Spirit tax to top $100 a litre in budget blow to distillers, drinkers.

Drinkers will be hit with a surge in the price of a humble gin and tonic within days, with a hefty spirit tax hike. Words by Madura McCormack, Courier Mail.
Spirit tax to top $100 a litre in budget blow to distillers, drinkers. - Granddad Jack's Craft Distillery

The price of a humble gin and tonic or rum and cola is expected to surge within days, with a hefty tax hike. And the six-monthly scheduled increase of the alcohol excise, tied to inflation, is expected to send the "punishing tax" soaring beyond $100 per litre of alcohol - a figure industry did not expect to hit until at least 2029.

Over 60 per cent of the cost of bottle of Bundaberg Rum underproof already goes straight to the taxman, according to manufacturer Diageo. Industry number-crunching shows the tax hike would mean at least $34 of a 700ml bottle of gin retailing at $60 was purely to service the alcohol excise and GST. Distillers are calling for the government to freeze future tax rises, warning it was exacerbating a "perfect storm" of supply chain issues, soaring input costs and depressed consumer demand.

Australia already has one of the highest spirits taxes in the world. But manufacturers shouldn't hold their breath, with the federal government signalling no changes to the rwice yearly tax hike are being considered. A spokeswoman for Treasurer Jim Chalmers said they had listened "respectfully to the ideas put to us", but those needed to be weighed against other priorities in the budget. The federal government raked in $4.3Sbn collectively from its excise tax on beer and spirits in 2021-22, a figure which has increased every year and stood at $3.lbn a decade prior.

Small distillers will be hit the hardest, with Queensland Distillers Association president and Granddad Jack's Craft Distillery founder Dave Ridden saying the excise was the biggest cost increase confronting his business. "Craft spirits can be more successful than what wine has been to Australia within the next 10 years, but it won't happen if we keep getting hammered with these increases. It defies logic," he said. The spirits industry supports an estimated 53,000 jobs across manufacturing, retail, wholesale and hospitality.

Diageo Australia managing director Angus McPherson said the current tax regime was becoming "unbearable". "Like all businesses across the country, we've copped a lot of recent price hikes - from increased power costs to raw material costs and freight costs," he said. "Inflation is a major challenge across the economy, and we're not immune to it - but the way we're taxed makes it even harder."

Australian Distillers Association chief executive Paul McLeay said the policy settings needed to be right to support a growing industry, most of which were small family-owned business located in regional areas.

Many distillers won't survive spirit excise tax hike "If the Government is serious about building a broader, deeper industrial base in Australia and the creation of manufacturing jobs in the regions, it must reconsider this punitive excise regime that disincentivises producers to invest in and grow their - businesses," he said.

Article from the Courier Mail, published on July 21, 2023.

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