Tax relief saves wineries

SMALL wineries with revenue of under $1 million may be surviving difficult market conditions with the help of tax relief, according to a new industry survey.
The 2005 vintage benchmarking survey by financial services firm Deloitte and the Winemakers’ Federation of Australia shows that profitability among small wineries improved significantly in the 2004/05 financial year although 10 per cent still ran at a loss.

The survey said very small wineries that had responded to questionnaires generated earnings-before-tax margins of 8.1 per cent, supported by revenue not directly linked to wine production.

Other revenue included the Wine Equalisation Tax Commonwealth Producer rebate, or WET rebate, of up to $290,000.

„Tax relief is particularly important for small wineries with less than $1 million of revenue as generally they have higher grape costs, wine costs, overhead cost per litre and packaging costs than larger wineries,“ Deloitte Wine Industry Group leader Stephen Harvey said.

„Fierce competition, excess wine production and greater retail consolidation are placing extreme margin pressure on all wineries and the WET rebate is a welcome relief to Australia’s small wineries.“

The survey showed that among wineries of all sizes, income was being hurt by higher general and administration costs, interest expenses, higher selling costs and inventory write-downs.

The survey also concluded that contract processing for others had become a major activity for all wineries with less than $10 million of revenue.

More wineries were also increasing the proportion of revenue derived from sales of wine priced at more than $50 per bottle.

Source: theaustralian.news.com.au