Allegra Spender (Wentworth, Independent) Share this | Hansard source

I rise to speak briefly on the Excise Tariff Amendment (Draught Beer) Bill 2025. While I support the bill in its efforts to provide some temporary relief to parts of Australia's hospitality sector, who are really struggling—namely, pubs and clubs—I want to echo many of the concerns expressed by some of my crossbench colleagues, speak briefly on another area of our excise regime and comment on a proposed ATO determination currently under consideration.

My electorate of Wentworth is home to some amazing local institutions, from the Bondi Bowlo and the Diggers to the Paddington RSL. These are just some of the community operated bars, clubs and restaurants that give so much to the culture, atmosphere and events of the eastern suburbs. But these establishments and the rest in the eastern suburbs have navigated a challenging business environment over the past few years. COVID hit these sorts of organisations really hard, and the long tail of the cost-of-living crisis has dried up consumer demand in what should have been their recovery phase and has made it harder to keep their doors open.

Across Australia, hospitality venues are falling at a faster rate than almost any other sector in the economy, beaten only by construction. In 2023-24, we lost 1,667 such businesses across Australia. This bill offers some welcome reprieve. This bill amends the Excise Tariff Act and the Customs Tariff Act to pause indexation of the excise and customs duty rates on draught beer—beer poured from taps—for two years.

Wentworth also hosts some amazing craft breweries, including Bondi Brewing and Curly Lewis, as well as Australia's leading independent Seltzer company, FELLR. These independent brewers also add so much to my local community, creating new venues and products and the taste of the eastern suburbs, consumed all over Australia. These institutions face considerable challenges of their own. Not only is indexation pushing up the price of their products twice a year; they face an incredibly concentrated market dominated by two large multinational companies. The Independent Brewers Association reports that, after you take out foreign owned businesses and home-brand products, some 670-odd independent brewers are left to compete for around seven per cent of the remaining market share.

Last year, as part of the Standing Committee on Economics, I investigated the beer market as part of the Bettercompetition, better prices report. We heard that the beer market has become pay to play, where the large companies can undercut local competitors through promotional marketing, discounts and even tap contracts that mean independents might either have no taps in a pub or a club or jostle amongst each other for a single tap. This makes it hard for independent brewers to get their brands out into public consumption outside of their own premises. They often rely on the sale of bottled or canned beer, sold in traditional liquor stores or at their own storefronts. For brewers with this business model, this excise will provide very limited relief.

While I acknowledge the announcement by the government to lift the remission cap from $350,000 to $400,000 from 1 July next year, I will also be supporting the member for Bradfield's amendment to increase the scope of the excise to include local, independent craft beer sold in bottles and cans.

Local independent brewers face another potential challenge in the coming months because of a recently announced draft guidance known as ED 2024/D2. Based on the draft determination, the ATO appears to be moving away from an objective determination of what constitutes beer to favour a more subjective one. Instead of determining beer based on its fermentation process, the ATO, it appears, will look at the final product to see if it fits within a conventional understanding of beer. This has potentially significant consequences for beverage producers whose product is no longer considered to fit within the conventional understanding of beer now or in the future. These products would be subject to a new excise rate of $105.98 per litre of alcohol compared to beer, which attracts an excise rate of $62.56, putting them at a significant cost disadvantage compared to beer.

With the nature of beer evolving per different preferences and tastes to include a broader palette including sour beer and even seltzers, I ask the questions: Is it really the role of the ATO to determine what is and isn't a beer now based on how beer is conventionally understood? Aren't other people concerned about this in this chamber? I make light of it, but I'm sincere. I do wonder if this is the role of the ATO, to determine what is a beer and what isn't a beer. It does seem to be some sort of overreach of the Taxation Office.

While I have been reassured and received assurances that this will not be targeting craft brewers exploring different types of sour beers, for example, I'm concerned about the ambiguity of the determination in a market that is reliant on innovation to challenge the status quo. As I've already mentioned, Australia's beer market is already dominated by an offshore duopoly that holds more than 80 per cent of the Australian beer market. I'm concerned that imposing further restrictive definitions on beer based on convention serves to protect existing products and will limit the ability for new local brewers to compete with established brands on the basis of the innovation in the product market, which they have done to date. I understand that draft determination ED 2024/D2 is due to be finalised by the end of 2025—but no longer consulting with stakeholders. I urge the Assistant Treasurer to consider advising the ATO to revise ED 2024/D2 in favour of rules that are clear, well designed and easy to follow. This is important for business to continue to innovate and invest, confident that they know how their product will ultimately be classified.

Finally, returning to the issue of excise, I'd like to use this opportunity to draw the parliament's attention to another issue we have in Australia's excise regime: illegal tobacco. This is a social problem that is hiding in plain sight. After successfully slashing the proportion of Australians smoking daily from 25 per cent in 1991 to eight per cent in 2023, we are seeing tobacconists now popping up like mushrooms across our community, selling illegal tobacco and vapes and capitalising on cheap illegal tobacco. There are now around 20,000 tobacconists in Australia—about 60 tobacconists for every McDonald's. The term, 'Do you have the cheap ones?' is becoming a thinly veiled codename for illicit cigarettes costing about one-third of the price of legal cigarettes.

There is a perfectly sound reason for having a tobacco excise tax, as my economics 101 lecturer would tell me. We want price externalities and to discourage harmful behaviours. For the most part, our tobacco policy has served public health and public finance well. But we've hit an inflection point. The growing disparity between the prices of legal and illegal cigarettes has created a lucrative and largely unenforced black market, which is proving counterproductive to both health and the budget, not to mention the impact it is having on driving organised crime.

The consumption of legal tobacco apparently fell by 22 per cent last year. That is frankly unbelievable and is in contradiction to wastewater testing. What that shows is that the consumption of legal tobacco fell 22 per cent, with wastewater indicating that this is just moving straight out of the legal tobacco and into illegal tobacco, which means that we are now missing around potentially up to one-fifth of our tobacco excise and we are fuelling, through this change, organised crime that is facilitating this trade in illegal tobacco. Consequently cigarette excise is in freefall, with economist Chris Richardson estimating that untaxed illegal cigarettes are costing the budget around $10 billion. Organised crime has grabbed the opportunity presented by illegal tobacco leading to a surge in arson attacks and violence for the control of a growing and highly lucrative market. Across Australia we've had more than 200 attacks since 2023, but the police tell me that they are simply not resourced to deal with this growing threat.

I acknowledge that the government has already made some contributions to the issue, including contributions both this year and last year to step up funding for the Federal Police and the Australian Border Force. But the government is losing the war on this, and much more needs to be done. At the very minimum, I think the government needs to have an urgent parliamentary inquiry into what is needed to actually solve this issue. We should think about having three priorities for excise policy—public health and collecting revenue but also minimising criminal activity associated. At this stage, the current tobacco excise is failing at least two of these measures. It needs to be reviewed, and the question of how we manage what has now turned into an enormous problem which is going to be extremely difficult and complicated to reverse—this is where this growth in excise has left us. I draw the government's attention to this in particular. They should be taking urgent action on this issue. Frankly, they have not done anywhere near enough.

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