If you’ve ever wondered why a bottle of your favourite spirit seems pricier than you expected, the answer lies in alcohol taxes and a roll of red tape. And that price is set to soar this week thanks to a new spirit tax the government is introducing, which could add as much as $100 per litre of booze. The new tax will follow a six-monthly increase which means prices will only continue to rise. This comes in direct contradiction to the Federal Government’s issuing of $225m in tax relief for small breweries and distillers as part of the 2021-22 Federal Budget, which in the biz is what we call having your cake and eating it too. In Australia, like many other countries, the government imposes taxes on alcoholic beverages, including spirits. Understanding the basics of spirit alcohol tax can help demystify the costs behind that bottle of whiskey or vodka you’re eyeing. So, let’s break it down.

Spirit alcohol tax, also known as excise duty, is a tax imposed by the Australian government on alcoholic beverages with high alcohol content, such as spirits, liquors, and liqueurs. The tax is levied at the point of manufacture or import, and the cost is typically passed on to consumers, resulting in higher retail prices. Following?

The calculation of spirit alcohol tax in Australia is primarily based on the alcohol content (ethanol) present in the beverage. The tax is charged per litre of alcohol, rather than the volume of the entire product. The higher the alcohol content, the more tax is applied. So that means a bottle of rum will be taxed higher than a beer because it’s more bang for your buck. The tax is usually paid by manufacturers, distillers, and importers of spirits. These businesses are responsible for ensuring the accurate calculation and collection of the tax on their products before they reach the market. As mentioned earlier, the excise duty is generally passed on to consumers through higher retail prices. So, when you purchase a bottle of spirits from a liquor store, a significant portion of the price you pay goes toward covering the imposed tax.

And the six-monthly scheduled increase of the alcohol excise, tied to inflation, is predicted to send the outrageous tax soaring beyond $100 per litre of alcohol — a figure the industry did not expect to hit until at least 2029. This isn’t even touching on the brewed (beer) and fermented (wine) taxes across the board, which can also vary state to state. It’s a whole kettle of fish. In addition to the spirit alcohol tax, there are other taxes and factors that can influence the final price of alcoholic beverages. These may include Goods and Services Tax (GST) and various markups, such as wholesale and retail markups, which contribute to the retail price.

On paper, one of the main reasons cited for imposing alcohol taxes is to discourage excessive alcohol consumption, which can have adverse effects on public health and safety. Higher taxes on alcohol are aimed at reducing alcohol-related harm and promoting responsible drinking. This reasoning flies in the face of data that suggests Australians are drinking less alcohol year on year for the last 10 years, and that overall alcohol consumption is around 30 per cent lower in 2023 than it was in the 1970s. James Christopher of Brix Distillers in Surry Hills lamented, “We have an amazing local craft spirit industry growing at a strong rate. If the federal government wants this local industry to continue growing and focus on the quality products we are currently producing, while also be truly competitive against overseas brands, then the tax needs to be overhauled. Distilleries will need to continue passing the increases across to the consumer and we will only see prices go up, rather than stabilise.”