The beer world – and the mainstream news media – has been alight with news that the Federal Government has announced changes to the excise regime.

While sections of the industry have long campaigned for excise relief, the news has been greeted with mixed feelings across the industry.

Economies are complex machines and tax changes can have far reaching and unpredictable impacts. While only time will tell how it actually affects the small brewing industry, one thing is certain from the tone and positioning of the announcement: craft beer is now big and popular enough that governments are starting to see votes in it.

What’s been announced:

The Treasurer, Scott Morrison, has announced the Governmentit will increase the amount beverage companies can claim back on their excise and extend the concessional draught beer excise rate to smaller kegs. The alcohol excise refund scheme cap will increase from $30,000 a year to $100,000, from 1 July 2019 for all brewers and distillers.

Additionallydraught beer sold in kegs exceeding 48 litres is taxed at lower rates compared with beer sold in smaller kegs. The government will extend the concessional draught beer excise rates to kegs of 8 litres or more.

The Spin:

While being sold as a measure to benefit craft breweries, even referred to as a tax on craft beer, these measures apply to brewers equally.

The Treasurer characterizes the smaller keg size as being favoured by small brewers.

The tax rebate is being described as ‘tax relief’ to brewers.

An alternative interpretation:

Larger brewers also see the potential in getting their beer into restaurants and cafes in smaller draught format. In other countries smaller kegs are commonly used, and there seems to be no reason that smaller kegs will not be used by the large multinational breweries here as well.

At least one brewer has also privately expressed concern that, with 50-litre kegs being a standard format in Australia due to the former tax implications, it created an artificial barrier for many international brewers exporting to Australia. They expressed concern that the changes will see a ‘flood’of international draught beers taking advantage of the smaller keg size.

The description that it is a rebate suggests the excise will end up in brewers’ pockets. Market forces will ultimately decide whether this results in increased profitability for brewers and potential business investment, or will be passed on to consumers in the form of cheaper beer. Both have benefits for the industry.

The response:

The news has been given a mixed response by brewers and the industry.

Independent Brewers Association

(Media Release)
Independent brewers celebrate Budget announcement

Australia’s independent brewers today welcome the news that the Federal Government is set to significantly increase the level of support it offers the industry.

The Federal Treasurer, Scott Morrison, has announced that the Budget will contain good news for small brewers in Australia. Brewers will receive up to an additional $70,000 in excise rebate and that the excise rate will be lowered on small kegs.

“This is great news for independent brewers, great news for consumers and great news for job creation,” said Ben Kooyman, the Chair of the Independent Brewers Association.

“Having the Federal Government make these changes shows that they realise what an amazing industry we have and will enable our members to expand.”

“Australia’s 450 small, independent brewers will take that additional excise rebate and invest it back in their businesses. That will mean they will be able to increase their production, invest in quality improvement and most importantly hire more staff to join over 2400 Australians the industry already employs.”

“A reduction to the excise rate on smaller kegs has the potential to fundamentally change the way many of our members do business. It will allow them to win customers in smaller venues and in distant markets. And having to deal with full 50 litre kegs is one of the biggest workplace health and safety issues in many breweries. This will give brewers more options.”

“The independent brewing industry has been lobbying for many years to ask for a fairer deal on excise. It has been a core aim of the IBA since its inception and we have spent a great deal of time collecting data, commissioning independent research and telling our industry’s story to key Government members. I am very proud of what we have been able to achieve and it shows the importance of the industry speaking with a single voice.”

Brewers Association

(Media Statement)
The excise cut on kegs is a great result for draught beer across the board. The increase to the brewers rebate, from $30K to $100K, will be a boost and shows the government has confidence in the beer category. This represents important government support for the entire sector, especially in the face of alarmist fringe groups determined to undermine all alcohol and demonise people who enjoy a drink. It shows their efforts, though persistent, carry little sway.

Green Beacon Brewery

Adrian Slaughter, co-owner

“Great to see government engaging and acting to support private enterprise in this nature. I’m hopeful that this move will open up more routes to market for craft and brewers but I’m concerned this is another layer to an already convoluted taxation system.

Like some in the industry, I’m also interested to see if it encourages more non-vested new entrants but only time will tell. Any relief in taxation though should be applauded by the industry as a whole.”

Stomping Ground Brewery / Local Taphouse

Steve Jeffares, co-founder

Lowering the excise rate for kegs smaller than 50L

This is certainly a fantastic development for breweries and testament to the lobbying work done over a long period of time by members of the brewing fraternity and the trade associations, most recently the IBA.

Ever since my back was injured 12 years ago from moving full 65kg kegs around cool room, I have agitated to see the regulations changed to encourage smaller and lighter kegs from an OH&S perspective. I know best practice should see two people move each keg but anyone in the industry knows that this is almost impossible to do consistently.

With breweries being able to sell beer in smaller kegs, I expect it will open up more opportunities for restaurants and small bars to offer tap beer instead of package product. I don’t think venues who sell a large volume of beer will want to shift to smaller kegs in a hurry as it will require changing kegs more often and more storage space but for those businesses that do adopt smaller kegs, they will drain the keg quicker which means the beer served should be fresher.

This change may give independent breweries a short term advantage against the corporate breweries as they own vast stocks of 50 litre kegs and it’s unlikely they will further invest significantly in smaller kegs (and the system changes to adopt them) in a hurry. The breweries they have acquired though, like Pirate Life, Feral, Mountain Goat, 4 Pines etc, along with independent breweries like ours, are more likely introduce some 30 litre kegs into the mix, especially for smaller venues and for beers that tend to sell slower because they are less popular styles, more complex or have a higher ABV.

As an increasing number of breweries rely on keg rental or leasing arrangements, I expect those companies will quickly adapt to offer kegs in different sizes when the legislation takes effect in 14 or so months.

Excise

The increase of the maximum rebate from $30k a year to $100k is obviously a very welcome step.

While many media outlets are leading their stories about this development with the notion that beer will become cheaper, I think this is a politically led comment from Scott Morrison to excite voters. While some breweries may certainly choose to invest those extra funds in price discounting, I expect any extra rebate will help us invest in improving quality control measures,capital expensesandattracting and retaining the best staff to stimulate further growth of our business.