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

I move:

Motion unavailable at the time of publishing.

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.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

Is the motion seconded?

Rebekha Sharkie (Mayo, Centre Alliance) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

Bridget Archer (Bass, Liberal Party) Share this | Link to this | Hansard source

It's no secret that Tasmania is leading the charge when it comes to topnotch distillery products in the Australian market, as evidenced by the number of my fellow Tasmanians speaking on this motion, and I commend the member for Clark for bringing it forward. There are now over 300 locally owned distilleries spread across the country, 52 of which are situated in Tasmania, producing some of the best whisky you can find. That's not bias; a number of Tasmanian distillers have been named the best single malt whiskies in the world. In my electorate of Bass there are eight incredible locally owned distilleries taking the market by storm. I can stand by their products as I can proudly state I have tried the wares of each of the following local distillery companies: Abel Gin, Corra Linn, Darby-Norris, Fannys Bay, Flinders Island, Furneaux, Tamar Valley and Turner Stillhouse. I note that 65 per cent of Australian distillers are in regional and rural areas like northern Tasmania, bringing economic benefits through farm production, manufacturing, regional tourism and hospitality.

Our government has implemented a number of measures to support our country's growing distilling industry, including the measure which will see, from 1 July this year, alcohol manufacturers automatically receiving excise duty remissions when they lodge excise returns, assisting with cash flow and reducing compliance costs. This builds on the government's decision to extend the excise refund scheme to distillers from 1 July 2017. Under the scheme, eligible manufacturers of alcoholic beverages can claim a refund of 60 per cent of the excise duty paid on the products. From 1 July 2019 the cap for the scheme was increased from $30,000 to $100,000. Additionally, in December 2020 the government announced simplifying and streamlining the excise regime would be a new priority area for the Deregulation Taskforce. The task force is working to make it easier for business to invest and create jobs as well as assist in COVID-19 recovery.

However, a significant block towards further economic growth of this industry still exists due to the current high rate of the spirits excise tax. Australia currently has the third-highest spirit tax in the world, with spirits taxed four times more than wine and cider and double the tax paid by brewers, disproportionately impacting spirit producers. I believe an opportunity exists to look at reducing the current rate of the spirits excise, even by a moderate amount, which would provide our distillers with the confidence to reinvest in their businesses and create further jobs in the hospitality and regional tourism industries, two industries that were hardest hit by the pandemic. According to the Tasmanian visitor survey in 2018, more than 126,000 people visited a Tasmanian distillery. Whilst visitor numbers may have been recently impacted by COVID restrictions, it is a growing market. Further, a modest reduction in the rate would support additional industries, including agriculture and advanced manufacturing. From the discussions I have had with local distillers, a rate reduction would have a significant positive impact on their business and growth potential.

I have also had recent discussions with local microbrewers, including Will Egan, a local microbrewer and co-host of Tasmanian beer podcast Beer Babies. I was recently invited onto the Beer Babies podcast to discuss, in addition to my favourite local beer, Little Rivers pale ale, the issues currently facing small microbreweries in the state. Whilst this industry is not as severely affected by the excise tax to the extent distilleries are, they are still challenged by the current rate of excise tax. I look forward to raising their concerns further with the relevant ministers.

Lastly, as we all know, this week marks the ominous one-year anniversary since the first round of social restrictions came into effect, including the shutting of pubs and clubs across Australia. Lion, owner and operator of the iconic Boag's Brewery in northern Tasmania, has anointed tomorrow, 23 March, National Local Day to recognise the resilience of our pubs and clubs over the past 12 months. If you can, hit up your local establishment tomorrow and order a locally produced beer or spirit and show your support for your local hospitality and beer or spirit producer.

Rebekha Sharkie (Mayo, Centre Alliance) Share this | Link to this | Hansard source

I am very pleased to second the motion by the member for Clark. I support his motion wholeheartedly. South Australia is famous around the world for our wine. In my electorate I have six wine regions that have become an integral part of our economic prosperity and tourism experience.

We all recognise the importance of the wine sector in regional Australia and the significance the industry has for our international reputation for producing outstanding products. In recent years, we have witnessed the development of craft breweries and distilleries. A decade ago, we did not have a single commercial distillery in Mayo. Today, more than a dozen craft distilleries operate and, like their wine cousins, are among some of the best in the world, producing some of the finest craft gin and whisky on offer. As the member for Clark advised, this rapidly expanding sector now comprises more than 300 locally owned distilleries across Australia, supporting more than 5,000 direct jobs and a further 15,000 indirect jobs. This growth has occurred despite the inequitable application of the spirits excise causing unnecessary financial burdens on hardworking Australians. It is simply absurd that our spirits distillers are subjected to the third-highest spirits tax in the world. They are taxed four times more than wine and cider producers and twice as much as brewers in Australia.

Ironically, according to independent modelling the government has an excise rate that is now so high that it collects less revenue than if the rate were lowered. It is absurd. The current situation is an opportunity lost. It is a revenue loss for government, an employment loss and an export opportunity loss. Demand for spirits is growing globally, and markets within our region are expected to grow substantially. We have distillers that are producing international-award-winning gins, whiskies and rums; however, we are exporting at only $4 per capita, compared to $171 per capita in Ireland, $85 per capita in Estonia, $70 per capita in Sweden and $11 per capita in our near neighbour New Zealand. The potential for the Australian distilled spirits sector is enormous. It has the prospect to share a similar success to that of our wine industry, and we know how important the growth of the wine industry has been over the decades for Australia. It has helped enormously in the regions.

On a final note, many craft distillers have told me that, while they employ people in their enterprise, they often themselves have a second job, because the excise tax makes it so difficult to be viable. However, they persist because they are passionate. It's not hard to see in my electorate, when I go and visit many of my distilleries and take home a bottle of gin from here and there—I never drink and drive! But, when I go and see them, they are so passionate about the craft that they create, and it's so incredibly disappointing that we keep taxing the lifeblood out of them. I support the member for Clark in his call for a cut of the spirits excise to the brandy rate, a freeze in the spirits and brandy CPI indexation for three years and an increase in the current excise funding scheme limit for craft distillers from $100,000 to $300,000 for two years.

I bet most people don't realise that, when they go to a winery and at the cellar door they are poured a sample, that sample is excise free—there is no tax paid on that for the producer. However, if you go to a gin distillery door, they need to pay excise on that small taste that you have—bottle after bottle. It is costing them a fortune just to keep the doors open. I really think that we can do much better for our distilleries in this place simply by having a fairer tax regime for them. I want to see more distilleries in my electorate. I particularly love it because it's a business that a lot of young people have moved into. But we are taxing the lifeblood out of this industry, and this industry will not flourish. The government says it's a government for low taxes and believes that, by lowering taxes, we stimulate the economy. Well, this is a prime example.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

I was almost at the point of wanting to move a motion to extend the member for Mayo's time; her contribution was so outstanding.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

I think you've done enough of that today, Member for Goldstein.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

Her crusade for lower taxes is certainly something I believe in. But to have lower taxes on distilled spirits, Deputy Speaker, well, that just lights my eyes up! As you know, I am a bit fond of a tipple from the wonderful gin distilleries of this great nation. I have paid my own fair share of tax and excise across this country, as many other people have, and I think it's about time we had a proper discussion about reform as well, and I know a lot of other members in this place do too. I say that not as a producer. I don't have a distillery in my electorate, Member for Bass, I'm sorry to say. I'd be quite happy to open one and be the No. 1 chief patron; however, the space doesn't allow for it. But there are some in close proximity. Hippocampus, which used to be based in Western Australia, is I understand now in Bentleigh East, which is just outside the Goldstein electorate. We have the very energetic, young blokes from the Original spirit company, which, like many things in the wonderful Goldstein electorate, even if we don't produce it, we definitely consume! So, we are very proud of our contribution in encouraging the distilled spirits market to grow particularly premium spirits.

It's one of the great success stories of our country. If you think about all the things that we do, and there are many—we do wonderful wines, wonderful minerals, wonderful agriculture and aquaculture—this is one of those areas where we have created a sector out of pure value-add and human ingenuity. It's a space where we as a country do it so differently to everybody else, which gives us an incredible product position. But there's one thing that's holding us, like the entire country, back: we desperately need tax reform, tax reform, tax reform. Let's start with distilled spirits. I'd like something a little bit bigger than that, but I'll take it as a good starting place. We have such unique ingredients. It is a product we can sell to the world and that the world yearns for. It loves the product we offer, but tax is holding us back.

The member for Mayo made an excellent observation. If you've ever been to a gin distillery and talked to the makers, they will tell you explicitly about how the tax structures force them to pay tax up-front. There is no other sector that is required to do that. As a consequence, it's harder for new businesses to be established. We could have more distilleries creating new and innovative products—more Shiraz gins, more gins with lemon myrtle, more innovative hybrid products. The member for Mayo made a sound point on that too. I've had some gins from her electorate. In fact, Member for Mayo, my parents went to your electorate recently and dropped off some gin from your electorate. I think have had some from pretty much everybody's electorate. In fact, I'm quite disturbed at how much excise tax I have paid! But that's by the by.

We need these sectors to thrive, because there is potential not only for these products to be consumed by us, to generate local employment, although they can, and to be exported—and a lot of our distilled spirits go on to win global medals, and rightfully so, because they have such unique flavours and taste; more critically, tax is holding the sector back from growing by making it harder for people to invest, to start new and innovative products and to be able to go on and sell them to the world. If we want to have a successful distilled spirits sector, with the potential to grow—and we have a distilled spirits sector already, but it is being held back—if we remove some of the taxes and make them a bit more equal to other tax arrangements, it would allow the sector to flourish and thrive. You would get all the allied benefits as well. You'd have spirits regions, where people would go and enjoy tourism. There'd be local B&Bs and lovely restaurants and, yes, maybe wine as well—one of those other great success stories of our country. At every point, if we rolled tax back, we would enable and empower the sector to grow, to attract capital and to be part of the future success of our nation.

I want to see change. I see members here from all sides of the chamber seeking change, particularly members from Tasmania. We give a fair amount of money to the Tasmanian government through direct transfers. I want to make sure that they go towards something that we could all enjoy more of. As part of the great tradition of our country, Deputy Speaker Wallace, you might remember that, right back at the foundation of the modern nation, when we became colonies, we used distilled spirits as a tradeable product. Let's bring that back and make it part of our future too!

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

I think you've missed your calling in life!

Brian Mitchell (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

I thank the previous speaker for his contribution and I thank the member for Clark for bringing this motion on. I am the co-chair of the Parliamentary Friends of Australian Spirits, so I am here with a vested interest. I'm a big supporter of the measures that the member for Clark is calling for. But I just want to give a brief history lesson. I have spoken on this matter in the parliament before, but it's always good to repeat history, in case it's forgotten. It was a Tasmanian Labor politician, Duncan Kerr, the former member for Denison—in fact, the predecessor of the member for Clark—who was responsible for bringing in Australia's spirits industry. As history shows, about 28 years ago, Bill Lark, who everybody knows is the godfather of Australian spirits, whispered in Duncan's ear and said, 'Did you know distilling is illegal in Australia for craft distillers?' and Duncan said, 'Really?' All that was needed was a regulation change by the government. Duncan went to see the then customs minister, Barry Jones, and, with literally the swipe of a ministerial pen, the law was changed—it didn't even have to go to the parliament—and that brought in craft distilling in this country. Three hundred distilleries later and many hundreds of millions of dollars and thousands of employees—all thanks to a great Labor legacy of Duncan Kerr, Barry Jones and, of course, Bill Lark. It would be remiss of me not to mention that Bill Lark was inducted into the inaugural Hall of Fame by the Australian Whisky Awards on the weekend. Congratulations to Bill.

Normally, I would get to my feet and talk about the many distilleries in Lyons. There are well north of 20, perhaps 30 by now. Every hour there's another one opening up. They're all wonderful in my electorate and many of them win awards. I've used up my time, so I can't list the awards. Distilling in Tasmania has a special place in every Tasmanian's heart. We are a world leader in gin and whisky and, as the member for Clark said, vodka. I'm very proud to be co-chair of the parliamentary friends, along with Senator Perin Davey from New South Wales. We had our launch at the start of this year. It was a fantastic evening. We had Stu Gregor and Greg Holland there from the industry—two leading lights really putting the case forward.

But the reason I'm on my feet today is to talk about the very serious issue of tax reform for this industry. It's been put to me that spirits in Australia are now about where wine used to be. When wine taxation was reformed, it led to an explosion in the industry. It just blossomed. That's what we want to see happen with spirits. They've done pretty well over the last 28 years, I have to say. Despite the incredibly onerous taxation on them and the excise requirements, they have done pretty well at growing the industry, but they won't reach their potential unless there's further reform. We're after a number of reforms, but the most critical is the $350,000 rebate. If they can get that in the upcoming budget, that would be a terrific start. We want wider reform, and the member for Clark has spoken eloquently about that, as did the member for Mayo. The critical, No. 1 issue that I would like the Treasurer to give attention to is to lift the rebate so that it's on parity with wine. They're not asking for anything different to other industries. They're asking for parity and to lift the rebate to $350,000. That's the most urgent thing the Treasurer can do. It's easy to do. It could be done in the budget. I reckon the industry would be pretty happy with that as a start. That would allow more investment in the industry and would allow many more people to be employed. Particularly, this is an industry that has suffered quite dramatically from COVID, as we know. It's not just a retail operation. It relies pretty heavily on tourism and cellar-door operations, and those sales absolutely crashed, particularly for the high-end product. I have figures here. There was a 21 per cent decline in sales volume for bottled spirits and a decline of up to 80 per cent at the cellar door because of the drop. This is an industry that really needs assistance. It's an industry that has fantastic potential. It's an industry that's well loved, not just by Tasmanians but by all Australians—

Mr Tim Wilson interjecting—

and, as it sounds, by the member for Goldstein in particular, doing his bit for Australia. I urge the government to listen to the industry, listen to the sector, grow jobs and reform the excise.

Patrick Gorman (Perth, Australian Labor Party, Shadow Assistant Minister for Western Australia) Share this | Link to this | Hansard source

Let's distil this motion in simple terms. Our spirits manufacturers are asking for a level playing field—a spirit level, if you like. For some, it is too 'whisky' to make the investment grow under current conditions. For some, it just rubs against the grain. They are treated differently to others in the alcohol production industry, but they don't whine; they keep their 'gin' up. They put their case to government through the gin-dependent member for Clark and his motion. As others have said, this is a very highly regulated and highly taxed industry. It's an industry that does need our support, just as it supported our community over the last 12 months. I will talk about that more in a moment. We need to keep an open mind to make sure that the necessary changes to ensure future growth in this industry happen and to make sure it remains competitively internationally. Because one of the great stories of this industry is that, as we continue to produce here at home—there are many areas where we don't—this is one area where we are reducing our reliance on imported products.

We talk about bringing back manufacturing to Australia. The distilling industry is manufacturing, and we should do what we can to support it. It's exactly what Australians want: quality jobs, value added, export-ready. We saw that when we needed them the distillers were happy to step up to the plate, happy to do something to support their community. They were in a very important part of our front line against the COVID pandemic. I look at the Whipper Snapper Distillery in East Perth in my electorate. It's a fabulous distillery. Alastair Murdoch and his team run an amazing operation that went practically overnight from making fabulous high-end products to turning fabulous Western Australian wine into hand sanitiser. Within a week they were pumping out 1,500 litres of hand sanitiser a week, filling key demand for industry, for the WA health department and others.

Now, thankfully, they are back to their normal production and hoping to expand. It means they use more WA wheat. I went down there last week and said I would be speaking on this motion and I would love something that I could bring in—could they give me one little grain of wheat? As we know, this industry doesn't do things by halves. They suggested I hold this up in parliament, which I know I'm not allowed to do. So I said, 'That's very nice of you.' That is Western Australian wheat used by a Western Australian business to create an export-ready product.

It's not just exporting in terms of exporting our products overseas; it's also a huge tourism industry in my home state of Western Australia. We have heard from every other member who has spoken about the tourism benefits of these industries. Look at businesses like Old Young's in the Swan Valley. I spoke to them at the height of the pandemic and the international border closures last year, when they were thinking, what are we going to do? They are award-winning, a great tourism destination for people who visit the Swan Valley. Most people who visit the Swan Valley just want a nice glass of wine. But not everyone wants a glass of wine, so if you are in the Swan Valley and you want something slightly different, I suggest pop by Old Young's. Of course it would be easier for more people to do that if the Prime Minister's plane tickets that he waves around also applied to trips to the great capital of Perth, which has unfortunately been forgotten by the tourism package that was announced the other week.

I know my community supports these local distillers. I've been bombarded by emails, as many have. You don't get many emails about complex tax policy, but I have received quite a few about this one. So to Joel, Carla and everyone who has been emailing me, I have received your emails and you are about to get an acknowledgement of that with this speech.

The other thing for me in the electorate of Perth is the Northbridge night-time economy. Those people who like to get out and about at night time, isn't it great to see them consuming? You look at the beer list, the wine list— it's Australian products. And more and more we are seeing distilled Australian products in the cocktails and spirits that people consume. The more we can do in this place to support that transformation is a good thing.

Finally I want to acknowledge that the broader alcohol production industry has done it tough over the last year. I acknowledge the local breweries in my electorate who have done it tough—I give a particular shout to Reece Wheadon of Nowhereman Brewing—and the independent retailers who sell all these products. I will finish by congratulating—which I haven't done in this place before—Commune Wine Store, who fought through ridiculous, oppressive regulation and finally got their store at Maylands open at the end of last year. Congratulations.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

The time for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.