News & Current Affairs
Australia’s spirits sector, including whisky producers, faces renewed pressure following the latest excise tax increase on February 1, 2025. This marks the 76th biannual adjustment since 1983, pushing the tax to AU$104.31 per liter and solidifying Australia’s position as having the third-highest spirits tax globally, behind Iceland and Norway.
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Key Takeaways
Excise tax for spirits now rises to AU$104.31 per liter.
Biannual tax hikes since 1983 have made Australia’s spirits excise the third highest globally.
Small distilleries absorb 48%+ tax on retail prices, stifling growth.
Industry seeks policy reforms to unlock $1 billion export potential by 2035.
A 41-Year Trend of Biannual Hikes
The roots of Australia’s spiraling spirits excise tax trace back to 1983, when former Treasurer Paul Keating linked excise to inflation, intending to create economic stability. However, critics now argue that this policy fosters an unstable investment environment for distillers. Since 2021, the tax has surged by nearly 20%, with a 3.7% increase in February 2023 and another jump in August 2024. The latest hike to AU$104.31/L exacerbates the comparative burden, with spirits taxed at double the rate of beer and far exceeding wine, despite similar production inputs.
Immediate Impacts on Whisky Makers
For whisky producers, these tax hikes have immediate and far-reaching consequences:
Export Limitations: Despite potential for whisky exports to reach $1 billion by 2035, high taxes discourage growth. Distillers like Four Pillars argue that the tax regime incentivizes staying small rather than pursuing global expansion. In contrast, U.S. spirits, taxed at US$9.10/L, enjoy a competitive edge compared to Australia’s US$65/L rate.
Consumer Costs: A bottle of whisky retailing at AU$79 now carries an excise tax that accounts for nearly 48% of its price. This drives consumers toward more affordable imported options. Whisky bars and retailers also face shrinking margins, with tax comprising $1.25 per whisky served.
Regional Distilleries at Risk: With 88% of Australian distilleries employing fewer than 20 people, many small-scale operations struggle to absorb these financial shocks. The AU$350,000 excise remission cap offers little relief for mid-sized producers, leaving them vulnerable as they scale operations.
Industry Demands for Reform
Australia’s whisky industry boasts unique advantages, from premium native botanicals to aging in distinctive wine barrels, lending exceptional flavor profiles to their spirits. Rising global demand for craft whiskies positions Australia to join the ranks of whisky powerhouses like Japan and Ireland.
However, without policy reforms, particularly addressing the burdensome excise tax, the industry risks missing this golden opportunity. The Australian Distillers Association is calling for a two-year tax freeze and parity with brandy’s lower excise rates to foster investment and growth.
The Economic Toll of Automatic Indexation
The February 2025 hike underscores a systemic issue: automatic indexation, designed for 1980s economic conditions, no longer serves today’s industry needs. This outdated mechanism threatens an AU$11.6 billion industry that supports approximately 60,000 jobs. Without reform, Australia’s whisky makers face an uphill battle to remain competitive on the global stage.
What’s Next for Australia’s Whisky Industry?
While the excise tax continues to rise, the whisky industry’s resilience is being tested. Distillers, industry groups, and whisky enthusiasts alike are pushing for reforms that would unlock Australia’s potential as a global whisky powerhouse. Without these changes, the nation’s burgeoning whisky scene could struggle to achieve the growth it deserves.
Without these changes, the nation’s burgeoning whisky scene could struggle to achieve the growth it deserves.
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