ANSWER ID:9271, 9273

This support note deals with wholesale sales of wine by a wine producer and how to account for the producer rebate where both the customer quotes/does not quote at the time of the sale.

Our support notes Wine Equalisation Tax (WET) and Cellar door sales - Wine Equalisation Tax (WET) may also be useful.

This support note is for guidance only - you should always seek advice from your accounting advisor or the ATO regarding how tax should be applied in your circumstances.

How do I record the producer rebate?

Task 1 - Create three new accounts to track the producer WET rebate

This account will be used to track the amount of rebate owed to you by the Commonwealth government. It is set up as a liability account so that it is grouped with your other tax tracking accounts and will have a debit (negative) balance and in effect be an asset.

1. Go to the Accounts command centre and click Account List.
2. Click the Liability tab then click New.
3. Give the account a unique number that suits your account list.
4. Name the account 'Producer WET Rebate' or similar.
5. Select Other Current Liabilities in the Account Type drop-down menu.
6. Click OK.
7. Repeat steps 1 - 6 to create another liability account called GST Misallocated (or similar).

Also create a new income account called 'WET Refundable' or similar. Select the Detail Account option. This account will track the rebate amount paid by the Commonwealth government.

Task 2 - Create new tax codes to calculate the WET rebate

1. Go to the Lists menu and choose Tax Codes.
2. Click New.
3. Create a new tax code called 'PWR', Producer WET Rebate.
4. Make the Tax Type Goods & Services Tax and the Rate 29%.
5. Make the Linked Account for Tax Collected and the Linked Account for Tax Paid the liability accounts set up in Task 1 above. See our example below. Image Removed
6. Create a second new tax code called 'WRO', Producer WET Rebate offset. Make the Tax Type Goods and Services Tax and the Rate 29%. Make the Linked Account for Tax Collected the income account created in Task 1 above. Also make the Linked Account for Tax Paid the liability accounts set up in Task 1 above. See our example below. Image Removed

Task 3 - Create a tax code to consolidate the GST and WET tax types

Note: This tax code may already exist in your company file.

1. Go to the Lists menu and choose Tax Codes.
2. Click New.
3. Enter GW as the code and provide a description of Consolidated WEG & WET or similar.
4. Select the Consolidated tax type. The consolidated tax type allows you to combine multiple tax codes into one code. In the Code field, enter the WET tax code, tab to the next line and add the WEG code. The GW code can now be used on invoices to calculate both the WET and GST amounts.
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Task 4 - Create a new inventory item to record the WET rebate

(see below for BusinessBasics AccountRight Basics instructions)

1. Go to the Inventory command centre and click Items List.
2. Click New.
3. Create a new inventory item called 'WET Rebate Item' or similar.
4. Select the option I Sell this Item and select an income account for tracking sales. See our example below. Image Removed
5. Click the Selling Details tab.
6. Specify N-T as the Tax Code When Sold.
7. Click OK.

1. Go to the Lists menu and choose Items.
2. Click New.
3. Enter an Item Number and Name, for example "WET rebate item" or similar.
4. Select an Income Account for Tracking Sales.
5. Specify N-T as the Tax Code When Sold.
6. Click OK.

Task 5 - Input your Sales invoice

Case 1: Wholesale sale with WET Payable

Enter the sale and assign the consolidated tax code GW (consolidated WET and GST on WET) to the wine product being sold. This will calculate the applicable GST and WET on the selling price, where the selling price is exclusive of WET and GST.

On the second line of the invoice, repeat the first line, but put the sell quantity in the Backorder column instead of the Ship column as a negative and allocate the PWR tax code created earlier. On the third line, place the quantity sold in the Backorder column as a positive and allocate the WRO tax code that was also created earlier. This sale will create an invoice which records the WET and GST payable by the customer, and also an order that will account for the WET rebate to the wine producer.

Instead of printing this sale as a normal invoice to give to the customer, print it as a packing slip so that the backordered items do not show, as these are for internal use only. Go to the Sales command centre, click Print Invoices and choose the Form Layout as Packing Slip (Item). Customise the Packing Slip so that the dollar amounts of the sale are printed as well as any other fields that are required on a tax invoice.

To make it easier to link the invoice to the order, go to the Setup menu and choose Preferences then click the Sales tab and select the Retain original invoice number on Backorders [system-wide] option.

The order created above needs to be recorded as an invoice so that the WET rebate payable is recorded in the accounts. Go to the Sales command centre, click Sales Register and click the Orders tab. Locate the order and open it. Ensure that all of the details are correct and then click the Invoice button to convert the order to an invoice. If you want you can change the Invoice # so that it is different to the invoice # of the first sale recorded above. Click Record. The invoice will be for $0, but a negative liability (asset) will be posted for the amount of the producer rebate, which will be cleared when the rebate is received. Also, the amount of the rebate will be recorded against an income account (see example below). The rebate is classified as income by the ATO (see NAT 11779-08.2004) and shown at T1 on the BAS.

Example

Selling price of $30,000 exclusive of GST and WET. Total tax of $12,570 consists of WET of $8,700 ($30,000 x 29%) plus GST and GST on WET of $3,870 ($30,000 x 12.9%).

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Recapping the order that is converted to an invoice (Edit > Recap Transaction) shows the following journal entries will be posted to record the WET rebate. The WET rebate is the selling price of $30,000 x 29%=$8,700.

Note that the image below is from a pre-2011 version of AccountRight. Recapping the transaction in AccountRight 2011 and later may display values different to those below due to account consolidation.

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Case 2: Wholesale sale where purchaser quotes and notifies they do not intend to make a GST-free supply

Follow the method as per Case 1 above, but instead of using the GW tax code against the wine product being sold, use the GST or other applicable tax code as there is no WET payable by the purchaser.

Example

Selling price of $15,000 (excluding WET and GST).

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Recapping the order that is converted to an invoice (Edit > Recap Transaction) shows the following journal entries will be posted to record the WET rebate. The WET rebate is the selling price of $15,000 x 29%=$4,350.

Note that the image below is from a pre-2011 version of AccountRight. Recapping the transaction in AccountRight 2011 and later may display values different to those below due to account consolidation.

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How is the rebate reflected in the BAS?

The refundable amount of WET should be entered at 1D 'Wine Equalisation Tax Refundable' on the BAS. It should also be shown as income at T1 by selecting the income account created in Task 1 above.

The producer rebate should be entered at 1D, 'Wine Equalisation Tax Refundable'. This can be done in BASlink by clicking the Setup button at field 1D and selecting the PWR tax code used in the example above.

Note: If you are reporting GST on a Cash basis, you will have to manually enter the figure in to the 1D field.

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, 9267 

There's more to wine production than just stomping on grapes. There's also a host of tax considerations - here's just a few (with ATO links for additional information):

• wine equalisation tax (WET)
• wine producer rebate
• retail wine sales
• wholesale wine sales
• wine exports

This complexity, and your individual business requirements, make it difficult to provide a "one size fits all" method for setting up and recording wine-related transactions in AccountRight. Generally, specific tax codes will need to be set up and used when recording sales. These tax codes will then help you determine your GST reporting requirements.

Want to learn more?

We might not be experts in wine production and sales, but our community forum is a great place to connect with business professionals who are happy to share their insights.