On 5 August, the Australian Federal Government will increase what is already the world’s third highest tax on spirits, and the industry is calling for change.
Australia’s spirits tax first surpassed $100 in August last year, reaching $100.05 per litre of alcohol. The tax on spirits continued to rise, reaching $101.85 per litre of alcohol in February 2024, with an impending tax increase on the cards once again.
Consumer spending has already taken a hit as the impact of cost-of-living pressures is felt around the country, and according to Greg Holland, Spirits & Cocktails Chief Executive, continued tax hikes cannot be justified in these economic circumstances.
“Enjoying a drink with friends is one of life’s few simple pleasures for Australians who are currently struggling with the cost of living,” he says.
“Sadly, this custom is increasingly being priced out of reach for many people, thanks to relentless alcohol tax hikes every six months.”
These pressures continue to inflict damage on Australia’s spirits industry, which is said to have the potential to become a $1bn powerhouse under the right policy settings. This potential, with the support of the Federal Government, could take Australia’s spirits from a $210m export market to a $1bn export market by 2035.
While spirits excise was once deemed a revenue-raising measure, Holland says it is abundantly clear that the automatic indexation of excise to CPI has outlived its usefulness.
He said: “The Federal Government’s own data has repeatedly demonstrated that rising alcohol excise is contributing to the stubborn inflation problem that it is trying so hard to address.
“Meanwhile, our hospitality sector is on its knees. Another tax increase will only increase the cost burden on struggling venues.
“At $101.85 per litre, the tax is already so absurdly high that it has lured organised crime syndicates into the bootlegging of illicit alcohol.
“And, the Government has repeatedly been forced to downgrade its spirits excise revenue forecasts, suggesting we have already reached the limit of what consumers are prepared to pay for spirits.”
As part of the 2024-2025 Federal Budget, the Government announced its Future Made in Australia policy, an investment that would help Australia succeed and remain an indispensable part of the global economy.
While the industry was supportive of the Future Made in Australia policy, Australian Distillers Association Chief Executive Paul McLeay says the current excise regime is at odds with the objectives of boosting domestic manufacturing and trade.
“The Government has allocated $22.7 billion over the next decade to its Future Made In Australia policy, which we are fully supportive of,” he said.
“However, we hope these lofty ambitions will not be at the expense of quicker wins in developing manufacturing sectors with strong growth prospects, such as distilling.”
With over 700 distilleries in Australia primed to deliver a $1bn export industry, McLeay says the industry isn’t asking for funding from the Government to make this happen, just some relief on six-monthly tax increases.
“We are calling for spirits tax to be frozen at its current rate for two years. This would have a comparatively modest budgetary impact in the context of the Government’s domestic manufacturing agenda.
“This would provide the stability for a broader review of spirits excise settings, so we can create the right conditions to attract capital investment, scale up manufacturing capabilities and grow exports,” he added.