Trade marks and the WET rebate – how brands have become a tax consideration for wine makers

By David Stewart

26 August 2019

The Australian Taxation Office has had in place a Wine Equalisation Tax (WET) rebate for many years. The WET rebate allows wine producers to claim a rebate on the quantum of paid WET.  Before 1 July 2018, the maximum amount that could be claimed each financial year was $500,000. But from 1 July 2018, the maximum amount that can be claimed each financial year is $350,000, and included tougher criteria.

A producer is defined as a business which:

1. manufactures the wine; or
2. provides source product (whole unprocessed grapes, apples or pears, other fruit or vegetables, or honey, and rice) to a contract winemaker to be made into wine on your behalf, but only if at all times the producer owns the source product and the produced wine.

It specifically excludes wine vendors who rebottle third party wine and sell the wine under their own brand.

One of the significant changes from an intellectual property perspective is that wine must be branded with a trade mark owned by the producer or an associated entity.  The legislation lays out the key requirements:

A producer’s wine satisfies the packaging requirement if it is:

1. packaged in a container that does not exceed five litres (51 litres for cider and perry);
2. branded with one of the following trade marks owned by a producer or an entity associated with the producer and that trade mark readily identifies, or can be associated with the producer of the wine:
   • a registered trade mark;
   • a trade mark for which an application to register is under consideration;
   • a trade mark for which registration is pending;
   • a trade mark that has been used in the course of trade throughout the period beginning from 1 July 2015 and ending at the time an assessable dealing with the wine occurred (for example a common law trade mark that has been recognised by the courts or the Registrar of Trade Marks); and
3. as packaged, suitable for retail sale or retail sale from the container.

In the Explanatory Memorandum to the legislation, we have a definition of a “trade mark”:

1.36   A trade mark is a registered trade mark if it is registered under:

• for an Australian producer – the Trade Marks Act 1995 with IP Australia [1] ; or
• for a New Zealand producer – the Trade Marks Act 1995 with IP Australia or with the Intellectual Property Office under New Zealand law.

1.37   An application for an Australian trade mark is pending from the time when the application has been filed until:

•  the application lapses, is withdrawn or is rejected;
•  if the Registrar of Trade Marks refuses to register the trade mark and there is no appeal against the decision, the end of the period allowed for the appeal;
• if the Registrar refuses the decision to register the trade mark, the decision is appealed and the decision to refuse registration is upheld, the day on which the decision is upheld; or
• the trade mark is registered.

1.38   A trade mark also qualifies if it has been used in the course of trade throughout the period beginning from 1 July 2015 and ending at the time an assessable dealing with the wine occurred. Examples of trade marks of this type include:

•  an Australian common law trade mark – that is a trade mark that an Australian court or the Registrar of Trade Marks has recognised as a common law trade mark in Australia;
• a New Zealand common law trade mark – that is a trade mark that a New Zealand court has recognised as a common law trade mark in New Zealand; or
• a trade mark that a producer has applied to their product that has not been registered as a trade mark.

This was an unfortunate development for cleanskin sales. Cleanskin wine started as a mechanism in the early 2000s for the Australian wine industry to cope with the notorious “wine glut”. The wine is sold at a very low cost, and without a brand (thereby known as a “cleanskin”) which identifies the producer. The purpose of doing this is to avoid the potential of damaging the equity in a brand ordinarily associated with low price wine.

How has this translated into trade mark filings in Australia?

• From 1 January 2015 to 31 December 2015 there were 1895 pending and registered trade marks filed in class 33.
• From 1 January 2016 to 31 December 2016, there were 2144 pending and registered trade marks filed in class 33
• From 1 January 2017 to 31 December 2017, there were 2293 pending and registered trade marks in class 33.
• From 1 January 2018 to 31 December 2018, there were 3248 pending and registered trade marks in class 33
• From 1 January 2019 to the present date, there have been 1836 pending and registered trade marks in class 33.

Perhaps it is too early to tell, but it looks as if the trade mark filing “sugar hit” caused by the amendments to the WET tax rebate regime has passed.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.