Australia has been hit with another spirits tax rise, with excise now at $104.31 per litre of alcohol. That’s seven times higher than the United States and significantly higher than the $61.21 New Zealanders pay in spirits tax.

The alcohol excise tax in Australia is the highest in the world outside of Scandinavia and it rises twice a year, every year, in line with inflation.

While inflation has eased to its lowest level since March 2021, reducing the expected alcohol excise rise to 1.004%, industry bodies have cautioned that drinks producers, venues and consumers are still struggling.

The tax paid on every one litre bottle of Bundaberg Rum sold in Australia, for example, has now risen to $38.59.

Bundaberg Rum launched a campaign last month in towns across Queensland and NSW, letting consumers know they are paying 63% tax on a $61.50 1L bottle of Bundaberg Rum UP.

Chair of the Bundaberg Distilling Co. Amanda Lampe said: “We’ve been talking to Bundy drinkers from Cairns, to Caboolture to Coffs Harbour and they’ve been telling us they notice when the price of their favourite drinks go up.”

“The message is loud and clear: they’re feeling the pinch. People are cutting back, skipping drinks at the pub and hunting for bargains.

“At the end of the day the government makes a lot more money out of a bottle of Bundaberg Rum than we do.”

A poll of more than 2100 Yahoo Finance readers revealed that 80% felt the increased prices would mean they would avoid going out for a drink.

“Beer and spirits excise is a dripping tap which delivers $6.2 billion of drinkers’ money to Canberra already – and is budgeted to go up another $800 million by 2027,” Australian Hotels Association chief executive Stephen Ferguson told news.com.au.

“That’s money out of people’s pockets who can’t afford it. Everyone knows a dripping tap should be turned off.

“That’s what we want to see, a fair go for the men and women who enjoy a beer or gin and tonic at their local pub – not a hidden tax designed to increase by small amounts that goes up twice a year.

“These are the places where jobs are actually created – and they are the heart of their communities.”

Alcohol excise rises backfire on Australian Government

In December 2024, the Australian Government has dramatically downgraded its expected revenue from the alcohol excise tax over the next four years as price rises dent consumer demand.

Spirit excise proceeds, for example, have been revised downwards by $1.7 billion over the four years to 2027-28 (a drop of 8%).

The Australian Government’s Mid-Year Economic and Fiscal Outlook 2024–25 (MYEFO) shows a significant decline in forecast revenue since the previous estimates in the May budget.

Beer, spirits and “other alcohol” excise revenues are expected to be down $330 million on estimates for 2024-25, with 2025-26 predicted to be down $380 million.

The Coalition is contemplating changes to the alcohol excise system according to deputy opposition leader Sussan Ley.

“We’re looking at everything when it comes to tax, and we always say that under our side of politics, taxes will be lower, simpler and fairer,” Ley told Adelaide radio when asked about tax settings on alcohol.

“I’m very sympathetic when I speak to not just the people who run the pubs, it’s the punters who go in there for a couple of quiet, cold ones at the end of the day.

“They’ve worked all day in the hot sun, they’re just having a couple on the way home, and it’s becoming unaffordable.”

Surging prices fuel bootleg booze industry

In addition to downgrading forecast excise revenue, the soaring taxes are driving growth in the black market for alcohol.

In 2022-23, around $710million, or 88.8% of unreported alcohol duty was recorded due to the black market or “shadow economy” according to the ATO.

It’s estimated that 2.4 million bottles of illegal alcohol enter the market every year. 

Alcohol Beverages Australia Executive Director Alistair Coe told The Australian twice yearly excise increases were a “blunt policy instrument” that were encouraging the production and sale of illicit alcohol.

“Not only is the commonwealth losing considerable revenue, but the illicit alcohol sold can be quite dangerous,” Coe said.

Last year, Victoria Police and the ATO uncovered a billion-dollar liquor substitution racket that involved crime syndicates mixed denatured spirits such as those used for paint stripper, with whisky and vodka, which was subsequently sold at pubs, nightclubs and music festivals.

An ATO spokeperson said that organised crime liquor operations were on the rise.

“The ATO is obviously concerned about the tax leakage and the unfair impact on businesses that do the right thing, as well as the broader community threats, including the health and safety risks inherent in the consumption of illegally manufactured alcohol,” said the spokesperson. 

Inspectors from Liquor & Gaming NSW seized 191 bottles and cans of alcohol from an unlicensed supermarket in Camperdown in Sydney’s inner west in September 2024.

Oriental Express on Parramatta Road is alleged to have sold alcohol to covert inspectors on 28 August 2024. The supermarket does not hold a liquor licence.

The drinks for sale on the supermarket shelves ranged in alcohol content from 4.5 per cent to 56 per cent.

They included Sizak Soju in various flavours, Golden River and Pearl River beer, Jiang Xiaobai fruit cube and Jiang Xiaobai fruit cube grape.

Liquor & Gaming NSW Executive Director Regulatory Operations Jane Lin said: “What is most concerning in cases like this is that unlicensed premises are not subject to the same legislative controls as licensed premises are, which increases the risk of alcohol-related harm occurring.

“This could include someone under the age of 18 purchasing a drink with a very high alcohol content.

“Licensed supermarkets have particular controls in place to prevent minors purchasing alcohol or even being in the liquor sales area without a responsible adult.

“The seized drinks are not clearly marked in English as alcoholic and the packaging of some of them may appeal to minors with bright colours, fruits and emojis.

“Children consuming drinks with an alcohol content as high as 56 per cent could have tragic consequences.”

The tax on spirits will rise again in August 2025.