Budget Update: What the WET changes mean for you.

Published by Mark Pollard - 8th May 2016

On Tuesday night the government announced some changes to the Wine Equalisation Tax (WET).

What the heck is WET anyway?

WET is something that every wine drinker pays on every bottle of wine sold in Australia. It currently amounts to 29% of the wholesale cost of your favourite drop.

The “WET Rebate” was introduced over 15 years ago to support small winemakers, giving them a rebate of up to $500,000 per year. Or from a different view, $1.7m of sales was exempt from the tax.

Over the last 15 years the rebate has been rorted. The government has been paying much more rebate out than they technically should… a lot more.

So they’ve done a review and have announced the following changes in the new budget, saving them $300m.

The WET rebate cap will reduce:

  • from $500,000 to $350,000 on July 1, 2017
  • and again to $290,000 on July 1, 2018

On top of the reductions wine producers will also have to meet stricter criteria to even qualify for the rebate from July 1, 2019.

What does this mean for you?

Well the amount of rebate (income) that small winemakers are going to receive will drastically decline next year and then again the next.

This could mean that to maintain their income they have to raise prices and you have to pay more for your favourite drop.

The bigger producers will not really feel it as much so may not need to pass this on.

It may however spell the end of some of the really HOT pricing that you have seen over the last few years. Some of these wines are created by ‘virtual’ winemakers who just buy bulk and have it bottled at contract facilities using the WET rebate as their margin. These guys don’t actually have the overheads of small winemakers with wineries / vineyards / infrastructure that the government were originally trying to help prosper.

So it all remains to be seen what the actual effect will be:

  • Will the major retailers flex their muscle and not allow any price increases, crushing some smaller winemakers?
  • Will it further reduce the big retailers willingness to stock the small winemakers?
  • Will it force more of the small winemakers to fold?

We wanted to update you on these changes now – as wine drinkers in Australia we should all be aware of what the budget could potentially do to some of our favourite wines.

Of course at Naked Wines, we will stay committed to smaller winemakers around the country. They are our lifeblood and reason for existence.

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