Media reports suggest a win for small brewers in the upcoming Federal budget.
Murdoch media papers are reporting Treasurer Scott Morrison will announce an end to the higher excise paid on beer sold in kegs smaller than 50 litres, and an increase in the amount of excise brewers can claim back.
Brewers can now claim a refund of 60 per cent of the excise duty they have paid up to a maximum of $30,000 a year. This will increase to $100,000 from July 1 next year. It will also be extended to apply to all brewers and distillers, the papers said.
The move is a win for brewers and the Independent Brewing Association which has been campaigning for tax reform for the small brewing sector. Craft brewing has been significantly disadvantaged when compared to the generous and market distorting assistance given to wineries.
However, whether the changes will benefit brewers with added profitability or passed on to beer drinkers remains to be seen, and the overall impact on the industry, with even Mr Morrison suggesting the move will result in cheaper beer.
Competition is likely to see the tax savings passed on to consumers, rather than bolster brewery balance sheets.
Making the price of craft beer more competitive with larger breweries should increase its appeal and potentially increase the market for craft beer, which is viewed as expensive in the broader market.
Some brewers are concerned at what the changes might lead to, including an even faster influx of new breweries and even greater competition in an the already buoyant market.
Industry veteran Richard Watkins recently told Beer is a Conversation of his concerns.
“Because the margins are controlled quite tightly in wholesale beer, if we suddenly take excise out of the equation…what’s going to happen we’re going to get people coming into our industry not for the love of it, they’re going to come into our industry,” he cautioned.
“They know they can make money – they think they can make money because their margin on the deal will be better.
“So our market out there will have a lot of people coming into coming into the industry paying a good marketing company to come up with a brand and not really having a story and not really investing in the industry, simply just coming in to make money,” he explained.
The reduction in keg size could see greater penetration of tap beer in venues such as restaurants that have traditionally avoided the larger size kegs. It could also assist venues wanting to take a wider range of beers and turn them over quickly, ensuring that keg beer is served fresher.
A move to lower keg sizes will also have potential occupational health benefits, with fewer injuries from handling of kegs weighing over 60 kilograms.
At this stage full details of the Government’s plans are not confirmed, and whether these changes are limited to smaller or independent players or will be applied across the industry.
The changes may also further complicate the already unwieldy alcohol taxation regime that sees a wide disparity of treatments across beer, wine and spirits.
The Independent Brewers Association will be releasing a statement later today, which the details of the changes have been confirmed.