Australia’s excise tax on spirits has increased to $110.15 per litre of pure alcohol – a move the Spirits Council of Australia fears could increase demand for lower-priced illicit alcohol products.
The new rate took effect on Monday and applies to spirits including whisky, vodka, gin, rum and some RTD beverages. According to the Spirits Council of Australia, the increase is one of the largest six-monthly increases outside the Covid period.
Australia has operated an automatic twice-yearly alcohol excise indexation system since the early 1980s. Spirits Council of Australia executive director Steven Fanner said the tax rate is now more than six times the US rate and about twice the rate in New Zealand. Australia now has the highest spirits tax outside Scandinavia.
For a 700ml bottle of spirits at 40 per cent alcohol by volume, the excise tax is equivalent to $30.84, excluding GST. The federal government is expected to collect $9.2 billion in alcohol tax revenue this year.
The council said the current system could reduce the price competitiveness of legal products and increase demand for illicit alternatives.
The warning follows research indicating that illicit alcohol is being sold alongside legal products in Australian bottle shops. Some illicit products were found to contain contaminants that may pose risks to consumers.
Fanner said Australia should review its automatic excise indexation system and assess its impact on the market. He said there is still an opportunity to prevent similar developments in the spirits market. Without reform, the current system could drive demand for illicit alternatives.
“We have seen what has happened with tobacco – when relentless tax increases and inadequate enforcement created market opportunities ripe for exploitation,” he said.
- Further reading: Spike in illicit alcohol sparks concerns over spirits tax settings.
