The Independent Brewers Association was cautiously optimistic this morning about the 2020-21 Budget announced last night, despite its omission of excise cuts and specific brewing industry measures.
The 2020 Federal Budget announced last night by Treasurer Josh Frydenberg opened with the MP declaring that COVID-19 has triggered “the most severe global economic crisis since the great depression”.
It totalled the initial COVID response at $299 billion, including health measures, JobKeeper, and boosting cash flow for employers.
IBA chair Peter Philip said that the government focus on job creation resonates with the organisation’s aims.
“However,” he said, “this budget is predicated on not only having a vaccine but all borders being open and life returning to some sense of normality.
“It is our sincere hope that this is the case as many of our businesses rely on people being able to visit taprooms, pubs and restaurants.
“It is a risky proposition but one we all need to be optimistic about as the alternative is not one we want to consider.”
When it came to alcohol excise, the Government did not heed the calls of the IBA and the Brewers Association of Australia who both asked for it to be cut or frozen in their pre-Budget submissions.
IBA chair Philip said it was “disappointing” to see their requests for excise relief ignored.
“Although we knew this was going to be a long burn, it would certainly have made a significant contribution to ensuring breweries were able to come out the other end of this disaster by investing in their business and ultimately creating new jobs,” he said.
“[But] I want to assure our members and the whole indie brewing community that we will continue to work on the requests outlined in our pre-budget submission, we are still fighting the good fight!”
The IBA had also asked for the development of a Beer Australia national strategy similar to that of the wine industry to help it recover and grow to its full potential.
Excise revenue figures released in the Budget showed the impact of COVID on the beer and wider alcohol industry so far.
In 2020 the government made $190 million less in beer and wine excise than it expected at its mid-year economic outlook projections. Beer brought the Government in $2.5 billion, $100 million less than the Government had previously predicted.
Spirits were the only category to make more than projected for the Government, up 3.5 per cent to $2.6 billion.
In its projections for 2021-22, the Government predicted a further slashing on its income from beer. It predicts that it will make $2.4 billion in the next financial year, a decline on forecasts of $270 million.
This is the biggest projected decline out of beer, wine and spirits, which the government expects will lose a collective $480 million on initial projections.
Aid for breweries
While the cornerstone of brewers’ demands was not met, there were other positives for breweries in the Budget.
“The Federal budget seems to provide options for indie brewers when it comes to the Modern Manufacturing Fund, hire of trainees and the Instant Asset Right Off Scheme,” Philip said.
JobMaker hiring credits will enable businesses to hire young Australians, $4.3 million commitment to Beyond Blue’s New Access for Small Business, and regional tourism support packages were also major elements of the Budget to aid small businesses like breweries.
In addition to the $1.3 billion Modern Manufacturing Initiative announced last week, the Government announced an additional $52.8 million for the second round of the Manufacturing Modernisation Fund to help manufacturers scale-up, invest in new technologies and create and upskill jobs. This was something the IBA asked for specifically in their submission.
“The expansion of the manufacturing grants with a focus on food and beverage is very welcome and something we have been calling for since the last round closed as several indie brewers received funding under this program,” said Philip.
“Continued investment in brewery infrastructure will be a sure-fire way to ensure economic recovery for our members so we congratulate the government on this measure.”
Businesses will also be able to write off the full value of any eligible asset they purchase for their business until June 2022, which the Treasurer said would help “99 per cent of businesses”, and was subsequently called “a game-changer” for smaller businesses by Kate Carnell, small business ombudsman.
Losses incurred can also be offset against prior profits made in or after the 2018‑19 financial year, according to the Budget, effectively allowing small businesses which have paid tax on profits in or after 2019 to claim back losses incurred from full year 2020 to June 2022.
“However, this is somewhat tempered by the fact that anyone carrying excise debt as a result of those expenses being deferred during the pandemic will be limited to their own financial reserves rather than borrowings,” said Philip.
“Anyone carrying a tax debt will be precluded from bank loans which is why our pre-Budget submission also asked for these debts to be forgiven. This is also the case for the instant asset write off option – how will our members invest in equipment if they don’t have any cash or can’t borrow?”
Updated 2.52pm AEST, including commentary from the BA.
In a statement to Brews News, the Brewers Association of Australia said it welcomed a number of key aspects of the Budget, including the JobMaker hiring credit and the Modern Manufacturing Strategy.
It hailed the tourism measures, saying getting people into regional Australia will also help the industry recover more quickly, as will the back-dating of personal tax cuts for Australians.
“[This] will also encourage people to spend in their local communities which should be great for hospitality and jobs,” a spokesperson said.
However the major sticking point was clearly beer excise, which the BA says is the fourth highest in the industrialised world.
“While overall we’re pleased with the Budget, we would have also welcomed a much needed cut in beer tax to make beer more affordable.
“A cut, or at the very least, a freezing of excise would have given hospitality businesses a boost at this important time, particularly as beer is the most consumed alcoholic beverage in Australia’s licensed venues.
“We know that the recovery from the pandemic will be long and challenging and so brewers will continue to advocate for tax relief for Australian publicans, clubs and drinkers.
“We look forward to continuing to engage with the Government about the benefits of cutting, or at least freezing, beer excise.”