NZ wineries get Aussie tax boost

New Zealand wineries exporting to Australia get a windfall of over $20 million in wine tax rebates from the Australian government.

Australia introduced rebates on its 29 percent Wine Equalisation Tax (WET) to Australian wineries in 2004, raising concerns in New Zealand that wine from this side of the Tasman was having to compete on an uneven playing field - contrary to the intent of the bilateral closer economic relations (CER) treaty.

In a move which infuriated Australian producers, the rebate was extended to NZ companies a year later, after then trade negotiations minister Jim Sutton complained the rebates were effectively a subsidy for Australian winegrowers.

At the time, nearly 100 NZ wineries exported to Australia and for the year to June 2003, exports amounted to 4.6 million litres valued at $51.6 million. Since then, the volume of NZ wine sold in Australia has increased tenfold, with the annual value now over $323m. Last year's 51 percent jump in exports to Australia included a significant lift in the amount of bulk wine - which attracts the same rebate as bottled product.

Winemakers' Federation of Australia chief executive Stephen Strachan said this week that many local producers were vehemently opposed to NZ wineries receiving the rebate, but the terms of the CER deal meant that NZ wine sold on the other side of the Tasman was eligible.

"We are not supportive of it (the rebate going to NZ)," Mr Strachan told the Weekly Times newspaper in Melbourne. "But ... there is not much we can do about it."

His New Zealand counterpart, Philip Gregan of Winegrowers New Zealand, told NZPA "it's probably in the order of $20m or something like that would be coming back".

But he noted that New Zealand wineries owned by Australian companies often didn't qualify for the payments because the parent company claimed the rebates.

Mr Gregan said he didn't think the rebates were a sore point for the winegrowers in each country: "When Australian and New Zealand winemakers get together, it's not the subject of much discussion".