Consequences of WET
What will be the wine equalisation tax (WET) reform consequences? According to a report of the same name, commissioned by Wines of West Australia, and compiled by RSM Consulting, there will be “significant impacts on the wine industry in Western Australia with a loss or reduction in the WET rebate”.
There are an estimated 350 wine businesses in WA. Amazingly, 194 (55 per cent) responded to the survey, which revealed that WA will have 50 wine businesses hit by the cap reduction.
The 194 respondents accounted for 2157 full-time jobs. Cap reduction is one aspect of WET reform. The bigger issue could be ownership: 84 of the 194 respondents had no interest in a winery, while 79 of the 194 respondents had an interest in a vineyard but not a winery.
It’s worth noting who didn’t respond to the survey. The majority were producers of less than 100 tonnes, but there were nine over 100 tonnes and a further three that were multi-state and/or primarily export. RSM estimates the respondents accounted for 85 per cent of total WA wine production. There are also about 200 growers that provide grapes to the producers. These were not included in the survey.
To the question, tonnes processed for the brands you own:
Spread of respondents
Those employed in the industry (excluding casual or part-time workers):
- Production (growing grapes and making wine): 875
- Sales and marketing, including cellar door sales: 715
- Management, administration and accounts: 567
- Businesses with no employees: 28 (probably owners)
Ninety-eight respondents said they would have to reduce their number of employees if the WET rebate remains as presented in the last budget.
Not surprisingly, Margaret River is expected to be hit the hardest by both the WET reduction and the definition of what is a true investment in winery or vineyard. The total estimated loss to wine, hence regions, in WA via WET reduction is put at $8 million per year.
The yet-to-be-resolved issue of eligibility, if it remains as proposed, will take another $9.9 million out of the industry, it is estimated, and will lead to many withdrawing from the industry. To compensate for the loss of WET, price increases would need to be implemented. Almost 70 per cent of those responding to the survey think the increase needed would not be acceptable to the market.
The alternative is to seek or increase exports. However, this would require extra investment and many feel it is beyond their finances.
Last week’s news regarding changes to the Riverina Wine Show was exciting and very welcome. To recap, the show will be in two parts: one for Riverina GI wines, the other for entries nationwide. There will also be an award for grower excellence, linked to medal results in this show, and Australian Wine Awards for Italian varietals.
Great news, well done. This should lift the Riverina Wine Show to greater heights. But there’s more. This week it was announced that the NSW regions of Hilltops and Tumbarumba are to launch their own wine shows within the Riverina Wine show. Sophie Otton is chair of the Riverina wine show and will also chair the two new shows. TKR looks forward to seeing the results of all three shows and the sections within.