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Tax Increase on Alcohol in Australia: Implications for Consumers and Industry

By Aussie Brewmakers Team • Feb 10, 2024

Australians are waking up to the reality of paying more for their favorite beer and spirits as the federal alcohol tax takes a leap, effective from February 1. The anticipated price surge is a result of the biannual indexation increase, pushing the tax on one litre of pure alcohol from $100.05 to $101.85. As a consequence, the tax on a pint of beer is set to climb by 90 cents, while the levy on a slab will reach $20, according to the Brewers Association of Australia.

This adjustment catapults Australia to the third position for the highest spirits tax globally, trailing only Iceland and Norway. The implications of this tax hike are manifold, affecting not just consumers but also the brewing, distilling, and hospitality sectors. Concerns loom over the impact this will have on an already stretched cost-of-living scenario, as well as its potential to exacerbate inflation and job losses.

Recent federal government data reveals that the automatic biannual indexation of spirits tax is directly contributing to inflationary pressures. Greg Holland, the chief executive of Spirits & Cocktails Australia, highlighted that the alcohol category alone accounted for a significant 2.8 per cent rise in the December Consumer Price Index (CPI) quarter.

In response to these developments, industry leaders are urging the government to reassess the automatic indexation of spirits excise, which has been in place since 1984. Holland stresses the need for policy revision, given that Australia now boasts the third-highest spirits tax globally. The cumulative effect of such taxation mechanisms on consumers is palpable, particularly when considering the cascading impact on retail prices.

The mechanics of alcohol taxation are intricate, with levies calculated at the point of manufacture or importation per litre of pure alcohol. Consequently, consumers are likely to bear the brunt of these tax increases as manufacturers and distillers pass on the additional costs. Furthermore, ancillary taxes such as the Goods and Services Tax (GST) and other levies further inflate retail prices, placing an additional burden on the average consumer.

In the face of escalating commercial prices, a trend towards homemade brewing and distilling is gaining traction. Making one’s own beverages at home has become increasingly popular, offering significant cost savings of over 70% compared to commercial pricing. This shift not only provides consumers with a more affordable alternative but also fosters a sense of independence and creativity.

It’s worth noting that while spirits and beer are subject to excise tax, wine falls under a different taxation regime, namely the wine equalization tax, which operates differently and may not be subject to the same level of biannual indexation.

As Australians grapple with rising costs across various sectors, the impact of the alcohol tax increase adds another layer of financial strain. While the government seeks to balance revenue generation with broader economic considerations, the burden on consumers and industries underscores the need for a nuanced approach to taxation policies in the alcohol sector. As discussions continue on the appropriate balance between revenue needs and economic impacts, stakeholders across the spectrum will closely monitor the ramifications of these tax adjustments.

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