Winemakers' industry guidelines
The Income Tax Act 2007 sets out the rules for the valuation of trading stock at balance date.
Trading stock held at balance date for wineries includes stock in the process of fermenting, maturing wines and wines held for sale.
There are simplified rules for "small " taxpayers, those who, together with associates, have an annual turnover of $3 million or less.
Small taxpayers may value their stock at cost, market value, replacement price or discounted selling price.
In determining the cost of closing stock, small taxpayers that manufacture or produce trading stock are allowed to include a lesser level of costs than other taxpayers. The following costs of production must be included:
- direct and indirect material costs
- direct and indirect labour costs
- utilities costs such as heat, light and power
- cost of repairs and maintenance to factory plant
- cost of rent or depreciation of factory plant.
Small taxpayers that have a turnover of $1.3 million or less and reasonably estimate the value of their closing stock is less than $10,000, may use their opening value of trading stock as the value of their closing stock.
Taxpayers other than small taxpayers
Trading stock must be valued using a cost valuation method or, when the market selling value is lower than cost, market selling value can be used.
Cost is determined using generally accepted accounting principles. In this case the requirements of NZIAS-2 Inventories are applicable to the extent that they apply to stock that is trading stock for tax purposes.
The costs to include are the costs you incurred in the ordinary course of business to bring the stock to their present condition and location.
As well as including those costs (set out above) that a small taxpayer must include, other taxpayers must also include certain other overhead costs.
The WET rebate
The wine equalisation tax (WET) is levied in Australia for sales of wine including wine exported from New Zealand. If you’re exporting wine to Australia you may be entitled to a WET rebate.
To claim the rebate you must have an excise identification number and be an approved New Zealand participant. The amount of the rebate is income for the New Zealand resident wine producer.