The Australian Tax Office (ATO) has confirmed Australia’s illicit alcohol market continuing to grow, with new figures revealing its dangerous impact.

The alcohol tax gap – which estimates how much excise and customs duty on alcohol is lost each year through things such as illegal production, unreported sales and non-compliance – has risen to $1.23 billion and now represents almost 14 per cent of the market.

The new ATO figures show the value of the alcohol tax gap has more than doubled since 2015–16, growing by $685 million to $1.23 billion in 2024–25.

The Federal Government has written off about $2.3 billion in forecast spirits revenue over the four years from 2024-25 to 2027-28, demonstrating a simultaneous decline in the size of the legitimate spirits market.

Spirits Council of Australia executive director Steven Fanner said the ATO figures reinforced what the industry already knew: that Australia’s growing illicit alcohol problem is being driven by record-high taxes, tax loopholes and inadequate regulation.

“Sadly, the fact that Australia now has a billion-dollar alcohol black market does not come as a surprise to anyone working in the industry, particularly legitimate producers whose products are being undercut by rivers of cheap, low-quality, tax-free alcohol,” Fanner said.

“Let’s be very clear, this hurts everyone – the government is losing more than $1 billion a year in revenue, responsible producers are struggling and consumers are being put at risk by products they can’t trust.”

Fanner urged the government to address Australia’s spirits tax, which is sitting at $110.15 per litre of alcohol, the highest in the world outside of Scandinavia.

He also raised significant concerns that the Alcohol Manufacturer’s Remissions Scheme (AMR), a $400,000 tax break for distillers, is being exploited by organisations that are not distilling products but are simply moving tax-free spirits through the market.

The AMR is now costing the government almost three times as much as it was expected to when it was introduced by the Morrison Government in 2021.

“This scheme is clearly not operating as it was intended to. Rather than providing excise relief for legitimate distillers, it is blurring the lines between the legitimate and illicit alcohol market,” Fanner said.

“The picture is clear – you have a threefold blowout in the cost of the remission scheme, an alcohol black market costing taxpayers more than a billion a year, and declining revenue from the sale of legitimate spirits.

“We have an urgent window to act to ensure we don’t repeat the mistakes we have seen occur in tobacco.”