Wine Equalisation Tax: imported wine and gift containers - taxable value

Where bottles of wine and presentation tubes and boxes (gift containers) are imported in the same consignment (but packed separately) and classified as wine in accordance with the classification rules in Schedule 2 to the Customs Tariff Act 1995, does the value of the gift containers form part of the taxable value of the wine for the purposes of Division 9 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?

No, where bottles of wine and gift containers are imported in the same consignment (but packed separately) and classified as wine in accordance with the classification rules in Schedule 2 to the Customs Tariff Act, the value of the gift containers does not form part of the taxable value of the wine for the purposes of Division 9 of the WET Act.

An entity is an importer of wine and is registered for GST.

The entity imports bottles of wine with associated gift containers. During transportation the items are separately packed within the same consignment.

The cost of the bottles of wine and the cost of the gift containers are separately itemised on the invoice for the imported goods.

The Australian Customs Service (Customs) has determined that the bottles of wine and associated gift containers are both classified under article 2204.21.20 (grape wine) of Schedule 3 to the Customs Tariff Act.

The entity makes a local entry of wine for the purposes of section 5-30 of the WET Act.

Subsection 9-5(1) of the WET Act provides that the general rules for calculating the taxable value of a taxable dealing are set out in the Assessable Dealings Table (the Table).

The Table is in section 5-5 of the WET Act and lists all the assessable dealings that are subject to wine tax.

Where an entity makes a local entry of wine, the relevant assessable dealing is AD10 in the Assessable Dealings Table. The normal taxable value specified in the table for AD10 is 'the *GST importation value'.

Section 33-1 of the WET Act provides that the 'GST importation value' of a local entry is an amount equal to the value of a taxable importation for GST purposes, disregarding any wine tax payable included in that value.

The basic rules for determining the value of a taxable importation for GST purposes are in section 13-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Subsection 13-20(2) provides that the value of a taxable importation is the sum of: • the customs value of the imported goods • the cost of the international transport of the goods • the cost of insurance for the transport • the costs of certain loading or handling of the goods during the course of the international transport • the costs of certain supplies of services during the course of the international transport of the goods that facilitates the international transport • any customs duty or wine tax payable.

'Customs value' is defined in the GST Act in section 195-1 as the customs value of the goods for the purposes of Division 2 of Part VIII of the Customs Act 1901 (Customs Act).

Therefore, the taxable value for the purposes of wine tax hinges upon the customs value for the purposes of the Customs Act.

In this case, Customs (in accordance with the rules for classifying goods in Schedule 2 to the Customs Tariff Act) has classified both the imported bottles of wine and the gift containers to the tariff classification applicable to wine. This has the effect of applying the rate of customs duty relevant to wine to the gift containers. The question arising at this point is whether this classification has a consequence in determining taxable value for wine tax purposes.

As explained above, column 5 of AD10 specifies that the normal taxable value of a local entry is to be determined from the GST importation value. The first two elements of the definition of GST importation value refer to the customs value of the goods and the cost of international transport of the goods. In the context of wine tax, the goods are the wine. This interpretation is supported by the overview to the wine tax legislation in section 2-1 of the WET Act. Section 2-1 states: '...The wine tax is a single stage tax applying (in most cases) to dealings in wine...'

Section 2-5 of the WET Act also supports this interpretation. Section 2-5 states: '...The broad aim of the wine tax law is to tax the last wholesale sale of wine...'

Subsection 23-5(1) of the WET Act, which sets out how wine tax on customs dealings is to be paid, also focuses on the 'wine' and provides that wine tax on customs dealings is to be paid to the Commonwealth at the same time that customs duty is payable on the wine in question.

Therefore, in the context of wine tax, the focus is on the goods being the wine. The mere fact that Customs has classified both the wine and the gift containers to the tariff classification applicable to wine does not mean that the gift containers are themselves wine. It follows that the wine has a certain customs value, and the gift containers have their own separate customs value.

Therefore, in calculating the normal taxable value of the wine, the following amounts are not included: • the customs value of the gift containers • the portion of international transport costs attributable to the gift containers • the portion of transport insurance costs attributable to the gift containers • the portion of costs of certain loading or handling during the course of the international transport attributable to the gift containers • the portion of costs of certain supplies of services during the course of the international transport that facilitates the international transport attributable to the gift containers • the customs duty on the gift containers.

Although the normal taxable value of the wine does not include the above amounts, it must be ascertained whether there are any specific provisions within the WET Act that serve to include the value of the gift containers in the taxable value of the wine. Subdivision 9-C of the WET Act provides for amounts to be added to the taxable value of wine in certain circumstances. One circumstance, set out in section 9-65 of the WET Act, is where a container is associated with wine that is the subject of a taxable dealing. The term 'container' is defined in section 33-1 of the WET Act as: (a) packaging in which, or with which , any property (the contents) is packed or secured , in the ordinary course of a business, for the purpose of marketing or delivery of the contents; and ... [emphasis added]

The emphasised words play a critical role, leading to the construction that the wine (the contents) must be either in the packaging or secured by the packaging in order for the packaging to constitute a container for the purposes of section 9-65 of the WET Act. Neither applies in this case, as at the time of importation, the bottles of wine are neither packed in, nor secured by the gift containers. Thus the gift containers do not satisfy the definition of container provided by section 33-1 of the WET Act and therefore section 9-65 of the WET Act does not apply.

Accordingly, the value of the gift containers does not form part of the normal taxable value of the wine, and nor is there any legislative mechanism via which the value of the gift containers is included in the taxable value of the wine. It follows that the taxable value of wine does not include the customs value of gift containers that are packed separately from the wine. Note 1: Subsection 13-20(2) of the GST Act was amended with affect from 1 July 2010 to include into the calculation of the 'value of taxable importation', subject to satisfying a number of criteria, an amount paid or payable for loading or handling of the goods and for the supply of a service that facilitates the international transport of the goods. In addition, the definitions of 'international transport' and 'place of consignment' in section 195-1 of the GST Act were amended. Note 2: Section 23-5 of the WET Act was amended under Indirect Tax Laws Amendment (Assessment) Act 2012 by substituting 'assessed wine tax' for 'wine' effective from 1 July 2012.

Date of amendment Part Comment 29 November 2013 Reason for Decision, Related Public Rulings Updated references and added note.

Date of amendment | Part | Comment

29 November 2013 | Reason for Decision, Related Public Rulings | Updated references and added note.