“The scales are tipped heavily towards winemakers, and all we want is a level playing field. One tonne of wine [about 500 litres] earns the government about $1000 on box wine – if they’re lucky. That’s a 30:1 disadvantage as a producer, all because we choose grain instead of grapes, and distil it into whisky,” he says. Whisky producer Dave Vitale has sold 60,000 bottles of Starward whisky in the past year. “We don’t hate winemakers… but we are exploring other markets to diversify our audience so that we can compete with them fairly,” Vitale says. He’s one of a chorus of spirit producers that insist the country’s heavy-handed alcohol excise is unfairly punishing the booming gin and whisky sector. Stuart Gregor, a co-founder of Four Pillars Gin, says excise tax unfairly penalises the spirit industry.

Four Pillars Four Pillars gin co-founder Stuart Gregor has been slugged by nine excise tax rises since launching four years ago. The Yarra Valley distillery turned over about $10 million last financial year, up from $8 million on the previous year. The excise is a particularly bitter to swallow given that the wine industry has enjoyed huge tax breaks in the last two decades, Gregor says, who is also the president of the Australian Distillers Association. Four Pillars Gin’s Stu Gregor (left), Cameron Mackenzie and Matt Jones remortgaged their houses and took on multiple investors to start their venture. Credit:Kristoffer Paulsen “Excise tax unfairly penalises the spirit industry. The government is addicted to the excise they get from spirits. Every single review of the tax system has said the alcohol industry ought to be taxed on a per drink basis.

“It’s completely crazy that tax on Australian spirits continues to be increased twice each year, the result of which greatly affects potential employment and tourism, promotes imported products over home-made, and makes exporting our goods almost unviable,” Gregor says. “Our gin, by the very nature of the excise tax means we have to be a luxury good, so we have to have a natural ceiling on our market share determined by price. “The reality is that people are punished and have to pay more because they like spirits more than wine.” A Treasury spokesman says that wine is taxed differently to most other types of alcohol and the systems are not directly comparable. “Broadly, wine is taxed at a flat rate of 29 per cent on the wholesale value, whereas beer and spirits are taxed at set rates based on the amount of pure alcohol within the beverage,” the spokesman says.

“The government regularly considers the appropriateness of the tax system, including alcohol excise and considers volumetric taxation of spirits to be the appropriate method.” Craig Westwood started Cedar Fox Distilling late last year. Excise a monthly burden But spirit producers aren’t buying it. Melbourne’s Craig Westwood started his gin distillery, Cedar Fox Distilling, late last year. “We haven’t even cracked 500 bottles in sales yet, and yet we’ve paid $12,000 in excise since we launched – which is separate to the GST we’ve paid,” Westwood says.

“Even in a bad month, you still owe the excise. Producers have to anticipate sales ahead of time because the excise correlates with your invoicing total for the month. It makes it extremely difficult to run a business. “The government is making the biggest slice out of a bottle of gin while the producer gets the smallest slice. And people wonder why they’re paying between $80 and $100 for a good bottle of locally produced gin.” Craig Westwood just wants to focus on making gin. In high spirits The ATO website explains that the alcohol excise is expressed per litre of alcohol for alcoholic beverages.

The volume of alcohol subject to excise duty is calculated by multiplying the actual volume of product by its alcoholic strength. Gin and whisky strength can hover above 40 per cent. Tobacco and fuel also attract an excise tax. Excise rates rise twice a year in line with the Consumer Price Index (CPI), generally in February and August each year. The CPI indexation factor for rates from August 1, 2018, is 1.008. Additional tax relief was announced in the 2018/19 Federal Budget, with an increase in the alcohol excise refund scheme cap from $30,000 per financial year to $100,000. But the fact is that the gin and whisky sector is booming. Australia was home to 10 distilleries a few years ago, but there are now about 100 craft gin and whisky producers, Treasury figures show. This represents phenomenal growth in the excise tax raked in by the government. The alcohol beverages industry injects more than $19.7 billion every year into the Australian economy, including a massive $5.9 billion in tax revenue, according to Alcohol Beverages Australia.

Cedar Fox is concerned the heavy excise may encourage a black economy. Black economy concerns Loading Westwood wondered whether such a heavy-handed approach to excise tax could stimulate a gin and whisky black economy like it has with the illegal tobacco sector. While he’s meticulous to ensure he meets government licensing requirements, he admits it’s been a complex and expensive process.