A TAX hike imposed today on the distilling industry is a “kick in the guts” to businesses already struggling with the impact of COVID lockdowns.

The excise hike of 1.4% announced by the Australian Tax Office is the 19th in a decade for distillers in Australia, who already pay the third highest spirits tax in the world.

The tax blows out further every six months, because of indexation to the CPI. The automatic increases mean the Federal Government’s average tax take from the distilling industry, which includes the manufacturing of premixed spirits, increases by $100 million – $120 million every year.

“This is a never-ending tax with an ever-increasing appetite,” Spirits and Cocktails chief executive Greg Holland said.

“It has always been a handbrake on the growth of businesses that could otherwise be employing more staff, buying more local produce, exporting quality Australian products, and attracting more tourists to local communities.

“But with COVID, this latest tax hike feels particularly savage. It’s a kick in the guts to the many distillers and manufacturers, pubs, bars and restaurants who are struggling in the face of repeated lockdowns and a decline in tourism.”

A joint campaign by Spirits and Cocktails Australia and the Australian Distillers Association has called on the Federal Government to freeze the excise increases for at least three years to give the industry a chance to consolidate and recover from the devastating impact of rolling COVID lockdowns.

“But after some very welcome relief in the Federal Budget, where the government increased the excise cap for small distillers from $100,000 to $350,000, the return to automatic excise hikes looks like Canberra giving with one hand and taking with the other,” Mr Holland said.

“The Budget’s increase in the excise cap was worth about $20 million for the industry. But today’s hike could drag up to five times that amount back in tax.”

Having the third highest spirits tax in the world, exacerbated by automatic increases twice a year, has created a situation in Australia where up to 60% of the retail price of an average 700ml bottle of spirits is now tax.

“That is an outrageous burden, imposed by the Federal Government, on a sector that could otherwise be replicating the growth of the Australian wine sector.”