On August 5, the Australian Federal Government will implement another hike in what is already the world’s third-highest tax on spirits. The spirits industry is urging for reform in response to these escalating costs.
Since surpassing $100 per litre of alcohol in August last year, the spirits tax has continued to climb, reaching $101.85 per litre in February 2024. With another increase on the horizon, the industry faces mounting challenges.
Greg Holland, Chief Executive of Spirits & Cocktails, criticizes the ongoing tax hikes, emphasizing their impact on consumer spending amidst widespread cost-of-living pressures. “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 states. “Sadly, this custom is increasingly being priced out of reach for many people, thanks to relentless alcohol tax hikes every six months.”
The rising tax burden threatens the potential of Australia’s spirits industry, which could evolve into a $1 billion powerhouse with favorable policy conditions. Currently, the industry contributes $210 million to the export market, with aspirations to expand significantly by 2035.
Holland argues that the automatic indexation of spirits excise to the Consumer Price Index (CPI) has become outdated. “The Federal Government’s own data shows that increasing alcohol excise is exacerbating the inflation problem it aims to resolve,” he says. “Our hospitality sector is already struggling, and another tax increase will only worsen the financial strain on venues.”
He also highlights concerns over organized crime, noting that the high tax rate has driven illicit alcohol bootlegging. Additionally, the Government has repeatedly revised its spirits excise revenue forecasts, indicating that consumer tolerance for such high prices may be exhausted.
The 2024-2025 Federal Budget introduced the Future Made in Australia policy, an initiative aimed at bolstering domestic manufacturing and trade. Although the industry supports this policy, Australian Distillers Association Chief Executive Paul McLeay argues that the current excise regime conflicts with the policy’s goals.
“The Government has committed $22.7 billion over the next decade to the Future Made in Australia policy, which we fully support,” McLeay says. “However, we hope these ambitious plans won’t come at the cost of faster progress in sectors like distilling that have strong growth potential.”
With over 700 Australian distilleries poised to drive a $1 billion export industry, McLeay emphasizes that the industry seeks no government funding but rather relief from biannual tax increases. “We are calling for a freeze on the spirits tax at its current rate for two years. This modest adjustment would provide stability and allow for a comprehensive review of spirits excise settings, fostering investment and growth in the sector,” he concludes.
Related Topics:
