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Australia Wine Equalisation Tax (WET)
This article is specific to Australia, but the set up can be applied to other jurisdictions for similar taxes. Please consult with your accountant on your tax obligations.
Background: In Australia, Wine equalisation tax (WET) applies to wine manufacturers, wholesalers, and importers. WET is a tax of 29% of the wholesale value of wine. It is only payable if you are registered or required to be registered for GST.
WET Calculation
Example for a wholesale wine sale:
Price of Wine = $100.00 WET (29%) = $29.00 Price including WET = $129.00 GST (10%) = $12.90 Total Price = $141.90
The effective tax rate is therefore 41.90% as GST is applied on top of the WET.
Setting up Xero
We recommend setting up a new Tax Rate in Xero to cater for this, combining both WET and GST, as per the below screenshot.
Selecting Compound for GST lets you apply GST on the total including WET.
More details on how to add a new tax rate can be found in Xero's help docs: https://central.xero.com/s/article/Add-or-edit-tax-rates
Once done, you can set up the tax type in your Xero items if you're using that to track COGS and Inventory.
Setting up Shopify
Natively, Shopify does not support WET but we can override GST to include WET for specific products.
Depending on what the business sells, we may need to create a new Product Type or Collection in Shopify to override the tax on those products to include WET.
After doing so, we will need to set up a Product overrides for the Wine collection with the tax rate as 41.9%.
Example Shopify Order and Xero Invoice
When a Shopify order for products in that new collection is now generated, the tax will be 41.9% in Shopify. Even though it says GST, we can ignore that as we've overridden the tax rate for that to 41.90% which shows in the example screenshot below.
Given this is a custom tax mapping, please reach out to the Hyve Support team via our online chat or email help@hyvelabs.co to assist with the tax configuration in the app. You will need to provide the details of the tax created in Xero and the product type / collection created in Xero.
When that order is posted over to Xero, the invoice will be as follows, where the Tax Rate is the newly created WET + GST rate with the right dollar amount.
Bear in mind, you should consult with your accountant to ensure the set up complies with your tax obligations.