tax relief increase

What the Tax Relief Increase Means for Brewers in Australia

March 3, 2022

Chances are you’ve heard about the tax relief increase for brewers in Australia.

The good news for Australian drinkers is that lifting the excise relief cap will assist small businesses in getting started or growing. The price may not go down, but drinkers will have more choices.

Despite its hasty implementation at the end of last year, Treasurer Josh Frydenberg’s update to alcohol excise regulations was not well publicized since it pertains to brewing companies. The majority of national media carried the same copy saying that the threshold for small brewers’ excise rebates will be raised from $60k to $100,000 plus the rebate will increase. The important detail that they left out was that the rebate was raised from 60% to 100%.

In this financial year, excises have been removed for small brewers, who are now permitted to sell approximately 100 kegs of beer of 5% abv each week and receive a PA credit of $350,000 from the Australian Tax Office.

The Reasons Behind the Decision

As part of a partnership between the organization representing boutique distilleries and the body for big spirits producers, a cocktail party was held at Parliament House in February. In the aftermath, brewers and distillers were told they will be reimbursed for a maximum of $350,000 of excise they have paid up to this point.

Stuart Gregor, president of Ada and Four Pillars Gin, says that spirits excise is calculated based on strength. Due to this, a 700ml bottle of 40%-alcohol gin usually costs around $26 more than it does without tax. This is roughly a third of the price in tax and means the higher the proof, the higher the tax. It does depend on what you’re drinking, however.

As Kylie Lethbridge, managing director of the Independent Brewers Association (IBA), describes: the small and independent beer brewers have also been suffering, and their campaigns have been pursuing the same goal.

Craft beer sector revenues are taxed at a rate of 42 cents per dollar. Craft beer production in Australia is taxed at the third highest rate in the world. You pay more tax on your beer if it has a higher alcohol content, just like spirits.

Straight from the Mouths of the Tax Office

Thankfully, there will be further tax increase relief for craft beer producers.

Australia’s brewers and distillers will be able to receive additional tax relief from 1 July 2021, thanks to the Morrison Government’s implementation of necessary regulations.

The 2022 budget announced changes to the excise remission scheme for brewers and distillers, including a cap of $350,000 on the amount that can be refunded annually and further tax relief for small businesses such as brewers and distillers.

Small businesses in Australia are being supported by reducing the tax burden on this growing sector.

This tax relief increase change will create more investment and jobs in Australia’s brewing and distilling sector, which employs approximately 15,000 people. In addition, the changes will support 600 breweries and 400 distilleries.

It will be a complement to the Government’s 202021 MYEFO announcement to automatically remit excise duty remission to eligible alcohol manufacturers, reducing administration costs as well as addressing cash flow concerns. This initiative started in July of 2021.

With these changes, the Remission Scheme will be aligned with the existing Wine Equalization Tax (WET) rebate program. The goal is to provide a level playing field for all alcohol manufacturers in Australia as well as tax relief for the craft brewing and distilling industries.

The new regulations can be found on the Federal Register of Legislation website, and further information on the measure can be found at the Australian Taxation Office website.

How it Affects Your Beers

Is there going to be a price drop due to the tax relief increase? As a matter of fact, the reduction in excise taxes was not to lower the price nor was it designed to increase consumption; rather, it was to expand production at a distillery and create jobs.

However, the price of craft beer won’t be decreasing anytime soon under current arrangements. The price of beer is unlikely to decrease, as you get what you pay for and craft beer is a premium industry. Additionally, breweries consume a lot of resources. Because they’re labor-intensive, good beers are expensive to make.

The good news is that with this new tax policy, the number of craft breweries is only expected to keep growing.

What Does this Mean for Brewers and Consumers?

It is better to avoid the tax in the first place rather than remit it and then have it refunded later. Brewers who now pay no excise will see both positive effects on their liquidity (cash flow) and profitability.

With this policy, the brewing industry can combat the natural economies of scale that have led to the consolidation of the industry to only two players each with huge market share. Combined with instant asset write downs and carry-over tax loss offsets, the excise break offers an unparalleled support package for the industry when viewed in the context of a restarting economy.

Imagine a company that lost money through COVID-19, but brought forward taxable profits to offset the loss. By crediting them for back taxes paid in the past, the federal government is giving a free pass and allowing for growth in the sector.

Curious how your brewery can stay on top of these tax changes come tax season?

Breweries can track data from grain to glass with Beer30. We offer a modular approach so that every team member can use Beer30 to manage inventory, gather brew logs & fermentation data, assemble finished goods, and handle sales & accounting.

Using a smartphone, tablet or laptop, brewers can process data real-time and make informed decisions so that they can #BrewBetterBeer. When it comes to syncing their invoices and maintaining accurate balance sheets and ledgers, our integration with Xero and QuickBooks Online saves our customers hours every week.

You will have a better understanding of your overall margins and can make better real-time decisions to help your brewery #BrewMoreBeer by analyzing the true cost per can, bottle or keg of beer.

To get started with a free demo, click here.

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