Aussie tax break leaves sour taste for Kiwi winemakers

1.00pm

New Zealand winemakers are seeing red after a new tax break for their Australian counterparts could give their rivals a significant price advantage.

The $340 million tax deal was announced on Tuesday as part of the Australian budget.

NZ Wine Growers chief executive Philip Gregan said the deal means a bottle of Australian wine could cost, in Australia, about 25 per cent less than a similar New Zealand wine.

It was difficult to say whether the tax break would affect the cost of Australian wine sold in New Zealand, he said.

"Every Australian wine maker has been given a handout of $290,000 by the Australian government," Mr Gregan told National Radio today.

Australia was the New Zealand wine industry's third-largest export market with 4.6 million litres of wine valued at $51.6 million shipped there last year.

"We have very aggressive growth plans for the Australian market. Obviously a number of companies would have to look very closely at how they're pricing their wine in the market," he said.

The Winemakers Federation of Australia had pushed for the exemption to the wine equalisation tax, which was introduced with GST, on the first 600,000 litres of sales.

"There's no problem with that, the only problem is that the (Australian) government hasn't extended the same treatment to imported wines and certainly hasn't extended it to New Zealand wine."

Given closer economic relations between the transtasman countries, New Zealand winemakers expected the tax break would have been extended to them.

NZ Wine Growers had written to the Government on behalf of its members, and wanted it take the issue up with the government in Australia.

"We understand that's going to happen," Mr Gregan said.

The new Australian tax system for winemakers, starting on October 1, will exempt the first $1 million worth of their wholesale wine sales from the contentious wine equalisation tax.

That would effectively release 90 per cent of Australian winemakers from its burden.

National's foreign affairs and trade spokesman, Lockwood Smith, said the tax relief package would put New Zealand wine exports at a huge disadvantage.

"It is the equivalent of a subsidy to domestic producers. It is a serious trade issue and raises concerns about Australia's credibility as leader of the Cairns Group," he said.

He said the Government must act quickly on the issue.

- NZPA