Setting Up Wine Equalisation Tax

Setting Up Wine Equalisation Tax Overview

Setting up the Wine Equalisation Tax (WET) in SapphireOne involves a detailed checklist and procedure to ensure compliance and accuracy. This guide will walk you through the necessary steps to set up WET effectively.

What is Wine Equalisation Tax (WET)?

The Wine Equalisation Tax (WET) is a complex tax applied to wine sold or imported into Australia. It is calculated based on the wholesale value of the wine, which can vary significantly from the invoiced amount due to additional costs added by distributors.

This complexity necessitates a meticulous approach to ensure accurate tax calculations and compliance. WET applies to beverages containing more than 1.15% by volume of ethyl alcohol, including grape wine (sparkling and some fortified), grape wine products (such as marsala), fruit wines, vegetable wines, cider, perry (with some exceptions), mead, and sake. For the purposes of WET, these products are collectively referred to as wine. For more detailed information, refer to the Wine Equalisation Tax Ruling (WETR 2009/1).

When wine is fortified, either WET or excise applies, depending on the type of wine and its alcoholic strength. For fortified wines such as grape wine, grape wine products, and fruit or vegetable wines, the end product must not contain more than 22% alcohol by volume to remain subject to WET. For more information, see Excise – wine fortification. WET does not apply to beverages such as beer, spirits, liqueurs, pre-mixed spirits, some flavoured ciders, and ready-to-drink designer drinks. If these beverages have an alcohol content of more than 1.15%, they are subject either to excise duty (if manufactured in Australia) or customs duty (if imported).

For more detailed information on WET, please refer to the Australian Taxation Office (ATO) guidelines.

Setting Up Wine Equalisation Tax Guidelines

The WET tax involves a complex application process with numerous variables. Therefore, SapphireOne requires users to calculate and enter the tax on a transaction-by-transaction basis. Here are the key guidelines:

• Manual Calculation – Users are responsible for ensuring the accurate WET tax value is entered for each applicable transaction. This is because WET applies to the actual wholesale price of the wine, which may differ from the amount shown on the invoice. Distributors may add extra costs to the wholesale price on the invoice, making it unreliable for automatic WET tax calculation in SapphireOne.
• Transaction Calculation – When users enter the WET tax, the transaction’s final amount will be calculated as follows:
  1. Value of the item(s) in the transaction
  2. Plus WET tax (as calculated by the user)
  3. Plus GST
• BAS Integration – Upon creating a Business Activity Statement (BAS), SapphireOne consolidates all transactions with WET tax entries into section 1C on the BAS statement. Users can still manually adjust this value in the BAS statement if necessary. However, this should not be required if all transactions have the correct WET tax applied, as SapphireOne will enter the accurate consolidated value in section 1C on the BAS statement.

 Setting Up Wine Equalisation Tax procedure

Setting up the Wine Equalisation Tax (WET) in SapphireOne involves a few essential steps to ensure accurate tax calculation and reporting. Follow the instructions below to enable the WET tax data entry field:

1. To display the WET tax data entry field on Quotes, Orders, or Invoices, you must enable the WET checkbox. Navigate to Utilities > Controls > Master Defaults > Inventory Page
2. You must set up a new General Ledger Account to hold the value collected for this tax. We recommend consulting your accountant for guidance on collecting this tax and setting up the appropriate General Ledger account.
3. Navigate to Utilities > Controls > Company – Control Accounts Page – Default Tab, specify a WET control Account so that SapphireOne knows which account to process when WET tax is entered on a transaction.
4. Navigate to Inventory > Inventory > Inventory – Controls page to establish the WET rate.

Wine Equalisation Tax Examples

The following examples demonstrate the same transaction with varying tax applications:

1. Basic Transaction with GST Added:
   • Line items valued at $10,000.00
   • GST added at $1,000.00
   • Invoice total: $11,000.00
2. WET Applied to Full Invoiced Amount Before GST:
   • Line items valued at $10,000.00
   • WET at 29%: $2,990.00
   • GST now $1,290.00
   • Invoice total: $14,190.00
3. WET Applied to Actual Wholesale Cost at a Reduced Rate:
   • Line items valued at $10,000.00
   • Wholesale price considered to be $7,000.00
   • WET at 29% of $7,000.00: $2,030.00
   • GST now $1,203.00
   • Invoice total: $13,233.00

BAS Consolidation

BAS (Business Activity Statement) consolidation is a crucial process in ensuring accurate reporting of your organisation’s tax obligations. The examples provided above are consolidated into field 1C on the BAS as follows:

• In the second case, $2,900.00 would be consolidated to 1C on the BAS when created.
• In the third case, $2,030.00 would be consolidated to 1C on the BAS when created.

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