Australian spirits tax rises to $103.89 today in another cruel blow to spirits manufacturers, venues and consumers who are already grappling with challenging economic conditions.

The world’s third highest spirits tax has now risen by more than 20 per cent since the onset of the pandemic, thanks to a system of six-monthly indexation to CPI that dates back to an era where there were only two distilleries in Australia.

Australian Distillers Association chief executive Paul McLeay said there are now more than 700 distilleries in this country making world-class spirits, and their prospects depend on urgent intervention by the Federal Government.

“The continued Government inaction on this issue is incredibly frustrating for our industry, which already contributes $15.5 billion in added value to the Australian economy and supports more than 100,000 jobs,” he said.

“We know that our economic potential could be much greater. Analysis from Mandala Partners has demonstrated that spirits manufacturing can be a $1 billion export industry for Australia by 2035, but only if we have the right policy settings.

“The Federal Government must act now by freezing the spirits tax and partnering with industry to create an export body for spirits, just as it has done so successfully with Wine Australia over recent decades.”

Chronic instability hampering ambitions

Craig Michael, director of Bellarine Distillery in Drysdale, Victoria, said the tax is now $25 per litre higher than when the company began operations in 2015.

“These six-monthly increases are becoming increasingly difficult for our business to sustain, and they are impossible to plan for,” he said.

“How can we accurately undertake financial modelling and make business decisions if we don’t know what tax rate we will be paying in six months’ time?”

Hitting everyday punters’ hip pockets Night Time Industries Association chief executive officer Mick Gibb said the dreaded six-monthly tax increases are yet another impost on struggling hospitality venues.

“Every time the tax increases, the bar owner has to pay more for the tequila in that margarita, the gin in that martini or the vodka with that soda,” he said.

“Sometimes venues have no choice but to pass on these costs by increasing their prices. That ends up hitting the hip pockets of everyday punters who then say, ‘I’d love to go out more, but I just can't afford it’.”

Gibb said the tax increase compounds the existing inflationary pressures impacting venues, such as rent, electricity, freight and insurance.

“But in contrast to those unavoidable cost increases, these six-monthly tax hikes are completely at the Federal Government’s discretion,” he said.

“Freezing the tax is a sensible measure to ease the pressure on venues and consumers, and will also help the Government achieve its goal of reducing inflation.”

Spirits & Cocktails Australia chief executive Greg Holland says the latest tax increase simply cannot be justified in the current economic circumstances.

“Enjoying a drink with friends is one of life’s few simple pleasures for Australians who are currently struggling with the cost of living,” he says.

“Sadly, this custom is increasingly being priced out of reach for many people, thanks to relentless alcohol tax hikes every six months.”