Australian wineries and vineyards are among the most accounting-intensive agricultural businesses. They are subject to a unique excise-style tax (wine equalisation tax), biological asset accounting standards that differ from conventional inventory rules, and a cellar door culture that generates retail and tourism revenue streams alongside wholesale wine sales. Bookkeepers entering this sector for the first time need to understand each of these dimensions.
Biological Assets Under AASB 141
AASB 141 Agriculture governs the accounting for biological assets — living animals and plants. For a vineyard, the biological assets are the grapevines.
Under AASB 141, bearer plants (vines that are used to bear produce over more than one period and are not sold as agricultural produce) were reclassified under the 2015 amendment: bearer plants are now accounted for under AASB 116 Property, Plant and Equipment rather than at fair value. This means vines are measured at cost less accumulated depreciation, not at fair value.
However, the produce growing on bearer plants (the grapes on the vine before harvest) remains within the scope of AASB 141 and must be measured at fair value less costs to sell at each reporting date, to the extent that fair value can be reliably measured.
At harvest, the carrying amount of the harvested grapes (the agricultural produce) transfers from the biological asset category into inventory at the fair value less costs to sell at that date. This becomes the deemed cost of the grapes entering the winemaking process:
At harvest:
Dr Inventory — Harvested Grapes $850,000
Cr Gain on Harvest (P&L) $850,000
(at fair value less costs to sell)
During winemaking:
Dr WIP — Wine in Production $850,000
Cr Inventory — Harvested Grapes $850,000
The winemaking costs (processing, oak, bottling, labelling) are added to WIP until the wine is classified as finished goods inventory.
Viticultural Costs — Capitalised vs. Expensed
Vineyard costs divide into two categories:
Capitalised (added to bearer plant asset):
- Establishment costs for new vineyard blocks (land preparation, trellis installation, planting, first-year training)
- Costs to bring a new vine to bearing age (typically 3–4 years in Australian conditions)
- Major irrigation infrastructure
Expensed in the period:
- Ongoing pruning, shoot thinning, canopy management
- Spraying, fertilising, irrigation operating costs
- Vintage labour costs
The distinction matters because capitalised costs are recovered through depreciation over the productive life of the vines (typically 25–40 years), while expensed costs reduce income immediately.
Depreciation of established vines:
Dr Depreciation — Bearer Plants $45,000
Cr Accumulated Depreciation — Vines $45,000
Wine Equalisation Tax (WET)
Wine equalisation tax is levied under the A New Tax System (Wine Equalisation Tax) Act 1999. The rate is 29% of the wholesale value of wine.
WET applies at the point of wholesale sale — when wine is sold by the producer to a retailer or another person for resale. WET is separate from GST.
Key WET transactions:
| Transaction | WET applies? |
|---|---|
| Sale to retailer or distributor | Yes — 29% of wholesale price |
| Cellar door retail sale to consumer | Yes — WET calculated on notional wholesale value |
| Export | No — wine exported is WET-free |
| Sale of bulk wine (grape juice, unfinished) | No |
Bookkeeping for WET on a wholesale sale:
Dr Accounts Receivable $157,100
Cr Wine Sales Revenue $100,000
Cr GST Payable $10,000 (10% of $100,000)
Cr WET Payable $29,000 (29% of $100,000)
Cr WET — Input Tax Credit $18,100 (WET is included in GST-taxable supply)
Note that WET is included in the price on which GST is calculated — GST applies to the WET-inclusive value. This creates a tax-on-tax effect.
The WET Producer Rebate
The WET producer rebate allows eligible producers to claim back up to $350,000 per year of WET paid on wine they produce. The rebate was introduced to support smaller Australian producers.
Eligibility conditions (post-2018 reform):
- The producer must be the originating producer of the wine (grows or sources grapes, makes and packages the wine)
- Contract winemakers and brand owners who do not produce their own grapes are generally not eligible
- The rebate applies to Australian wine only
Bookkeeping the rebate:
Dr ATO WET Rebate Receivable $350,000
Cr WET Producer Rebate Income $350,000
The rebate is assessable income for income tax purposes. The rebate claim is made on the BAS.
Cellar Door Revenue and Agritourism
A winery's cellar door generates multiple revenue streams:
- Wine sales: Taxable supply (GST + WET at notional wholesale value)
- Tasting fees: Taxable supply (GST only — no WET)
- Food sales: Taxable supply (GST only)
- Accommodation (agritourism): Taxable supply (GST only)
- Events (private functions, weddings): Taxable supply (GST only)
Wine sold at the cellar door directly to consumers is a retail transaction but WET still applies. The producer must calculate a notional wholesale value (typically 50% of the retail price or a calculated cost-plus wholesale equivalent) and remit WET on that notional wholesale value.
Separate revenue codes for each cellar door revenue stream simplify BAS preparation and provide meaningful management information on which activities are profitable.
Irrigation Infrastructure Depreciation
Irrigation systems — drip lines, pumps, filtration, storage dams — are depreciable plant and equipment under Div 40 ITAA 1997. ATO Tax Ruling TR 2021/3 (effective life of depreciable assets) provides effective lives for agricultural irrigation systems:
- Drip irrigation systems: 15 years
- Water storage tanks: 20–50 years (depends on material)
- Pumps: 7–10 years
For small business entities (aggregated turnover < $10M), the instant asset write-off may apply to eligible new assets below the threshold — confirm the current threshold with the ATO.
Vintage Cost Allocation
Each vintage produces a cohort of wine that takes months or years to sell. The cost of goods sold must be matched to the vintage year's production costs — FIFO or weighted average cost is most practical.
A vintage cost schedule should track:
- Viticultural costs allocated to the vintage (grape growing costs for that year)
- Winemaking costs (processing, maturation, oak)
- Bottling and packaging costs
- WET paid (which reduces the net margin)
ReconLink's project-level coding capability is useful for tagging vintage-year costs, providing the bookkeeper with an accurate vintage COGS when the wine is eventually sold.
Key Reference Points
- AASB 141 Agriculture — biological assets (grapes on the vine)
- AASB 116 Property, Plant and Equipment — bearer plants (vines)
- A New Tax System (Wine Equalisation Tax) Act 1999 — WET
- ITAA 1997 Div 40 — plant and equipment depreciation (irrigation)
- ATO TR 2021/3 — effective life of depreciable assets
- ATO WET producer rebate guidance — ato.gov.au/wine-equalisation-tax
- ATO GSTR 2009/2 — GST and the wine equalisation tax