Andrew Wilkie (Clark, Independent) Share this | Hansard source

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Less than 10 years ago, there were 28 distilleries in Australia, but today there are 300 locally-owned distilleries spread across the country, including over 50 established or planned in my home state of Tasmania, where distillers are taking the world by storm as producers continue to win awards on the international stage for their world-class boutique whisky, gin and vodka. Craft distilleries are predominantly small- and medium-size family businesses in rural and regional areas, buying produce from local farmers, bringing in tourists and creating employment opportunities for local communities. In fact, they directly support over 5,000 jobs, with a further 15,000 created across the supply chain from primary producers and manufacturers through to sales and hospitality. However, the ability of this flourishing industry to recover from COVID-19 is being hamstrung. Its hopes of expanding overseas are being dashed, because Australia has the third highest spirits excise in the world. Indeed, craft distillers are paying a whopping $88 of tax per litre of pure alcohol, which increases twice a year and is projected to reach $100 over the next five years for each litre of vodka, gin or whisky produced. That's why I am today asking the federal government to make three changes to spirits taxation. These changes have been recommended by the Australian Distillers Association and Spirits & Cocktails Australia. I understand they're widely supported within the boutique distillery industry.

The first recommended change is that the spirits excise should be cut by $6 per litre, which would put it on par with the brandy excise rate. This seems only fair, given that, per standard drink, even brandy is taxed at more than double the rate of wine, cider or beer. It's nonsensical that the taxation rate is unequal across grape-derived spirits, like brandy, compared to grain-derived spirits, like vodka, gin and whisky. Moreover, as these increases are linked to CPI and reset every six months, actual prices are rising faster than inflation, because the tax increases are on top of the inflation, and that adds up big time, because Australian distilleries have faced 20 tax increases in the past 10 years, which makes not unreasonable the industries request for a three-year freeze on the biannual tax increase, giving businesses time to recover and grow post pandemic.

The final recommended change is simply increasing the distillers excise refund scheme limit from $100,000 to $350,000 per year, which would bring it into line with the incentives offered to small winemakers and is self-evidently fair enough.

I understand a justification for high-spirits taxation is to reduce the social cost of excessive alcohol consumption, but I am not convinced that the current tax system achieves this. Many government inquiries, including the 2009 Henry tax review, have criticised the inconsistencies within Australia's alcohol tax system and have recommended reform. It was noted in the Henry tax review and then summarised in the Australian Distillers Association and Spirits & Cocktails Australia pre-budget 2021 submission, which said:

Spirits are taxed at one level if they are fermented from grapes (specifically brandy), and at a higher rate if fermented from grain (such as whisky). Cheap wine is taxed lightly, while premium wine is taxed heavily. Additionally, beer is taxed at one rate at the local pub and another when purchased to consume at home.

My intention is not to drive prices down for consumers and encourage irresponsible alcohol consumption but to enable small businesses to flourish in the domestic and international markets. Surely with the extra funds freed up from the excise charge, boutique distillers would be able to employ more staff, invest in better infrastructure and expand their markets.

Tasmania's boutique distillers in particular desperately need this tax reform and some may sink without it. Significantly, the spirits industry predicts these measures are revenue positive for the federal budget and will have a net positive $1.4 billion impact over the forward estimates. Modelling by PricewaterhouseCoopers demonstrates that resetting spirits tax rates can actually increase government revenue while at the same time help the spirits, tourism and hospitality sectors. It is clear that current spirit taxation is a huge barrier to locally-made craft spirits, achieving success nationally and in overseas markets. It's just as clearly time the federal government implement the measures I have outlined above and support local distillers.

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