Australian government increases excise rebate to small brewers

Australia | It is a victory of sorts. While craft brewers celebrated the announcement on 1 May 2021 that the beer excise tax rebate will increase from AUD 100 000 to AUD 350 000 per annum, as of July this year, many worry that it will not benefit the brewers but the publicans.

Eligible brewers can soon claim a refund on any excise they pay up to an annual cap of AUD 350 000 (USD 272 000). Currently, they can claim a rebate of 60 percent of the excise they pay, up to an annual cap of AUD 100 000.

The Independent Brewers Association (IBA) has long campaigned for an increased tax rebate, as it would help independent brewers reinvest and continue to grow. Even after the rebate, independent brewers are forecast to contribute more than AUD 200 million (USD 155 million) in excise to the government in the 2022 financial year, growing to more than AUD 300 million in 2025.

The wrong kind of incentive

While it has been a long and popular campaign for the IBA, some voices in the independent brewing segment have been more cautious in support of an excise rebate, argues the website brewsnews.com.au.

They fear that, at the current rate of increase in brewery numbers, the rebate may be counter-productive, as it would attract more hopefuls to the industry and thus increase competition faster than demand for craft beer.

The number of independent brewers grew 15 percent to over 700 in 2020, despite the beer market declining nearly 2 percent overall.

“The other issue is the excise tax does not increase the cost of beer production, it increases the wholesale price of beer and benefits will only flow to brewers if the tax savings do not lead to lower wholesale prices in an increasingly competitive market,” says brewsnews.com.au.

The IBA appears to accept this as a possible consequence. It is urging breweries not to use the rebate to lower prices.