Wine equalisation tax: correcting errors in calculating the amount of the producer rebate

Does an entity, who over-claimed their entitlement to the producer rebate, apply subsection 19-25(4) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) to attribute the over-claimed amount as a liability to wine tax in the final tax period in the financial year in which the credit was over-claimed?

No. An entity, who over-claimed their entitlement to the producer rebate does not apply subsection 19-25(4) of the WET Act to attribute the over claimed amount as a liability to wine tax in the final tax period in the financial year in which the credit was over-claimed.

The entity is registered for goods and services tax.

The entity is a producer of rebatable wine. The entity is not an approved New Zealand participant.

During the financial year the entity miscalculated their entitlement to a producer rebate. They over-claimed the amount of rebate on various assessable dealings throughout the financial year.

The entity claimed less than $500,000 of producer rebate credits during the financial year.

Subsection 19-5(1) of the WET Act provides that an entity is entitled to the producer rebate for rebatable wine where the entity is the producer of that wine and is liable to WET for a dealing in the wine during the financial year (or would have been liable to WET had the purchasing entity not quoted).

The Wine Tax Credit Table in section 17-5 of the WET Act sets out the situations in which an entity is entitled to a wine tax credit (credit).

Credit ground CR9 of the table in section 17-5 of the WET Act provides that, where an entity has an assessable dealing that gives rise to a producer rebate entitlement under Division 19 of the WET Act, that entity is entitled to a credit equal to the amount of the producer rebate. It further states that the time the credit arises is immediately before the end of the financial year in which the assessable dealing occurred.

Subsection 17-10(1) of the WET Act states that credits are claimed by including the amount of the credit in the reduction of the net amount for the tax period in question under section 21-15 of the WET Act. Section 21-15 of the WET Act states that a credit is subtracted from the net amount of the tax period in which the entitlement to the credit arose.

Subsection 19-15(2) of the WET Act limits the amount of rebate that producers are entitled to per financial year to $500,000. Section 19-25 of the WET Act deals with 'excess claims' of the producer rebate and states at subsection 19-25(1): (1) If the sum of the amounts of producer rebates that you claim because of subsection 19-5(1) for tax periods during the financial year exceeds the amount of the producer rebates to which you are entitled in respect of the financial year, you are liable to pay an amount equal to that excess.

Footnote 37 to paragraph 67 of Wine Equalisation Tax Ruling WETR 2009/2 Wine equalisation tax : operation of the producer rebate for other than New Zealand participants (WETR 2009/2) explains that, although sections 17-5, 17-10 and 21-15 of the WET Act, when read together, appear to indicate that producer rebate credits are to be claimed in the final tax period of the financial year, subsection 19-25(1) of the WET Act suggests that producer rebates are to be claimed progressively in tax periods throughout the financial year. Arguably, if this were not the case, subsection 19-25(1) of the WET Act would in fact be superfluous.

As such, it is the Commissioner's view, as stated at paragraph 67 of WETR 2009/2, that producer rebates may be claimed in the activity statement for the tax period to which the dealing is attributed.

Subsection 19-25(4) of the WET Act deals with the liability arising from 'excess claims' of producer rebate and states: (4) An amount payable under the section is to be treated as if it were wine tax payable at the end of the financial year, and... for the purposes of Part 5 were attributable to the last tax period of the financial year.

Because credits for producer rebates are claimable progressively throughout the financial year, subsections 19-25(1) and 19-25(4) of the WET Act must be read in context. They do not apply to situations where a producer rebate is claimed but for which there is no entitlement, for example by a miscalculation. These subsections apply to situations where, at the end of a financial year it is apparent that an entity has claimed more than the $500,000 limit specified in subsection 19-15(2) of the WET Act.

In this case, the entity has not claimed in excess of the maximum of $500,000 of producer rebate credits during the financial year and as such a liability has not arisen under subsection 19-25(1) of the WET Act. It follows that subsection 19-25(4) of the WET Act does not apply to the amounts over-claimed.

The entity has miscalculated the amount of producer rebate on assessable dealings and over-claimed the producer rebate throughout the financial year. The amount of producer rebate claimed in the relevant tax periods must be corrected. It follows that the correction of over-claimed amounts of the producer rebate is treated in the same way as any other over-claimed amount of credit under Division 17 of the WET Act.