Woolworths is changing its method of liquor distribution, which gave it annual savings of $30 million on its wine tax bill, less than two months after the Australian Tax Office announced that the tax method was being investigated in April.
The wine equalisation tax – a subject of the Treasury’s review of taxation – is levied at 29 per cent on the final wholesale price of wine. However, when an indirect marketer is used – as was the case with Woolworths and its special-purpose vehicle – the wine can be taxed at half the retail price, which is more tax-effective.
Media reports say Woolworths was using this method for several years and its main rival, Coles, was gearing up to do the same when the warning came from the ATO.
It is reported that Woolworths sent a letter this month to suppliers of its Dan Murphy’s bottleshop chain, informing them that the first step to move towards national liquor distribution would be to remove the affected special-purpose marketing vehicle from its distribution chain.
The next step in its distribution changes would involve suppliers sending the product to large warehouses outside cities like Sydney, Melbourne and Perth rather than to individual stores.
It is unknown if the ATO will attempt to recover back taxes from companies like Woolworths.