Australian distillers slam spirits tax hike

A trade body has hit out at Australia’s “outdated” spirits tax regime as distillers face the biggest increase in nearly 50 years.

Tax has risen to AU$94.41 per litre of pure alcohol, based on consumer price inflation (CPI) figures, which means Australian distillers will have to pay an extra AU$1 of tax on an average 700ml bottle of spirit at 40% ABV.

“This is effectively a double whammy on spirits,” said Greg Holland, chief executive of trade group Spirits and Cocktails. “It’s the biggest increase in almost 50 years, since our tax figures were updated in 1978, and in that time spirits manufacturers have been slugged with the GST [goods and services tax] and the RTDs (ready-to-drink) tax as well. “

Australia has the third-highest spirits tax in the world, as well as a complex alcohol duty regime, trade body Spirits and Cocktails noted.

“We know all Australians are feeling the pain of inflation but this outdated tax regime means the spirits industry is effectively punished twice,” Holland added.

He noted distillers are paying ‘skyrocketing prices’ for barley, glass and cans, and freight charges that have more than doubled in certain regions.

Spirits and Cocktails cited several cost increases over the past 12 months for distillers, including a 55% increase on freight, a 20%-30% rise on glass, a 50% hike on cereals, and a 16% surge on oak barrels.

Holland noted: “On top of all the other cost of living pressures they’re facing, those millions of Australian consumers will now likely be slugged even more as a result of this excise increase.”

The trade group said the country’s ‘outmoded’ alcohol tax system indexes spirits excise to inflation, and results in increases every six months.

As such, up to 60% of the retail price of an average 700ml bottle of spirit in Australia is now tax, the group highlighted.

Automatic increases in line with CPI means the government’s average tax take from the distilling sector, which includes pre-mixed spirit production, rises by between AU$100 million to AU$120m every year.

Holland said: “This tax is cannibalising our industry. It has an insatiable appetite; no matter how hard our distillers and manufacturers work to grow, it keeps taking more.

“We look forward to working with the new federal government to build a more sustainable future for the Australian spirits industry.”

For an in-depth look at the Australian market, check out the August 2022 issue of The Spirits Business.

In December last year, the UK and Australia agreed to a trade deal that will remove tariffs on spirits such as Scotch whisky and gin.