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Vineyard Tax Schemes Need to be scrapped – Are they to blame?

Much commentary this week in the wine world (probably due to the fallout of the Henry Tax rulings that has not only greatly affected the Australian Mining Industry, but every other sector) has focused on the over-supply of grapes and recommendations by wine lobbyists that some of Australia’s premier wine regions, such as Barossa and Clare Valley need to remove up to 20% of their vineyard area to remain sustainable in the medium to long term.

The grape glut is still extremely topical, with 30 vineyards, many family owned, losing their contracts with Orlando Wyhndam, a total of over 8000 tonnes, predominantly from the South Australian and Victorian Riverland. One Barossa grape grower and representative lambasted the government for retaining tax incentives for mass planting of new vineyards. It is quite ludicrous that legislation still exists for tax incentive schemes for new vineyard plantings, when mature, high quality vineyards are being pulled out.

The problem however goes a little deeper, with the tax schemes being indirectly related to the perception in much of the world that Australia produces high volume, fruit driven styles for the cheaper end of the market. When the tax schemes were first introduced, there was a rush by many investors to plant vineyards, sign contracts with bigger companies, reduce tax while waiting for profit.

Unfortunately much of this was short sighted, and despite many commentators deriding the schemes, more and more factory vineyards were planted. Much of the vineyard area under these schemes was planted in irrigation areas where extremely high yield were achievable, pleasing investors, but producing lower quality fruit. Consequently wineries needed to produce wines in volume for the lower end of the market, and while it was also beneficial for wine companies, the domestic and export market was flooded with cheaper lower quality wine.

Consumers loved it for a while, and many still do. Cheap easy drinking wine for fun and fantasy. However underlying all the hype, damage was being done to the reputation of Australia’s ability to produce ultra high quality premium wines from lower yielding vineyards in distinctive regions where varieties suited the terroir. In my experience there are plenty of producers in this category, but still they find it hard to get a foot hold in the premium end of the market, save for a few wines that have given rave reviews by respected experts. The extraordinary prices these wines then command has also has had other detrimental consequences.

However, maybe the tide is slowly turning with wine heavy weights such as Jancis Robinson, and the unique banter of Gary Vaynerchuk of WineLibraryTV, vociferously talking up Australian Wines. Even recently Vaynerchuk commented that he has only recently realised the quality of Australian Wines.

The Vineyard Tax incentive schemes are not entirely to blame for the perception of Australian wine around the world, but they haven’t helped. Let’s hope the new breed of producers and marketers get the balance right for the future.

About Jono Farrington

Jono Farrington
Jono Farrington holds a Bachelor of Agricultural Science (Oenology) from the University of Adelaide (formely the Roseworthy Agricultural College). He also holds a Post Graduate Degree in Business Management from Monash University. He worked in the wine industry for nearly a decade, completing vintages in Australia and Bordeaux, before setting up an equestrian training centre.

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