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Excise Tariff Amendment (2009 Measures No. 1) Bill 2009 [No. 2]

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2008-2009

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

eXCISE tARIFF AMENDMENT (2009 MEASURES N o . 1) BILL 2009



customs tARIFF AMENDMENT (2009 MEASURES N o . 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)



T able 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

 

 



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

RTD

ready-to-drink beverage

WET

wine equalisation tax



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 Taxation Office

Nil

$31.79m

$254.68m

$259.89m

$264.96m

Australian Customs Service

Nil

$36.65m

$144.26m

$109.61m

$132.94m

Impact on fiscal balance

Nil

$68.44m

$398.93m

$369.5m

$397.9m

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 services tax

Nil

$6.22m

$36.27m

$33.59m

$36.17m

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 fiscal balance

Nil

Nil

$30m

$30m

$30m

Compliance cost impact :  The change to the beer and wine definitions will cause minor transitional compliance and administration costs.

 



C hapter 1     

Increased tax on certain alcoholic beverages

Outline of chapter

1.1                   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

1.2                   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’.

1.3                   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.  

1.4                   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.

1.5                   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

1.6                   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.

1.7                   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.

1.8                   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’.

1.9                   Such pre-mixed beverages are broadly described as mixtures of alcohol (in particular distilled spirits) with fruit juices or other flavourings.

1.10               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

1.11               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.

1.12               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 the Excise Tariff Act 1921 has a rate of $66.67 on and from 27 April 2008. 

Item 2 of the Schedule to the Excise Tariff Act 1921 has a rate of $39.36.

Excise-equivalent customs duty rate

Subheadings 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 in Schedules 3, 5 and 6 of the Customs Tariff Act 1995 have a non-ad valorem component of $66.67 on and from 27 April 2008.

Subheadings 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 in Schedules 3, 5 and 6 of the Customs Tariff Act 1995 have a non-ad valorem component of $39.36.

Detailed explanation of new law

1.13               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.

1.14               ‘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.

1.15               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. 

1.16               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]

1.17               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

1.18               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]

1.19               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]



C hapter 2     

New definition of beer

Outline of chapter

2.1                   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

2.2                   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.

2.3                   Some products, sometimes known as ‘malternatives’, made from beer, mimic spirit-based RTDs in terms of their taste and marketing.

2.4                   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.

2.5                   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

2.6                   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.

2.7                   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.

2.8                   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.

2.9                   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.

2.10               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 .

2.11               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.

2.12               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.

2.13               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.

2.14               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). 

2.15               Further changes to the beer definition seek to ensure certainty as to acceptable brewing processes for taxation purposes.

2.16               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.

2.17               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.

2.18               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

2.19                 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:

•        that is the product of the yeast fermentation of an aqueous extract, being predominantly an aqueous extract of cereals:

-       whether the cereals are malted or unmalted; and

-       whether or not the aqueous extract contains other sources of carbohydrates; and

•        that contains more than 1.15 per cent by volume of alcohol;

-       that may have had added to it, at any time, spirit distilled 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) .

Beer means a brewed beverage that:

•        is the product of the yeast fermentation of an aqueous extract of malted or unmalted cereals, whether or not containing other sources of carbohydrates;

•        contains hops, or extracts thereof, or other bitters;

•        has not had added to it, at any time, any alcohol from any other source; and

•        contains more than 1.15 per cent by volume of alcohol.

Detailed explanation of new law

2.20               ‘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.

2.21               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.

2.22               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.

2.23               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 .

2.24               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.

2.25               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 .

2.26               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.

2.27               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.

2.28               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.

2.29               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

2.30               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. 

 



C hapter 3     

New definition of grape wine product

Outline of chapter

3.1                   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

3.2                   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.

3.3                   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.

3.4                   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.

3.5                   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.

3.6                   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

3.7                   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.

3.8                   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.

3.9                   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.

3.10               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).

3.11               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.

3.12               However, there are aspects of the alcohol allowance for vegetable extracts that require clarification.

3.13               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.

3.14               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.

3.15               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

3.16                 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 beverage that:

•        contains at least 700 millilitres of grape wine per litre; and

•        has not had added to it, at any time, any ethyl alcohol from any other source, except:

-       grape spirit; or

-       alcohol used in preparing vegetable extracts (including spices, herbs and grasses); and

•        contains at least 8 per cent by volume of ethyl alcohol, but not more than 22 per cent by volume of ethyl alcohol;

•        must not have added to it at any time the flavour of any alcoholic beverage (other than wine), whether the flavour is natural or artificial; and

•        if the beverage has had added 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.

Grape wine product is a beverage that:

•        contains at least 700 millilitres of grape wine per litre; and

•        has not had added to it, at any time, any ethyl alcohol from any other source, except:

-       grape spirit; or

-       alcohol used in preparing vegetable extracts (including spices, herbs and grasses); and

•        contains at least 8 per cent by volume of ethyl alcohol, but not more than 22 per cent by volume of ethyl alcohol; and

•        complies with any requirements of the regulations, made for the purposes of section 31-8, relating to grape wine products.

Detailed explanation of new law

3.17               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.

3.18               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.

3.19               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).

3.20               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 .

3.21               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.

3.22               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.

3.23               In paragraph (a) of Additional Note 4B, the definition is clarified by specifying that ‘grape wine-based beverage’ does not include grape wine.

3.24               ‘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’.

3.25               ‘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.

3.26               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.

3.27               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.

3.28               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 .

3.29               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.

3.30               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.

3.31               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.

3.32               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.

3.33               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

3.34               Changes to the definition of ‘grape wine product’ to be made to the Customs Tariff Act 1995 will have effect from 1 July 2009.

 



C hapter 4     

Chilean originating goods

Outline of chapter

4.1                    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

4.2                    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 .

4.3                    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.

4.4                    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

4.5                    Changes to Schedule 7 to be made to the Customs Tariff Act 1995 will have effect from 1 July 2009.