Distillers welcome federal budget boost to support Australia's expanding taste for spirits

After years of lobbying by the Australian drinks industry, the federal government will allow eligible distillers to receive a full refund of any excise duty they pay, up to an annual cap of $350,000 as part of the 2021-22 budget.

Until now, local brewers and distillers have only been able to receive a repayment of 60 per cent of the excise they pay up to an annual cap of $100,000.

The boost has been welcomed by the Australian Distillers Association, whose president Stuart Gregor says the decision provides relief for hundreds of craft distillers around the country that have been severely affected by COVID-19.

There are more than 300 distillers across Australia, with about two-thirds in remote and regional areas.

The amended excise cap brings the tax incentives offered to the spirits industry in line with that of small wine and beer makers.

"It means craft distillers will have more capital available to help their businesses grow and to employ more locals – bringing important economic benefits through job creation, expanding farm production, regional tourism and hospitality for our communities," Gregor says.

The move comes as Roy Morgan released data from April showing the number of Australians who drink alcohol has increased for the first time in four years, with a higher proportion of people consuming spirits across all demographics.

Roy Morgan's Alcohol Consumption Report shows the proportion of those who drink alcohol rose by 0.8 percentage points to 67 per cent in 2020, the first year-on-year increase since 2016. If last year's trends continue, the number of Australians drinking spirits will overtake beer for the first time.

The report is consistent with data from mobile ordering technology company Me&u, which reported a 400 per cent increase in spirits growth from March 2020 to March 2021.

Me&u, which allows diners to order and pay at venues via QR code, reports sales of vodka and gin on the platform doubled in the past year.

The growing demand for gin has driven much of the spirits surge, with the number of Australians drinking gin over a four-week period rising from 7.4 per cent to 9 per cent in 2020.

One brand profiting from the boom is label Poor Toms. Childhood friends Jesse Kennedy and Griffin Blumer launched the company in Canberra through crowd-founding six years ago and have since moved production to Sydney. ​

"When we started the brand as 23- and 24-year-olds, we were stepping off into the unknown," Kennedy says.

"Now we find ourselves with a reasonably established brand and can engage with the industry in a way that's really exciting."

He puts the success of Poor Toms, and Australian gin more generally, down to more Australians "drinking less but drinking better".

Gemma Duff, Poor Toms' head of sales and marketing, says more Australians are shying away from international brands.

"There's been a cultural shift in Australia's drinking patterns that sees us seek out local, high-quality distilleries," she says.

Fellow Sydney label Archie Rose Distilling Co. has recently expanded its operations from Rosebery to Botany.

Brand manager Nick Baxter says Australians are attracted to local distillers because "gin speaks so much of where it's from – you can distil botanicals that capture the essence of a place in a completely unique way".

Despite this growth in demand, Spirits and Cocktails Australia chief executive Greg Holland says further tax changes are still needed to create jobs, investment and export opportunities for the domestic spirits industry.

"Australia's alcohol tax regime remains fundamentally flawed and unfair, imposing a spirits tax that is already 10 times higher than the US rate, and 68 per cent higher than New Zealand's, with further increases every six months," he says.