Issue
If an entity becomes aware, before the end of the financial year, that they have made claims in excess of the $500,000 entitlement to producer rebates for the financial year, can the entity rely on subsection 19-25(4) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) and attribute the excess amount claimed as a liability to wine tax in the final tax period of the financial year?
Decision
No. If an entity becomes aware, before the end of the financial year that they made claims in excess of the $500,000 entitlement to producer rebates for the financial year, the entity cannot rely on subsection 19-25(4) of the WET Act. Subsection 19-25(4) applies only where the financial year in which the excess producer rebates were claimed has ended.
Facts
An entity is registered for goods and services tax and has quarterly tax periods.
The entity is a producer of rebatable wine. The entity is not an approved New Zealand participant.
The entity has correctly calculated the amount of the producer rebate for each dealing with rebatable wine.
The entity is not an associated producer of any other producer.
At the end of the second quarter of the financial year commencing 1 July 2012, the amount of producer rebates claimed for the financial year exceeds $500,000.
Reasons for Decision
Subsection 19-5(1) of the WET Act provides that an entity is entitled to a producer rebate for rebatable wine where the entity is the producer of that wine and is liable to wine equalisation tax (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 maximum amount of producer rebates to which a producer is entitled to is limited, by subsection 19-15(2), to $500,000 for a financial year.
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.
It is the Commissioner's view, as stated at paragraph 67 of Wine Equalisation Tax Ruling WETR 2009/2 Wine equalisation tax : operation of the producer rebate for other than New Zealand participants , and clarified at footnote 37 to WETR 2009/2, that producer rebates may be claimed in the tax period to which the dealing in the wine is attributed.
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 a producer is entitled to for a 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.
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 this 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.
Subsections 19-25(1) and 19-25(4) of the WET Act apply to situations where, at the end of a financial year, it is apparent that an entity has claimed more than the $500,000 to which they are entitled as specified in subsection 19-15(2) of the WET Act.
In this situation however, it became apparent prior to the end of the financial year that the entity has claimed in excess of $500,000 of producer rebates. It therefore follows that subsections 19-25(1) and 19-25(4) of the WET Act do not apply, as the financial year has not ended.
If it becomes apparent before the end of the financial year that an entity has claimed more than the $500,000 producer rebate entitlement, the normal rules of working out the net amount apply. Hence, if in applying section 21-15 of the WET Act the net amount has been reduced by an amount of producer rebate for which there was no entitlement, the assessed net amount for the tax period must be amended.