Figures released by the Australian Taxation Office yesterday confirm a harsh new reality for spirits producers across the country: spirits excise will hit a whopping $100.05 per litre of alcohol from 1 August.
Twice a year, every year, the excise tax on spirits increases in line with the Consumer Price Index (CPI). The latest excise increase of 2.2% follows a record 4.1% jump this time last year and a 3.7% increase in February.
Spirits and Cocktails Australia chief executive, Greg Holland, slammed the increase.
“It’s outrageous to think that Australia’s spirits tax – which is already the third highest in the world – will exceed $100 per litre of alcohol next month,” he said.
“A gin and tonic now has more than double the tax of a beer on tap.”
“When will enough be enough?”
Australian Distillers Association chief executive, Paul McLeay, said the tax on spirits is unfair and unsustainable, putting a handbrake on the growth of a promising industry.
“It’s impossible for local distillers to consider employing more staff, opening a distillery door or accessing new export markets with this out-of-control tax,” he said.
“If the government is serious about growing domestic manufacturing jobs, particularly in the regions, they can’t have it both ways.”
Founder of Western Australia’s Old Young’s Distillery, James Young, said his business has repeatedly absorbed the excise increases for five years, which has had a significant effect on its bottom line.
“We’re getting smashed from all sides by the compounding effect of excise increases twice a year, every year, on top of the rising cost of shipping and raw materials.
“This is an industry the government should want to see succeed, because we’ve seen what the Australian wine industry has done overseas for exports.
“There should be no reason that Australian spirits can’t do the same. But there is a reason right now, which is we’re getting absolutely smoked by excise.”
Young, who is also the president of industry group WA Distillers Guild, said Australian distillers are being forced to confront some grim realities.
“I could name you half a dozen distilleries for sale right now, and a stack of others that are closing and going broke,” he said.
“And there are many other really good businesses that have shelved growth plans, because they’re just getting obliterated by excise increases.”
Victoria’s Bellarine Distillery founder Lorelle Warren said the excise situation has become completely untenable for small distilleries.
“When we started in 2018, we sold our flagship gin at $85. It’s now priced at $90. Theoretically, we should be selling it at above $100 if we passed on these increases, but I personally have a problem with that price point,” she said.
“I don’t know whether the consumer is willing to spend at that level, particularly given the current economic environment.”
Warren said she and husband Russ Watson built their business from nothing into a major tourism drawcard with 15 full-time equivalent employees.
“We had more than 30,000 people come through our doors last year, and we contribute significantly to the local economy by utilising local suppliers and all sorts of services,” she said.
“We’re now in great danger of actually considering whether we pull right back, which would be an absolute disaster given everything we’ve toiled for over the last few years.
“But really, as it currently stands, for six months of the year all we’re doing is paying tax.”
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