ATO move that could push up the price of beer: 'Last nail in the coffin'

The Australian Taxation Office (ATO) is looking into the definition of what a beer is, which could soon make the beloved beverage more expensive. The definition helps the ATO work out how much the alcohol needs to be taxed and the Excise Determination is exploring how things like water and flavouring could impact the wording.

While it might sound like splitting hairs, the definition helps distinguish beer from other types of alcohol, like spirits, which are taxed differently in Australia. But Kylie Lethbridge, chief executive at the Independent Brewers Association, is worried a huge portion of the industry could soon be wiped out.

"The last nail in the coffin for our small independent craft brewers in Australia," she told 6PR radio.

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"We feel a bit like we're in the firing line, this will have a significant impact for a number of brewed products that are beer, even outside of seltzer.

"Aussies who want to go out, want to meet people... want to go out to the local pub, have a couple of beers, it's just almost becoming unaffordable.

"Particularly when you've got the cost-of-living crisis overlaying that."

How is beer defined at the moment?

The ATO recently released a draft of what a beer could be defined as. It was listed as a beverage that has a bitter taste, mid-to-low alcohol level and taste, and has the smell and appearance of a beer base.

The previous definition, which has been in place since 2009, draws on more specific aspects:

• is the product of the yeast fermentation of an aqueous extract of predominantly malted or unmalted cereals

• contains hops, or extracts of hops, or other bitters

• may have spirit distilled from beer added to it, but only if that spirit does not add more than 0.5 per cent to the total volume of the final product

• may have other substances (including flavours) added to it

• contains no more than 4 per cent by weight of sugars

• does not contain any artificial sweeteners

• has an alcohol content of more than 1.15 per cent by volume

But the problem with this definition is that seltzers can be brewed in a very similar way, even though they are remarkably different in taste to beer.

The current definition puts a big focus on the process of making the beverage, however, the draft determination also shines a light on the "final product", which could place a certain drink in a different category for excise purposes.

This shake-up in definition could cause seltzers to go up in price, along with ginger beers, craft beers and lagers.

Fears for the industry if the definition is changed

Lethbridge made a submission to the ATO on behalf of the Independent Brewers Association warning of the implications of defining a beer in the "conventional" sense.

“[The change means] on any given day, a tax officer would have the power to determine what product is beer – presumably absent [of] any qualifications in brewing,” she said.

“Lagers are formulated with very low bitterness, very low flavour, and use production techniques to ‘strip them of their taste’ … to the point that they too could be understood to push the boundaries of what could conventionally be understood as beer."

At the moment, the ATO's excise on beer ranges between $2.22 to $36.98 per litre of alcohol.

However, other drinks can be far more expensive and range between $58.48 and $66.67 per litre of alcohol.

The ATO said the draft determination has been designed to "help manufacturers... correctly classify their beverages" and the tax office is still welcoming feedback on the definition.

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