Australia: Government announces increase in beer excise tax rebate for small brewers

Australia’s Federal Treasurer Josh Frydenberg on May 1 announced an increase in the beer excise tax rebate from A$100,000 to A$350,000.

From July this year, eligible brewers and distillers will be able to claim a refund on any excise they pay up to an annual cap of A$350,000. Brewers can currently claim a rebate of 60 per cent of the excise they pay, up to an annual cap of A$100,000.

The move has been pre-announced ahead of the May 11 Budget.

The announcement comes after a long campaign by the Independent Brewers Association, and formerly the Craft Beer Industry Association, which argues the increased tax rebate will help Australian independent brewers reinvest and continue to grow.

“Today’s investment from the Morrison Government is helping to rebuild an Australian-owned beer industry that will turbo-charge growth and deliver skilled jobs in family-owned, independent breweries around the country,” Independent Brewers Association (IBA) Chairman Peter Philip said in a release.

The association campaigned for the excise break similar to the that enjoyed by the wine industry, arguing that even after the rebate, independent brewers are forecast to contribute more than A$200 million in excise to the government in the 2022 financial year, growing to more than A$300m in FY2025.

“Australia’s is one of the highest beer taxes in the world, but with this change, small brewers will be able to invest more in people, equipment, and facilities to meet growing demand,” Mr Philp said.

“This new incentive will accelerate the resurgence of an Australian-owned beer industry, while giving consumers more home-grown choices.

While it has been a long and popular campaign for the small brewer’s association, quieter voices in the independent brewing segment have been more cautious in support of an excise rebate.

Some brewers that have spoken to Brews News in the past suggest that at the current rate of increase in brewery numbers, the rebate may be counter-productive by attracting even more to the industry and increasing competition faster than demand itself grows.

The IBA highlighted this growth in its release celebrating the excise change.

“Australia’s independent brewers grew by 15% in 2020, despite the beer market declining by 1.7% overall last year,” IBA General Manager Kylie Lethbridge said.

The other issue is the excise tax doesn’t increase the cost of beer production, it increases the wholesale price of beer and benefits will only flow to brewers if the tax savings don’t lead to lower wholesale prices in an increasingly competitive market.

The Brewers Association of Australia, which represents Australia’s largest breweries, has been campaigning for an excise freeze, or even a temporary halving of the beer excise. Their campaign has suggested it would be a benefit to publicans and the hospitality industry, not staying in brewers pockets.

“For a small to medium-sized pub which buys around 15 kegs a week a reduction of 50 per cent in the excise rate on draught beer could mean a A$465 saving in beer tax each week,” a recent statement from the association argued.

“Each venue owner could then decide whether to use this money to entice customers back through promotions or pay down debt to help them remain viable.”

The IBA appears to accept this as a possible consequence, urging breweries in an email today not to use the rebate to lower prices.

“We need to use these funds to invest in efficiency, capacity and people to continue to win the battle in the marketplace,” Chairman Peter Philp said.

“It would be short-sighted to see these funds as a short-term prop for margin which would only be a quick race to the bottom.

“Trying to play a price game will play into the hands of our competitors who will always be better able to fight a price war than we are.”

While supporting the IBA campaign in this tax round, the Brewers Association last year described the rebate as ‘distortionary’ and ‘rewarding mediocrity’.

“The call for wine-type tax rebates isn’t the answer. This perpetual handout is distortionary, rewards mediocrity and does nothing for punters. Governments of all persuasions have learned that costly lesson. They are loath to repeat it,” the Association’s then CEO Brett Heffernan argued.

“The best thing government can do for everyone looking for relief and recovery – consumers, brewers and hospitality – is freeze the next round of beer tax increases for a year.”

While the impact on breweries is yet to be seen, especially whether the move will attract an even greater number of new breweries to a crowding market, or place pressure on wholesale pricing, breweries with taprooms stand to benefit from the increased margins. Consumers are already conditioned to current tap pricing.

With mainstream media picking up the line that the relatively modest move will “turbocharge the nation’s craft beer brewers…by freeing up cash to employ new workers, expand on cellar door facilities or explore new export markets” the move will potentially play well in craft beer’s inner-city strongholds and the pre-budget announcement is clearly designed to bolster the Government’s standings in these areas.

Labour Leader Anthony Albanese has long been a strong supporter of craft beer, especially Sydney’s Inner West Brewers Association, and even has a beer named after him.

Now Scott Morrison gets to share in the reflected glow of the rise of craft beer, with the IBA’s media release heralding his personal contribution under the headline “Morrison Government raises a glass to indie beer in budget”.

“Clearly the Morrison Government is backing a winner that is poised for further growth,” the statement said.

The announcement is also a big lobbying win for the Independent Brewers Association, which is set to mark ten years of operation later this year.

Morrison Government raises a glass to indie beer in budget: a win for indie brewers will help build a new Australian-owned brewing industry.

Federal Treasurer Josh Frydenberg has today announced an investment in Australian independent brewers that will help drive down the jobless rate by increasing the beer excise tax rebate from A$100,000 to A$350,000.

The increased tax rebate will help Australian independent brewers reinvest and continue to grow their burgeoning home-grown industry.

“Today’s investment from the Morrison Government is helping to rebuild an Australian-owned beer industry that will turbo-charge growth and deliver skilled jobs in family owned, independent breweries around the country,” said Independent Brewers Association (IBA) Chairman and founder of Sydney-based Wayward Brewing Co Peter Philip.

Until now, about A$0.42 in every dollar of independent brewer revenue has been remitted in some form of federal tax.

“Excise tax is the single largest component of the cost of making a litre of beer,” Mr Philip said.

“Australia’s is one of the highest beer taxes in the world, but with this change, small brewers will be able to invest more in people, equipment, and facilities to meet growing demand.”

The rebate allows brewers to claim a refund of up to $350,000 of excise paid per year. Even after the rebate, independent brewers are forecast to contribute more than A$200 million in excise to the government in the 2022 financial year, growing to more than A$300m in FY2025.

Australia’s 600+ independent beer brewers contribute a massive A$1.93 billion in economic output to the economy.

They directly employ 7,000 people, representing 51% of all employment in the Australian brewing industry. The industry indirectly supports more than 33,000 jobs in associated industries such as agriculture, logistics, manufacturing, and hospitality.

“This new incentive will accelerate the resurgence of an Australian-owned beer industry, while giving consumers more home-grown choices.

“Consumers want to support local businesses that keep profits in Australia, which is why Australian beer lovers should look for the IBA Independent Seal for confidence that the beer they’re buying is independently owned,” Mr Philip said.

“Australia’s independent brewers grew by 15% in 2020, despite the beer market declining by 1.7% overall last year,” IBA General Manager Kylie Lethbridge said.

“Clearly the Morrison Government is backing a winner that is poised for further growth.”

The IBA is forecasting investment of more than A$500m in new manufacturing capability in Australia, as well as the creation of an additional 6,300 direct and 23,000 supporting jobs over the next five years.

Importantly, these jobs will spread into many regional and rural areas across the country, with two-thirds of indie breweries located outside the cities.

Independent breweries are becoming an important part of Australian culture and community, providing unique visitor experiences for tourists and vital skilled jobs in regional areas where those jobs are currently lacking.

“The Australian beer industry will do in the next 20 years what the wine industry did for Australia in the 1980’s, and the Morrison Government should be congratulated for their vision in helping enable this,” Mr Philip said.

Small brewers and distillers will benefit from A$255 million in tax relief to support more jobs and investment as part of the 2021-22 Budget.

Under our plan to support jobs in this growing sector, small brewers and distillers will benefit from a tripling of the excise refund cap for small brewers and distillers from A$100,000 to A$350,000 per year.

From 1 July 2021 eligible brewers and distillers will be able to receive a full remission of any excise they pay, up to an annual cap of A$350,000. Currently, eligible brewers and distillers are entitled to a refund of 60 per cent of the excise they pay, up to an annual cap of A$100,000.

This will align the benefit available under the Excise Refund Scheme for brewers and distillers with the Wine Equalisation Tax (WET) Producer Rebate.

There are around 600 brewers and 400 distillers across Australia, with around two thirds operating in rural and regional areas. The announced changes will allow these brewers and distillers to keep more of what they earn, helping them to invest, grow and support around 15,000 Australians that are currently employed in the sector.

Additional support to brewers and distillers across the country will also serve as much-needed relief for those businesses severely impacted by COVID-19.

Today’s announcement builds on the Morrison Government’s track record of supporting small brewers and distillers including by enabling them to automatically receive excise duty remissions when they lodge excise returns; providing them with record investment incentives; and fast tracking the reduction in the small company tax rate to 25 per cent by 1 July 2021.

The Morrison Government is committed to assisting local manufacturing businesses to grow, create jobs and support Australia’s economic recovery.

03 May, 2021