WET - Calculating WET on retail sales

A retail sale is any sale that is not a wholesale sale. These include sales made directly to the consumer, to wine clubs, bottle shops, hotels, restaurants and cafes.

The taxable value on retail sales is known as the 'notional wholesale selling price'. There are two ways to calculate this:

• half retail price
• average wholesale price.

For grape wine, you may use either the half retail or the average wholesale method to work out the notional wholesale selling price.

For wine other than grape wine, you must use the half retail price method.

WET on wine for own use

The 'notional wholesale selling price' is also the taxable value for wine for own use. The two methods used for retail sales are also used to calculate WET for wine for own use.

Half retail price method

To use this method to calculate the notional wholesale selling price (that is, the taxable value) on retail sales of grape wine or grape wine for own use:

• work out 50% of the retail price (including WET and GST) of those sales or in the case of wine for own use 50% of the price (including WET and GST) of what would have been the price if you sold it by retail
• then multiply that amount by 29% to work out the WET payable.

Example 1 – half retail price method

Happy Valley Wines makes a retail sale of one dozen bottles of grape wine at the cellar door for $140, including WET and GST. A bottle of the same wine is used for tastings at the cellar door.

Taxable value of a dozen bottles	$140.00 x 50%	= $70.00
WET payable per dozen	$70.00 x 29%	= $20.30
Taxable value of one bottle of this wine	$70.00÷12	= $ 5.83
WET payable on the bottle used for tasting	$5.83 x 29%	= $ 1.69

End of example

Average wholesale price method

You can only use this method if, in the relevant tax period, at least 10% by value of all your sales of grape wine are wholesale sales that are both:

• the same vintage as the grape wine to which the dealing relates
• produced from the same varieties or blends of grape varieties as the grape wine to which the dealing relates.

Calculating average wholesale price

To work out the average wholesale price, you use the weighted average of the prices of the wholesale sales (including exports) of wine that fall into this category for each tax period. By using the weighted average you take into account the relative proportion of each type of wine you sell.

When you calculate the average wholesale price, you take into account any discounts, incentives, rebates and other payments that reduce the wine’s selling price.

Example 2 – average wholesale price method

Good Wines Winery produces a variety of wine which they sell by wholesale and directly to customers at the cellar door.

They lodge their BAS monthly.

In the first week of September, they sold a dozen bottles of their 2004 Verdelho to a cellar door customer for $190 (inclusive of WET and GST).

During the rest of September, they sold additional bottles of the 2004 Verdelho, some to distributors.

In preparation for their September BAS, they work out that more than 10% of their sales of the 2004 Verdelho were wholesale sales to distributors.

Good Wine Winery chooses to use the average wholesale price method to calculate the taxable value and the WET payable for their retail sales of this wine in September.

The break up for the different wholesale prices for their 2004 Verdelho sales is:

• 70% at $80 per dozen (excluding WET and GST)
• 30% at $90 per dozen (excluding WET and GST).

To calculate the WET payable on a dozen of 2004 Verdelho sold at cellar door during the tax period, the winery performs the following steps:

Step 1 Work out the weighted average price of the wholesale sales of 2004 Verdelho: (70% x $80) + (30% x $90) = $56 + $27 = $83

Step 2 Multiply the weighted average price by the WET percentage (29%):
$83 X 29% = $24.07

The amount of WET payable for this cellar door sale of a dozen 2004 Verdelho is $24.07

GST is unaffected by the difference between retail and wholesale sales. GST is calculated on the retail price of the dozen bottles of 2004 Verdelho, so GST = $190 ÷ 11 = $17.27.

End of example

This article is an extract from information provided by the Australia Taxation Office found here.

The attached example 'Half Retail Method' calculator is prepared by mi-fi based on this information.