Industry leaders explain why spirits tax must be frozen

Australia’s spirits industry continues to vocalise its disapproval of the biannual spirits tax excise increases, arguing that it is becoming more and more out of touch with comparable economies. In Australia, $101.85 is now paid in tax for every litre of alcohol. By comparison, the amount of tax paid per litre of alcohol in the USA is $14.54 , $69.42 in New Zealand, and $61.90 in Great Britain. 

“Three of our most important G7 trading partners have recognised that the current economic conditions are putting unprecedented cost pressures on the industry and consumers,” said Greg Holland, Chief Executive at Spirits & Cocktails Australia. 

“Yet in Australia, the world’s third highest spirits tax was increased again last month to $101.85 per litre of alcohol, with another hike coming in August.

“As a result, hard-working Australians are continually being asked to pay more for their favourite spirits. For example, tax comprises 63% of the cost of a bottle of Bundaberg Rum.”

The recent increase to Australia’s spirits tax excise has made production more difficult for Australian distillers at a time where many governments are introducing policy that seeks to support their respective industries. Examples include the UK Government this week extending its freeze on alcohol duty until february 2025, Canada’s decision to cap annual inflation adjustment to excise duty at 2%, and Japan’s National Tax Agency’s effort to align tax rates and remove distortions between different alcohol categories.

The bi-annual indexation to the spirits tax excise have been progressively putting stress on the Australian distilling industry, with many distilleries already struggling in the current trading environment. One example is Cape Byron Distillery

“We don't have the economies of scale, nor are we growing quick enough to absorb these ongoing costs,” said Founder Eddie Brook.

“As a result, these six-monthly increases really do have the effect of reducing margin in our business at a time when we are already experiencing cost increases across the board, and economic conditions are impacting consumer demand and spend choices.

“It's getting to the point that it is putting such stress on the industry.”

The latest increase to the spirits tax excise has occurred concurrently with decreasing consumer spending. 

“Our margins are already being squeezed as input costs are going up across the board,” said Never Never Distilling Co-Founder George Georgiadis. 

“We’re already struggling to make that work and then we get slugged every six months with tax increases that are not only swallowing up more margin, but making our products proportionately more expensive to beer and wine again.”

Both Spirits & Cocktails Australia and the Australian Distillers Association are concerned about the sustainability of Australia’s distilling industry if the Federal Government doesn’t take action.

“A growing Australian spirits industry will promote investment and job creation across the industry and its supply chain,” said Holland.

“Sadly, Australia is increasingly being defined as a place where it is impossible for spirits manufacturers to do business.

“We call on the Federal Government to immediately freeze spirits tax for two years to safeguard our industry’s future and help the Government accomplish its stated mission of bringing inflation under control.”