in next month’s Federal Budget.
With beer tax set for another rise on August 1, punters will soon be forking out an extra 1c over the bar and an extra 20-30c per case.
While that may not sound like much, it means an extra $35 million flowing into government coffers in just six months.
The submission by CUB apparently claims that the industry is no longer able to handle a recession and has suffered since households began to cut back on so-called luxuries.
According to the Herald Sun there is a precedent, with UK Chancellor George Osborne cancelling a three-pence tax rise as well as granting a tax cut that he called “a penny off a pint”.
Radio station 2GB has taken up the cause, interviewing Beer & Brewer publisher David Lipman (live on air on Monday April 22) about just what beer tax is doing to the developing craft beer industry as well as mainstream brewers.
For those that missed the interview here’s the main issues:
- It’s about small brewers as they are producing the beer that is in demand and consumption is growing, when total beer consumption is declining – we [Australia] need to foster this and help where we can.
- The tax will remain as it generates billions, however there are ways for the Government to levy tax to fostering growth in small brewers e.g. creating a tax free threshold and making the tax a volumetric one, rather than it being based on ABV.
- Brewing Industry bodies such as the Craft Brewers Industry Association (CBIA) and the Australian Real Craft Brewers (ARCBA) lobby for excise relief. These groupssupport the idea of excise levied as a tax on consumption, but believe it is a significant burden on small business.
- Smaller brewers brew more beer over 5% than they do less than 5% – alcohol adds body and flavour to beer, its not about drinking more alcohol to get drunk, its about more flavour and appreciation – like with food matching and more.
More generally, the beer excise tax system in Australia is the worst in the world. Beer & Brewer published a story on it back in February 2011, showing the different systems around the world and its clear the Australian system is the frontrunner in unfairness.
Why?
In Australia brewers must pay their excise prior to the beer leaving the brewery, by comparison in NZ it within 30 days, which helps with cash flow. However, it is possible to gain a “periodic settlement permission” (Periodic settlement permission allows the holder of the permission
to deliver the goods during a period, which is usually seven days, and then pay
the duty on the first business day after the end of the period. For example, if
the period specified in the permission is Monday to Sunday then the permission
holder can move goods out of the licensed premises during that period and the
excise return must be lodged and duty paid by 4pm on Monday but if Monday is a
public holiday then Tuesday.)
However, if you are a small business you can apply to have the period for your periodic settlement permission changed from weekly to monthly. Under the small business entity concessions, you are asmall business if you carry on a business and your business turnover (aggregated turnover) is less than $2million. For those people who have monthly period for their periodic settlement permission, this means that they can move the goods out of the licensed premises during the calendar month and their excise return must be lodged and duty paid for these goods by the 21st day of the following month.
In Australia a 500L (10 x 50L kegs) batch of beer pays $700 in excise for 5% ABV – in the USA its approx $59 ($35 federal tax and $24 state tax. An 8L carton of beer (24 bottles) pays $13 in excise, whereas in USA its just $1.10.
Excise in the US is around 10% of what our brewers pay in Australia.
To break it down even further:
- Excise is increased every 6 months, in line with CPI
According to Owen Johnson (CBIA) if excise is indexed with CPI, then so should the microbrewery rebate. In fact, for the relatively small amount of 100,000L annual production, an excise free situation would be ideal. (NB: Excise rates may be
increased in February and August each year, in line with the consumer price
index.The rules covering indexation of excise rates are set out in the Excise
Tariff Act 1921.)
- The time is ripe to build on the momentum last year’s budget’s excise relief
The Australian Taxation Office guidelines state that there is no excise free threshold. Currently the microbrewery refund states that brewers can claim a maximum amount of $30,000 per year. David Bonighton from Mountain Goat says that approx 1 litre of beer costs $1 in excise. This means a brewery can only produce approx 45,000 litres of beer at 5% ABV per year before paying 100% excise (as brewers can only claim 60% of total excise paid up to max $30,000, this was $10k). Brewers must first pay their excise duty, then, once they have paid, they can claim their rebate.
John Stallwood of Nail (WA) says that brewers need to be producing roughly 100,000L to see meaningful profits.
- Excise tax stifles small brewers from being sustainable
Under the current system, 22-25% of sales income from beer goes to paying excise, regardless of whether the beer actually sells. This is without considering company tax, income tax etc.
- Brewers pay less excise for beer sold in vessels larger than 48L and beer sold in vessels (kegs and bottles) less than 48L attract a higher rate of excise
According to Owen Johnson (CBIA) the container size threshold need to be reduced to 18.5L, allowing smaller containers to go into food-focused venues. In addition, smaller containers keep quality up and gives small brewers access to venues that prefer ‘quality over quantity’.
Updating the container size threshold will also modernise tax law to reflect modern OH&S practicalities as the net weight of a 50L keg is 65kg, making it far too heavy for a single man lift in the workplace.
Get behind the industry and show your support in our Excise Forum.
Read about the ARCBA White Paper