Casey's Beer

Beer is taxed twice. The first tax is excise. Excise is levied on the quantity of alcohol contained in the beer. The rate of excise is per litre of alcohol by volume. The Goods and Services Tax (GST) is then levied on the price of the beer, including excise.

The actual rate of excise depends on two things: the alcohol content of the beer, and the size of the container in which the beer is sold. Excise per litre of alcohol is less for beers containing less alcohol. Excise rates are indexed to the Consumer Price Index (CPI) are adjusted (read increased) in line with the CPI each February and August.

Beer sold in containers greater than 48 litres is subject to a lesser rate of excise. The reason for this is that for the October 1998 federal election the Federal Coalition campaigned on introducing a new tax system, the centrepiece being the GST. The Prime Minister, John Howard, promised that under the GST the price of draught beer across the bar would not increase. When the GST was introduced on July 1st 2000 the price of draught beer did increase. The excise rates were very quickly rejigged to reduce the price of draught beer in order to honour the Prime Minister’s election promise. It must have been a “core promise”.

Excise rates per litre of alcohol by volume

(figures courtesy of the Australian Tax Office, current at August 2, 2010)

The first 1.15% of alcohol content is excise free. So on a 5o litre keg of 4.5% beer, excise is paid on only 3.35% of the alcohol content. This does not reduce the excise rate. The excise on such a keg of beer would be:

(4.5 – 1.15)% x 50 litres x $29.78 = $49.88 or $1.00 per litre.

For a carton of the same beer it would be:

(4.5 – 1.15)% x 9 litres x $42.31 = $12.76 or $1.42 per litre.

In both cases GST would be calculated on top of the excise. So if the carton of beer sold for $44 then there would be a total of $16.57 in taxes, $12.57 of excise and $4 of GST. This is just over 37% of the price.