Australian spirits manufacturers are this week confronting the grim reality of yet another increase to the world’s third highest spirits tax.

The new rate of $101.85 per litre follows a series of especially punishing increases powered by automatic six-monthly indexation to CPI.

Australian Distillers Association chief executive Paul McLeay said the country’s craft spirits industry is united in calling for urgent tax reform.

“There are now more than 600 distilleries across Australia, half of which are located in regional areas,” he said.

“Their future is increasingly being jeopardised by these relentless six-monthly tax increases.

“We say to the Government: enough is enough. Freeze spirits tax at its current rate for two years so that we can work together on developing sustainable policy settings for our industry.”

Spirits & Cocktails Australia chief executive Greg Holland said the latest hike means spirits tax has increased by 16 per cent during the inflationary environment of the last three years.

“This tax is clearly unsustainable for spirits manufacturers, their trade customers, and consumers who are already struggling with the cost of living,” he said.

“We call on the Government once again to freeze this tax at its current rate for two years.

“This temporary measure will take the pressure off our industry and help the Government accomplish its mission of bringing inflation back under control.”

Industry under stress: Cape Byron Distillery

Cape Byron Distillery founder Eddie Brook said small distilleries are unable to pass the tax hikes on to trade and consumers in the current economic environment.

“And we don't have the economies of scale, nor are we growing quick enough to absorb these ongoing costs,” he said.

“As a result, these six-monthly increases really do have the effect of reducing margin in our business at a time when we are already experiencing cost increases across the board, and economic conditions are impacting consumer demand and spend choices.

“It's getting to the point that it is putting such stress on the industry.”

A hostile market for spirits: Starward Whisky

Starward Whisky founder David Vitale said the tax rate was around $64 per litre when his distillery was conceived in 2007.

“Here we are 17 years later and we’ll be paying $101.85,” he said.

“Start-up businesses have a fixed amount of capital available to scale and grow, and every six months that’s compromised by the government giving themselves a pay rise.

“Every dollar increase in excise is a dollar less that we have to invest in scaling our businesses.

“Our sights have to be set on export markets because it’s simply uncompetitive to operate here in Australia.”

Jobs on the line: Never Never Distilling

Never Never Distilling co-founder George Georgiadis said the latest increase is very hard to stomach under the economic conditions confronting distillers in 2024.

“Our margins are already being squeezed as input costs are going up across the board,” he said.

“Meanwhile, revenue is down because consumers have cut their spending on premium Australian spirits.

“We’re already struggling to make that work and then we get slugged every six months with tax increases that are not only swallowing up more margin, but making our products proportionately more expensive to beer and wine again.”

Georgiadis said the latest increase puts Never Never under pressure to further reduce its workforce, having been forced to retrench several employees last year.