News and Views

Margaret River wine region; COLLATERAL DAMAGE with proposed Wine Tax changes

On Friday 10th June 2016 Wines of Western Australia released the results of a confidential independent survey report undertaken by RSM Australia into the impact of the government’s proposed wine tax changes within the State; the findings are very, very clear the Margaret River wine region will suffer short, medium and long term pain.

Indeed in one sentence the report confirms that:

“A perfect storm of unintended consequence …. will see a period of extreme rationalisation” and
“this type of rationalisation will be generational”

While the general thrust of the proposed changes are welcomed there are two pivotal elements being the reduction in the WET Rebate cap and amending the eligibility criteria for the WET rebate that will not only have an immediate and ongoing impact upon the wine industry it will also flow on incrementally with dire consequences to the economic and social fabric of the greater Margaret River regional community.

The key points of the RSM Australia survey and its impact on Margaret River include:

1. Margaret River, Western Australia’s largest wine region, will feel the greatest impact of the
proposed changes at 75%.

2. $9.9 million dollars per annum will be removed from Western Australian wine communities as
43% or 84 wine producers surveyed participants don’t have an interest in a winery. (Margaret
River proportion equals $7.425 million)

3. $8.0 million will be removed from Western Australian regional wine communities with the
proposed cap reduction to $290,000 per annum impacted on 50 wine producers. (Margaret
River proportion equals $6.0 million and 37 wineries)

4. From the 194 survey participants there are 2,157 full time jobs. 50% of the survey participants
have indicated they will immediately seek to reduce the number of people they employ.

5. Western Australia will be disproportionally affected as 29% of WET Rebate claims reaching
$500,000 are in the State with 37% impacted by the cap reduction when producers claiming less
than $50,000 are excluded.

It appears as though the Wine Equalisation Tax Rebate Consultative Group October 2015 report and subsequent recommendations that sort to maintain the basic principle of wine taxation in that the WET Rebate was established with the policy intent being ‘… recognition of the substantial financial hardship faced by small rural and regional wineries and aimed to support the viability and consequent capacity to generate employment wealth in local communities.’ have been set almost completely aside.

Business, in whatever industry, needs certainty and from certainty comes confidence. There is nothing
in the proposed two pivotal changes that provide certainty and with that lacking business confidence so
needed for investment decisions will disappear almost overnight.

To the many small to medium sized wine businesses in Australia and especially those in Margaret River it is abundantly clear that the proposed changes, if enacted, will see forced rationalisation leading to a contraction thus immediately reducing the diversity of offering and product differentiation that are the very key factors that underpin domestic and export market growth.

What is needed is leadership, real leadership that only true consultation can bring. This requires all of us in the ‘blending process’ be that individual wine producers, Regional, State or National bodies and of course the government to recognise the far reaching ‘generational’ impact these two changes
will bring to the Australian wine industry.

Collaboration with all parties is necessary to map out a strategic pathway forward and the Margaret
River Wine Association lends its strong support to calls from Wines of Western Australia for the government to immediately confirm their plan to 1) Reduce the WET Rebate cap; and 2) Amend the
eligibility criteria for the WET Rebate; be included in the post-election consultation process.

Stuart Watson, Margaret River Wine Association President said that ‘Based upon the independent
analysis by RSM Australia it was clear that the Margaret River wine region and most likely other fine
wine regions would simply be collateral damage in the wine tax reform process. Even if it was brought
about by unintended consequence it is of paramount importance that all involved widely consider the
long term negative changes that will be disproportionally born by small rural and regional communities
Australia wide.’

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