | | | | | |
|Impact on |Nil |$68.44m|$398.93|$369.5m|$397.9m|
|fiscal | | |m | | |
|balance | | | | | |
These revenue impacts include the following estimated increased
goods and services tax collections:
|Revenue |2007-08|2008-09|2009-10|2010-11|2011-12|
|Goods and |Nil |$6.22m |$36.27m|$33.59m|$36.17m|
|services tax | | | | | |
Compliance cost impact: Transitional compliance and administration
costs are expected to be minor if the rate change becomes law.
Changes to the definition of beer and grape wine product
The amendments to the Excise Tariff Act 1921 and the Customs Tariff
Act 1995 alter the definition of 'beer' and further amendments to
the Customs Tariff Act 1995 alter the definition of 'grape wine
product'.
Date of effect: 1 July 2009.
Proposal announced: On 25 February 2009, the Minister for Health
and Ageing tabled amendments to the taxation definitions of beer
and grape wine product in the House of Representatives.
Financial impact: The amendments will have the following revenue
implications:
|Revenue |2007-08|2008-09|2009-10|2010-11|2011-12|
|Impact on |Nil |Nil |$30m |$30m |$30m |
|fiscal | | | | | |
|balance | | | | | |
Compliance cost impact: The change to the beer and wine
definitions will cause minor transitional compliance and
administration costs.
Chapter 1
Increased tax on certain alcoholic beverages
Outline of chapter
1. This chapter explains amendments to the respective Schedules to the
Excise Tariff Act 1921 and the Customs Tariff Act 1995 to alter the
excise and excise-equivalent customs duties applying to certain
alcoholic beverages not exceeding 10 per cent by volume of alcohol.
Context of amendments
2. Excise is a tax on certain goods produced in Australia including
alcoholic beverages (other than wine). Imported goods comparable
to those subject to excise, known as 'excise-equivalent goods',
attract customs duty that includes a component at the same rate as
the excise rate so that imports and locally-produced goods are
taxed in an equivalent fashion. This component is commonly
referred to as 'excise-equivalent customs duty'.
3. The Government tabled Excise Tariff Proposal (No. 1) 2008 and
Customs Tariff Proposal (No. 1) 2008 in the House of
Representatives on 13 May 2008. These tariff proposals increased
the excise rate applying to 'other excisable beverages not
exceeding 10 per cent by volume of alcohol' (commonly referred to
as 'ready-to-drink beverages' or 'RTDs' or 'alcopops'), and the
relevant excise-equivalent customs duty rates applying to the
equivalent imported products, from $39.36 per litre of alcohol
content to $66.67 per litre of alcohol content on and from
27 April 2008. The rate change equates to the applicable rate of
other excisable beverages exceeding 10 per cent.
4. The rates for 'other excisable beverages not exceeding 10 per cent
by volume of alcohol' are subject to indexation on a half-yearly
basis and are increased in February and August each year.
5. The intention to alter the Excise Tariff had been previously
announced in the Commonwealth Government Special Notices Gazette
No. S87 of 26 April 2008 under section 160B of the Excise Act 1901.
The intention to alter the Customs Tariff was announced in the
Commonwealth Special Notices Gazette No. S88 of 26 April 2008 under
section 273EA of the Customs Act 1901.
6. The Excise Tariff Validation Bill 2009 and Customs Tariff
Validation Bill 2009 validated the revenue collected under Excise
Tariff Proposal (No. 1) 2008 and Customs Tariff Proposal (No. 1)
2008 from 27 April 2008 until 13 May 2009 and received Royal Assent
on 13 May 2009.
7. Excise Tariff Proposal (No. 1) 2009 and Customs Tariff Proposal
(No. 3) 2009 were tabled in the House of Representatives on 12 May
2009. These tariff proposals increased the excise rate applying to
'other excisable beverages not exceeding 10 per cent by volume of
alcohol' and the excise-equivalent rates of customs duty applying
to their imported equivalents, to $69.16 per litre of alcohol
content on and from 14 May 2009. The rate change equates to the
applicable rate of other excisable beverages exceeding 10 per cent.
8. The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and
Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 form one
part of the Government's ongoing strategy to discourage binge-
drinking, particularly among young people. The measure has
resulted from Government concerns at the growth in consumption of
alcoholic beverages often known as 'alcopops', or 'ready-to-drink
beverages'.
9. Such pre-mixed beverages are broadly described as mixtures of
alcohol (in particular distilled spirits) with fruit juices or
other flavourings.
10. The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and
Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 will raise
$1.2 billion over the forward estimates.
Summary of new law
11. The Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 and
Customs Tariff Amendment (2009 Measures No. 1) Bill 2009 amend the
Schedule to the Excise Tariff Act 1921 to increase the rate under
item 2 from $39.36 to $66.67 from 27 April 2008 and amends
Schedules 3, 5 and 6 to the Customs Tariff Act 1995 so that the
rates in those Schedules accord with changes to the Schedule to the
Excise Tariff Act 1921. It is noted that the rates for item 2 of
the Schedule to the Excise Tariff Act 1921 and Schedules 3, 5 and 6
to the Customs Tariff Act 1995 are subject to indexation on a half-
yearly basis.
12. The ad valorem component of the customs duty on these beverages,
where applicable, has not been changed by this measure.
Comparison of key features of new law and current law
|New law |Current law |
|Excise duty rate |
|Item 2 of the Schedule to|Item 2 of the Schedule to|
|the Excise Tariff Act |the Excise Tariff Act |
|1921 has a rate of $66.67|1921 has a rate of |
|on and from 27 April |$39.36. |
|2008. | |
|Excise-equivalent customs duty rate |
|Subheadings 2203.00.31; |Subheadings 2203.00.31; |
|2204.10.23; 2204.10.83; |2204.10.23; 2204.10.83; |
|2204.21.30; 2204.29.30; |2204.21.30; 2204.29.30; |
|2205.10.30; 2205.90.30; |2205.10.30; 2205.90.30; |
|2206.00.52; 2206.00.62; |2206.00.52; 2206.00.62; |
|2206.00.92; and |2206.00.92; and |
|2208.90.20 in Schedules |2208.90.20 in Schedules |
|3, 5 and 6 of the Customs|3, 5 and 6 of the Customs|
|Tariff Act 1995 have a |Tariff Act 1995 have a |
|non-ad valorem component |non-ad valorem component |
|of $66.67 on and from 27 |of $39.36. |
|April 2008. | |
Detailed explanation of new law
13. Other excisable beverages not exceeding 10 per cent by volume of
alcohol are classified to item 2 of the Schedule to the Excise
Tariff Act 1921. Goods classified to item 2 are defined as any
beverage containing more than 1.15 per cent alcohol by volume but
not exceeding 10 per cent alcohol by volume, but not including beer
or wine.
14. 'Beer' is defined in the Excise Tariff Act 1921 and 'wine' is
defined in the A New Tax System (Wine Equalisation Tax) Act 1999.
An excisable product not meeting these definitions and with an
alcohol content not exceeding 10 per cent by volume falls into the
category of other excisable beverages.
15. Imported alcoholic beverages not exceeding 10 per cent by volume of
alcohol are classified under several subheadings in Schedule 3 to
the Customs Tariff Act 1995, as well as items in Schedules 5 and 6.
The subheadings that receive equivalent tax treatment to item 2 of
the Schedule to the Excise Tariff Act 1921 include: 2203.00.31;
2204.10.23; 2204.10.83; 2204.21.30; 2204.29.30; 2205.10.30;
2205.90.30; 2206.00.52; 2206.00.62; 2206.00.92; and 2208.90.20.
16. The amendment set out in the Excise Tariff Amendment (2009 Measures
No. 1) Bill 2009 alters the Schedule to the Excise Tariff Act 1921
to increase the rate applicable under item 2, from $39.36 to
$66.67. [Schedule 1, item 1 of the Excise Tariff Amendment (2009
Measures No. 1) Bill 2009]
17. Additionally, Schedules 3, 5 and 6 to the Customs Tariff Act 1995
are altered by the Customs Tariff Amendment (2009 Measures No. 1)
Bill 2009 so that the relevant rates of excise-equivalent customs
duty accord with changes to the Schedule to the Excise Tariff Act
1921. [Schedule 1, items 1 to 33 of the Customs Tariff Amendment
(2009 Measures No. 1) Bill 2009]
Application and transitional provisions
18. In accordance with subsection 5(2) of the Excise Tariff Act 1921,
these excise tariff amendments are taken to have effect on 27 April
2008. [Section 2 of the Excise Tariff Amendment (2009 Measures No.
1) Bill 2009]
19. The amendments to the Customs Tariff Act 1995 are taken to have
commenced on 27 April 2008. In addition, the amendments apply to
goods imported into Australia on or after 27 April 2008 and to
goods imported before 27 April 2008 that, in effect, have not been
entered or delivered into home consumption before that date.
[Schedule 1, item 34 of the Customs Tariff Amendment (2009 Measures
No. 1) Bill 2009]
Chapter 2
New definition of beer
Outline of chapter
20. This chapter explains amendments to the respective Schedules to the
Excise Tariff Act 1921 and the Customs Tariff Act 1995 to alter the
definition of 'beer' for taxation purposes.
Context of amendments
21. Under Australian tax law, lower excise and excise-equivalent
customs duties apply to beer products compared to spirits, other
excisable beverages not exceeding 10 per cent by volume of alcohol
(known as ready-to-drink beverages (RTDs)) and some wine products.
22. Some products, sometimes known as 'malternatives', made from beer,
mimic spirit-based RTDs in terms of their taste and marketing.
23. These amendments seek to ensure that malternatives are subject to
the same tax rate as that applying to RTDs by amending the existing
taxation definition of beer. The tax changes are not designed to
affect the taxation of conventional beer products that have the
essential characteristics of beer, based on taste and ingredients.
24. On 18 March 2009, the Senate negatived the Excise Tariff Amendment
(2009 Measures No. 1) Bill 2009 and Customs Tariff Amendment (2009
Measures No. 1) Bill 2009 which would have legislated amendments to
the taxation definition of beer.
Summary of new law
25. Conventional beer products are bitter in taste and do not have the
sugar content of many other beverages. These amendments introduce
a definition of 'beer' which sets a combination of minimum limits
on bitterness and maximum limits on sugar content that must be
present in the final beverage.
26. The bitterness in beer is mostly derived from hops, or extracts of
hops, although other bitters may be used. Under the existing
taxation definition of beer it is a requirement that beer contains
hops or other bitters, however, there is no minimum level of
bitterness established. The new definition for beer will establish
a minimum bitterness level.
27. When beer contains hops or extracts of hops, the bitterness level
of the beer can be measured in terms of International Bitterness
Units. The higher the number, the greater the bitterness.
Manufacturing practices can give an indication of the International
Bitterness Units present in a beer.
28. Under the amended definition, beverages will be required to have a
bitterness equivalent to four International Bitterness Units or
greater to be taxed as beer.
29. The Australia New Zealand Foods Standards Code requires that beer
must contain hops or the preparations of hops. A small number of
beers manufactured overseas do not use hops at all but use other
bitters. Such beers may include a wide range of ingredients as a
bittering agent; examples include pine needles and heather. The
new definition establishes that these beers made without hops must
have a level of bitterness comparable to that of a beer made from
hops with a bitterness of not less than four International
Bitterness Units.
30. The current definition of beer does not preclude the addition of
sugars and places no constraint on the amount of sugar that may be
added, yet a sweet taste is not typical of beer. The new
definition will set 4 per cent weight of sugars in the final
beverage as the maximum level of sugar that can be contained in the
beer in order for a beverage to meet the beer definition. 'Sugar'
will be defined to mean monosaccharides and disaccharides.
31. The new definition will also be changed to prevent any artificial
sweetener being added to a beer at any time. This will prevent
such sweeteners from being used to evade the sugar content test
discussed above and is in accord with the definition of beer in the
Australia New Zealand Foods Standards Code which prevents beer
products from containing such artificial sweeteners.
32. Changes to the definition of beer will also establish limits on the
other types of alcohol that can be added to beer. The new
definition will act to ensure that the dominant amount of alcohol
contained within the beer will be derived as the result of the
yeast fermentation process of an aqueous extract of cereals. The
aqueous extract must be predominantly cereals, whether malted or
unmalted, but may also contain other sources of carbohydrates.
33. However, it would be possible to add spirit distilled from beer
at any time in the brewing process provided the amount of spirit
did not add more than 0.5 per cent to the total volume of the final
beverage (that is, 5 millilitres per litre).
34. Further changes to the beer definition seek to ensure certainty as
to acceptable brewing processes for taxation purposes.
35. The new definition will make it clear that beer may contain
flavours and that such flavours (for example, chilli, lime or
fruit) may be added to the beer at any time. The new definition
will also allow substances, including flavours containing ethyl
alcohol to be added to beer. However, a limit will be set such
that the alcohol contained in such substances did not add more than
0.5 per cent to the total volume of the final beverage.
36. After adding substances to the beer which include ethyl alcohol
(from a non-beer source) it would be possible to also add spirit
distilled from beer up to the limit expressed in paragraph 2.14.
37. Additionally, the new definition makes it clear that both malted
and unmalted cereals may be used and that the aqueous extract of
cereals developed to produce beer may, subject to other
restrictions within the beer definition, contain ingredients other
than cereal and carbohydrates.
Comparison of key features of new law and current law
38. A comparison of the new law to the current law is set out in the
following table. The main changes have been bolded in the new
definition.
|New law |Current law |
|Beer means a brewed beverage: |Beer means a brewed beverage |
|that is the product of the |that: |
|yeast fermentation of an |is the product of the yeast |
|aqueous extract, being |fermentation of an aqueous |
|predominantly an aqueous |extract of malted or unmalted|
|extract of cereals: |cereals, whether or not |
|whether the cereals are malted |containing other sources of |
|or unmalted; and |carbohydrates; |
|whether or not the aqueous |contains hops, or extracts |
|extract contains other sources |thereof, or other bitters; |
|of carbohydrates; and |has not had added to it, at |
|that contains more than 1.15 |any time, any alcohol from |
|per cent by volume of alcohol; |any other source; and |
|that may have had added to it, |contains more than 1.15 per |
|at any time, spirit distilled |cent by volume of alcohol. |
|from beer, but only if that | |
|spirit did not add more than | |
|0.5 per cent to the total | |
|volume of the final beverage; | |
|and | |
|that: | |
|contains hops, or extracts of | |
|hops, such that the beverage | |
|has International Bitterness | |
|Units of not less than four; or| |
| | |
|that contains other bitters | |
|such that the beverage has | |
|bitterness comparable to that | |
|of a beverage with | |
|International Bitterness Units | |
|of not less than four | |
|International Bitterness Units;| |
|and | |
|that has not had added to it, | |
|at any time, artificial | |
|sweetener; and | |
|that may have had added to it, | |
|at any time, other substances, | |
|including flavours but only if,| |
|in the case of substances that | |
|contain alcohol (other than | |
|spirit distilled from beer) the| |
|alcohol did not add more than | |
|0.5 per cent to the total | |
|volume of the final beverage; | |
|and | |
|that contains not more than 4 | |
|per cent by weight of | |
|monosaccharide and disaccharide| |
|(sugars). | |
Detailed explanation of new law
39. 'Beer' is defined in the Schedule to the Excise Tariff Act 1921.
Item 1 of the Schedule currently establishes various excise rates
for beer with application based on the beer's alcoholic content and
container volume (in litres). For example, the rate for beer
exceeding 3.5 per cent by volume of alcohol packaged in an
individual container not exceeding 48 litres is $40.82 (as at 2
February 2009) per litre of alcohol calculated on that alcohol
content by which the percentage by volume of alcohol of the goods
exceeds 1.15 per cent.
40. The definition of beer in the Schedule to the Excise Tariff
Act 1921 will be amended as discussed above. There are no other
changes to be made to that Schedule arising from the change in the
definition of beer.
41. Imported goods comparable to those subject to excise, known as
'excise-equivalent goods', attract customs duty of the same amount
as the excise so that imports and locally-produced goods are taxed
in an equivalent fashion under the excise and excise-equivalent
customs duty systems.
42. Section 19 of the Customs Tariff Act 1995 allows customs rates of
duty for certain alcohol and tobacco products to be adjusted
automatically, twice yearly, in line with movements in the Consumer
Price Index. The adjusted rates of duty reflect the rates of duty
applicable to similar goods imposed under the Excise Tariff Act
1921. For this purpose, the Table in section 19 lists paired
customs tariff subheadings and excise items that are subject to the
automatic indexation provisions. The amendments to the Table in
section 19 incorporate updated customs tariff subheadings and the
corresponding excise tariff items, to reflect changes made in
heading 2203 of the Customs Tariff Act 1995.
43. The Australian Customs Tariff is based on the International
Harmonized Commodity and Coding System. References to beer in the
International Harmonized Commodity and Coding System apply to a
wider range of beverages than those specified in the Australian
Excise and Customs Tariffs. Additional Notes 9 and 10 of Chapter
22 of the Customs Tariff Act 1995 contain the Excise Tariff
definition of 'beer'. 'Beer' made from malt (Additional Note 9) is
classified in heading 2203. 'Beer' made from unmalted cereals
(Additional Note 10) is classified in heading 2206.
44. Additional Notes 9 and 10 are combined (in Additional Note 9) and
the definition of 'beer' contained in that Note is amended to
reflect changes to the definition of 'beer' in the Excise Tariff
Act 1921.
45. In heading 2203, 'beer' that meets the definition contained in
Additional Note 9 will continue to be classified in tariff
subheadings 2203.00.6 and 2203.00.7. Subheadings 2203.00.3,
2203.00.31 and 2203.00.39 are repealed. Beverages previously
classified to these subheadings, and other beer that does not meet
the definition of 'beer' in Additional Note 9, will transfer to new
subheadings 2203.00.9, 2203.00.91 and 2203.00.99.
46. In heading 2206, 'beer' made from unmalted cereals that meets the
definition contained in Additional Note 9 will continue to be
classified in tariff subheadings 2206.00.7 and 2206.00.8. Other
beverages that do not meet the definition of 'beer' in Additional
Note 9, will transfer to subheadings 2206.00.9, 2206.00.91,
2206.00.92 and 2206.00.99.
47. The text of subheadings 2203.00.6, 2203.00.7, 2206.00.7 and
2206.00.8 is clarified by inserting a reference to 'beer' as
defined in Additional Note 9.
48. Schedules 5 and 6 to the Customs Tariff Act 1995 specify rates of
customs duty for certain goods, including alcoholic beverages, that
are US and Thai originating goods, under the Australia-US Free
Trade Agreement and the Thailand-Australia Free Trade Agreement,
respectively. The amendments to Schedules 5 and 6 reflect the
restructure of subheadings in heading 2203 in Schedule 3. These
amendments will ensure that excise-equivalent rates of customs duty
will continue to apply to the above goods, in accordance with the
Australia-US Free Trade Agreement and the Thailand-Australia Free
Trade Agreement.
Application and transitional provisions
49. Changes to the definition of 'beer' to be made in the Schedule to
the Excise Tariff Act 1921 and the Customs Tariff Act 1995 will
have effect from 1 July 2009.
Chapter 3
New definition of grape wine product
Outline of chapter
50. This chapter explains amendments to the Customs Tariff Act 1995 to
alter the definition of a 'grape wine product' for taxation
purposes. Equivalent amendments will be made to the A New Tax
System (Wine Equalisation Tax) Regulations 2000.
Context of amendments
51. Division 31 of the A New Tax System (Wine Equalisation Tax) Act
1999 and the A New Tax System (Wine Equalisation Tax)
Regulations 2000 define the meaning of 'wine' for the purposes of
application of the wine equalisation tax (WET). Wine is widely
defined. 'Wine' can apply to beverages fermented from any fruit or
vegetable and includes alcoholic products such as fruit wines or
vegetable wines, cider, perry, mead, sake, grape wine and grape
wine products.
52. The category known as 'grape wine products' currently includes wine
cocktails, flavoured wines and Irish style cream drinks, including
wine creams. A 'grape wine product' must contain 70 per cent grape
wine. The remaining amount (up to 30 per cent) can contain
flavours, although there are some limits on the type and use of
ethyl alcohol.
53. With a combination of flavourings or ingredients a grape wine
product could be produced to resemble a spirit-based ready-to-drink
beverage (RTD) product. In such circumstances the grape wine
product could be subject to significantly less tax than the RTD
product.
54. The amendments seek to ensure that grape wine products that mimic
spirit-based RTDs are subject to the same tax rate as that applying
to RTDs.
55. On 18 March 2009, the Senate negatived the Customs Tariff Amendment
(2009 Measures No. 1) Bill 2009 which would have legislated
amendments to the taxation definition of grape wine product.
Summary of new law
56. Under current tax law definitions, flavours can be added to wine
products, although such flavours can be precluded if they contain
ethyl alcohol. This means that wines can currently meet the
definition of 'grape wine product' and include a spirit flavour
such as rum, brandy, bourbon or tequila.
57. The amended definition will preclude the addition, at any time, of
the flavour of any alcoholic beverage (other than wine), whether
the flavour is natural or artificial and whether the flavour
contains alcohol or not. It will also apply to a non-wine
alcoholic beverage flavour which contains grape spirit. For
example, the addition of a rum flavour (whether that flavour
contains alcohol or not) or a number of flavours that combine to
produce a rum flavour would lead to the beverage no longer being
classified as a wine.
58. Supporting this change, other changes to the definition of wine
will act to provide certainty as to the circumstances where ethyl
alcohol can be added to a grape wine product.
59. Currently the meaning of grape wine product includes a requirement
that no ethyl alcohol other than grape spirit be added unless that
alcohol is used in preparing vegetable extracts (including spices,
herbs and grasses).
60. The alcohol allowance for vegetable extracts exists to ensure the
flavour of the vegetable extract can be added to the grape wine
product and the product remain classified as a wine. Such an
allowance is necessary to produce some traditional wine products
such as vermouth and marsala. The changes proposed to the
definition of grape wine product are not designed to affect the
taxation of these traditional wine products.
61. However, there are aspects of the alcohol allowance for vegetable
extracts that require clarification.
62. The definition of 'grape wine product' is to be changed so that
alcohol (other than grape spirit) used in the preparation of a
vegetable extract must not add more than one percentage point to
the final alcohol strength by volume of the beverage. Without such
a limit, additional amounts of alcohol (other than grape spirit)
could be added to a grape wine product, potentially to provide a
spirit flavour.
63. The amendments to the definition of grape wine product also ensure
that the alcohol used in the preparation of vegetable extracts must
be used to extract the flavours of the vegetable matter and must be
essential to the extraction process.
64. However, if the alcohol has been used to merely carry the flavour
extract (rather than make it), or is used to prepare nature-
identical flavouring substances or artificial flavouring
substances, the resulting flavour could not be used for a 'grape
wine product'.
Comparison of key features of new law and current law
65. A comparison of the key changes of the new law to the current law
is set out below. The main changes have been bolded in the new
definition.
|New law |Current law |
|Grape wine product is a |Grape wine product is a |
|beverage that: |beverage that: |
|contains at least 700 |contains at least 700 |
|millilitres of grape wine per|millilitres of grape wine per|
|litre; and |litre; and |
|has not had added to it, at |has not had added to it, at |
|any time, any ethyl alcohol |any time, any ethyl alcohol |
|from any other source, |from any other source, |
|except: |except: |
|grape spirit; or |grape spirit; or |
|alcohol used in preparing |alcohol used in preparing |
|vegetable extracts (including|vegetable extracts (including|
|spices, herbs and grasses); |spices, herbs and grasses); |
|and |and |
|contains at least 8 per cent |contains at least 8 per cent |
|by volume of ethyl alcohol, |by volume of ethyl alcohol, |
|but not more than 22 per cent|but not more than 22 per cent|
|by volume of ethyl alcohol; |by volume of ethyl alcohol; |
|must not have added to it at |and |
|any time the flavour of any |complies with any |
|alcoholic beverage (other |requirements of the |
|than wine), whether the |regulations, made for the |
|flavour is natural or |purposes of section 31-8, |
|artificial; and |relating to grape wine |
|if the beverage has had added|products. |
|to it ethyl alcohol used in | |
|preparing vegetable extracts,| |
|it must comply with the | |
|following requirements: | |
|the ethyl alcohol must only | |
|be used to extract flavours | |
|from vegetable matter; | |
|the ethyl alcohol must be | |
|essential to the extraction | |
|process; and | |
|the ethyl alcohol must not | |
|add more than one percentage | |
|point to the strength of | |
|alcohol by volume of the | |
|beverage. | |
Detailed explanation of new law
66. The WET is generally applied to assessable dealings in domestically
produced and imported wine at a rate of 29 per cent of its last
wholesale sale value. The WET applies in addition to the goods and
services tax.
67. Division 31 of the A New Tax System (Wine Equalisation Tax) Act
1999 and the A New Tax System (Wine Equalisation Tax)
Regulations 2000 define the meaning of wine for the purposes of
application of the WET. For imported wine products a similar
definition of wine exists in the Customs Tariff Act 1995. Set out
below is an explanation of the amendments to the Customs Tariff Act
1995 to alter the definition of a 'grape wine product' for taxation
purposes.
68. The amendments to the Table in section 19 of the Customs Tariff Act
1995 reflect changes made in heading 2206 (see comments in
paragraph 3.30).
69. In the Customs Tariff Act 1995, 'grape wine product' is defined in
Additional Note 4 to Chapter 22. The definition reflects the
definition of 'grape wine product' contained in the A New Tax
System (Wine Equalisation Tax) Act 1999 and the A New Tax System
(Wine Equalisation Tax) Regulations 2000.
70. Changes to the definition of grape wine product in the
Customs Tariff Act 1995 reflect proposed changes to that
definition. As a consequence of these changes, certain imported
beverages that were previously subject to the WET will no longer be
defined as 'grape wine product' and will be subject to rates of
customs duty equivalent to those applicable under the Excise Tariff
Act 1921 for the same products, if manufactured locally.
71. New Additional Note 4B to Chapter 22 defines 'grape wine-based
beverage'. This definition contains the elements of the previous
definition of 'grape wine product'. In particular, the previous
provision that no ethyl alcohol be added, except from grape spirit
or alcohol used in preparing vegetable extracts, is retained.
72. In paragraph (a) of Additional Note 4B, the definition is clarified
by specifying that 'grape wine-based beverage' does not include
grape wine.
73. 'Grape wine product' is re-defined in Additional Note 4 to be a
grape wine-based beverage, and therefore required to meet the above
criteria for grape wine-based beverage. Additional Note 4 also
provides the additional criteria relating to the definition of
'grape wine product'.
74. 'Grape wine product' must not include the flavour of any alcoholic
beverage other than wine, for example of rum or whisky - see
paragraph (a) of Additional Note 4.
75. New Additional Note 4A defines 'wine' for the purposes of paragraph
(a) of Additional Note 4. This Note provides that 'wine', for this
purpose, means grape wine, cider or perry, other fruit or vegetable
wine, mead and sake. In the Customs Tariff Act 1995, these
products are defined in Chapter 22, Additional Notes 3, 5, 6, 7 and
8, respectively.
76. Additional Note 4, defining 'grape wine product' also requires, in
paragraph (b), that, if ethyl alcohol has been used in preparing
vegetable extracts to add to the beverage, such additional alcohol
must only have been used to extract flavours from the vegetable
matter, must be essential to that process and must not add more
than one percentage point to the volume of alcohol.
77. Beverages that meet the definition of 'grape wine product' are
classified in heading 2205 (vermouth and other wine of fresh grapes
flavoured with plants or other aromatic substances) and heading
2206 (other fermented beverages) of the Customs Tariff Act 1995.
78. No formal amendments are made in heading 2205. However, the change
of definition of 'grape wine product' will result in a re-
classification of certain beverages from subheadings 2205.10.20
and 2205.90.20 to other subheadings in heading 2205
(subheadings 2205.10.30, 2205.10.90, 2205.90.30 or 2205.90.90).
These subheadings impose rates of customs duty equivalent to those
applicable under the Excise Tariff Act 1921 for the same products,
if manufactured locally. Protective rates of customs duty, where
applicable, are preserved.
79. In heading 2206 (other fermented beverages), grape wine product,
inter alia, is specified in subheadings 2206.00.30 and 2206.00.4.
As a consequence of the change of definition of 'grape wine
product' in Additional Notes 4, 4A and 4B, certain imported
beverages will no longer meet the terms of the definition. Such
beverages are excluded from the above subheadings and will be re-
classified to new subheadings 2206.00.1 and 2206.00.2 that have
been created for this purpose.
80. Subheading 2206.00.1 applies to 'grape wine-based beverages' that
are excluded from the definition of 'grape wine product' because of
the addition of a flavour mentioned in paragraph (a) of Additional
Note 4. New subheadings 2206.00.13 and 2206.00.14 impose duty
rates equivalent to those applicable under the Excise Tariff Act
1921 for the same products, if manufactured locally.
81. Subheading 2206.00.2 applies to 'grape wine-based beverages' that
do not comply with the requirements of paragraph (b) of Additional
Note 4 to Chapter 22, relating to the use of additional ethyl
alcohol in preparing vegetable extracts. New subheadings
2206.00.21, 2206.00.22, 2206.00.23 and 2206.00.24 impose duty rates
equivalent to those applicable under the Excise Tariff Act 1921 for
the same products, if manufactured locally. Protective rates of
customs duty, where applicable, are preserved.
82. Schedules 5 and 6 to the Customs Tariff Act 1995 (applicable to US
and Thai originating goods under the Australia-US Free Trade
Agreement and the Thailand-Australia Free Trade Agreement) are
amended to reflect the restructure of subheadings in heading 2206.
These amendments will ensure that excise-equivalent rates of
Customs duty will continue to apply to the above goods, in
accordance with the Australia-US Free Trade Agreement and the
Thailand-Australia Free Trade Agreement.
Application and transitional provisions
83. Changes to the definition of 'grape wine product' to be made to the
Customs Tariff Act 1995 will have effect from 1 July 2009.
Chapter 4
Chilean originating goods
Outline of chapter
84. This chapter explains amendments to Schedule 7 to the Customs
Tariff Act 1995, contained in Part 2 of Schedules 2 and 3 to the
Customs Tariff Amendment (2009 Measures No. 1) Bill 2009.
Summary of new law
85. The Customs Tariff Amendment (Australia-Chile Free Trade Agreement
Implementation) Act 2008 entered into force on 6 March 2009. The
Customs Tariff Amendment (Australia-Chile Free Trade Agreement
Implementation) Act 2008 created a new Schedule 7 to the Customs
Tariff Act 1995 specifying rates of customs duty for certain goods,
including alcoholic beverages that are Chilean originating goods
under the Australia-Chile Free Trade Agreement.
86. The amendments to be made to Schedule 7 reflect the amendments made
in Schedule 3 to the Customs Tariff Act 1995. The amendments to
Schedule 7 reflect the restructure of subheadings in heading 2203
and 2206.
87. These amendments will also ensure that the provisions of this Act
will apply to beer and wine products that are Chilean originating
goods, in accordance with the Australia-Chile Free Trade Agreement.
Application and transitional provisions
88. Changes to Schedule 7 to be made to the Customs Tariff Act 1995
will have effect from 1 July 2009.