The tax office will lift compliance action against operators exploiting the $400,000 alcohol remission, six weeks after the cap increased. The Spirits Council says enforcement alone will not fix it.
The Australian Taxation Office (ATO) has announced it will ramp up compliance action against businesses suspected of rorting the Alcohol Manufacturers Remission Scheme, the tax break that lets eligible distillers claim back excise on the first $400,000 they would otherwise pay each year.
The ATO says it will check new businesses seeking to enter the excise system and apply greater scrutiny to companies during their first two years of operation.
The Spirits Council of Australia (SCA) welcomed the move but said the rules themselves need work.
SCA executive director, Steven Fanner, said, “The scheme plays an important role in helping Australia’s emerging distillers grow and invest in their businesses, but we need to ensure only genuine distillers are accessing this tax benefit.”
Fanner said the council had been warning the government the scheme was not operating as intended, instead being exploited by aggregators and people who are not genuine distillers.
“Tough compliance action is critical, but we should not stop at enforcement. We also need to look at the rules themselves to ensure the benefits of the Government’s support for distillers are not being diverted elsewhere,” he said.
The council says inadequate integrity measures in the scheme have cost taxpayers millions and blurred the line between legal and illicit alcohol.
The remission was built for small producers. They need a manufacturers licence, evidence they have fermented or distilled at least 70 per cent of the alcohol, to satisfy a still ownership test, and be legally and economically independent of any other entity claiming the remission or the wine equalisation tax rebate.
SCA said the issue is aggregation – the pooling of excise-free spirit claimed across multiple producers and sold at volume. The ATO has also flagged “cap shopping”, where operators seek out unused remission caps rather than distilling to their own.
At the spirits excise rate, the cap is worth roughly 3200 litres of pure alcohol a year in forgone duty, so the incentive to manufacture eligibility rather than spirit is substantial. Around 1500 brewers and distillers access the scheme.
The cap rose from $350,000 to $400,000 on 1 July this year, part of the package that also froze draught beer indexation. Spirits got no indexation relief, so excise on spirits and RTDs has continued to climb at CPI while beer on tap has not.
The ATO already runs a retailer visits program that has been expanded to include clubs, nightclubs and hospitality venues, both to educate operators about illicit alcohol risk and to collect intelligence on product being supplied to them. The tax office has previously reported finding improper manufacturing and misuse of concessional or denatured spirit.
SCA is now pushing for a broader review of the scheme rules rather than compliance activity alone. The ATO has made the integrity of the excise system a stated focus area.
