Modest changes to Australia’s spirits tax settings will create the conditions for the sustainable growth of our industry.
Australia has fast become one of the most exciting markets for innovative spirits – from Bloody Shiraz Gin and Tasmanian Whisky to the uniquely Australian invention of the RTD (ready-to-drink spirits) – our ability to embrace the best of this great southern land’s natural environment and Australian ingenuity has set us apart on the world stage.
Our industry comprises both global manufacturers behind iconic spirits brand names, as well as local distillers whose products celebrate the best of Australian provenance. Our story is steeped in the legacy of centuries-old traditions and techniques, which have been replicated and reimagined to create distinctly Australian expressions of whisky, rum, gin, vodka and mezcal that have deservedly won international acclaim.
Over the last decade, more than 400 new distilleries have entered the Australian market, joining the likes of Johnnie Walker, Jack Daniels, Jim Beam and Absolut on retail shelves to meet growing consumer demand for premium spirits and ready-to-drink products.
Our success delivers over $11.6 billion in total value add to the Australian economy each year, and over 52,900 direct jobs, with 5,000 of these jobs in spirits manufacturing.
Significantly, two-thirds of manufacturing operations are located in regional and rural Australia, bringing important economic benefits to these communities.
However, we are still only seeing a fraction of the potential that the Australian spirits industry represents.
We understand the challenges facing the Federal Budget and note the focus on budget repair and policy levers that put downward pressure on inflation. We join many others in hoping that this includes a conversation about Australia’s tax system and opportunities to ensure a more sustainable stream of revenue for the Government.
With modest changes to current tax settings for spirits and the promise of a more holistic review, our industry can contribute to:
– growth in domestic manufacturing
– increased trade and employment
– support of innovation and technology, and
– the growth of regional industry.
We acknowledge the full remission of the first $350,000 in excise benefits a large number of craft distillers. However, the headline excise rate has a severe impact on Australian manufacturers of all sizes who are producing commercial volumes of spirits. Aspirational domestic distillers with plans to grow beyond craft-sized operations are limited in their ability to reinvest in their businesses.
Similarly, global manufacturers are dissuaded to invest in Australian distilleries to create a scalable domestic manufacturing industry, as high levels of excise ultimately makes such investment prohibitive.
Amplifying these issues is the burden of high inflation. Over the past twelve months, spirits manufacturers have reported surging costs for inputs such as barley, glass and cans, and freight charges that have more than doubled in some regions, which in some cases may have resulted in costs being passed through to consumers.
All Australian businesses and consumers are grappling with the challenges of rising inflation and cost of living pressures. However, very few sectors are subject to a ‘double whammy’ of inflationary pressures on the cost of goods and twice-yearly indexation of excise.
With modest reform, the Government has the potential to release the handbrake on the Australian spirits industry to unlock opportunities to create a sustainable and scalable manufacturing industry.