Spirits producers and lovers awoke this week to the grim reality of more than $100 per litre of tax on their products, in a further blow to this burgeoning industry. 

The excise tax rose to $100.05 per litre of alcohol from 1 August, following hikes of 4.1% last year and another 3.7% in February, putting further pressure on Australian spirits manufacturers, who were not expecting taxes to break through the $100 barrier until 2029.

It also comes at a difficult time for consumers, who are already struggling with inflationary pressures on household budgets.

Twice a year, every year, the excise tax on spirits increases in line with the Consumer Price Index (CPI).

Spirits & Cocktails Australia chief executive Greg Holland said spirits manufacturers are in a state of disbelief at the latest tax hike confronting their businesses. 

“This cannot be what the policy makers had in mind when they designed the alcohol excise regime in 1983, at which time there were only two spirits manufacturers in Australia,” he said.

“There are now more than 600 businesses subject to this tax. “When spirits drinkers head down to their local today, they should ask themselves why they are paying the third highest excise rate in the world for their favourite spirit. 

“This situation is clearly untenable. We are calling on the Federal Government to freeze future excise increases so that the policy settings this industry can be reviewed.” 

Australian Distillers chief executive Paul McLeay said that reaching the $100/litre milestone six years earlier than previously forecast means the industry is now at a crossroads. 

“We can either get the policy settings right to support this industry that is showing so much promise, or tax it into oblivion,” he said. 

“Evidently, the current excise regime is at odds with the government’s stated aim of driving growth in the manufacturing and tourism sectors, and job creation in regional areas, which is where two out of every three Australian distilleries are located.”

James Christopher of Brix Distillers in Surry Hills told Delicious: “We have an amazing local craft spirit industry growing at a strong rate. If the Federal Government wants this local industry to continue growing and focus on the quality products we are currently producing, while also be truly competitive against overseas brands, then the tax needs to be overhauled. Distilleries will need to continue passing the increases across to the consumer and we will only see prices go up, rather than stabilise.”

Major producers are also calling for a freeze on excise increases.

Diageo Australia, which produces Queensland’s iconic Bundaberg Rum, said the current tax regime was becoming “unbearable”.

“We know our loyal Bundy consumers love our product, but many of them don’t know that more than 60 per cent of the money they already pay for a bottle of Bundaberg Rum UP goes straight to the taxman in Canberra, and that tax keeps growing and growing,” managing director Angus McPherson said.

Government revenue from alcohol taxes has skyrocketed. In 2021-22, the Federal Government expected alcohol tax receipts of around $8 billion, up from $6.5 billion in 2017-18, according to the Treasury.

Double blow for Victorian drinks industry

The alcohol excise increase comes ahead of Victoria’s Container Deposit Scheme commencing on 1 November 2023.

Under Victoria’s Container Deposit Scheme, First Suppliers (beverage manufacturers and importers) pay for the cost of operating the Scheme to recover eligible containers.

CDS Vic’s costs (ex GST) per container for First Suppliers will start at 11.05c for aluminium, 11.40c for glass, 11.15c for HDPE, 11.15c for PET and 11.50c for LPB, and 11.10 cents for other materials.

“I’m not sure how much longer liquor retailers can sustain these archaic tax increases on top of a Container Deposit Scheme,” said Cellarbrations at Gisborne owner Tony Bongiovanni.

“We are the front line to consumers reactions to this already highly taxed industry. In addition, the industry is facing a declining retail market due to the constant hikes in interest rates.”

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