What is the definition of Beer? The ATO have had a crack…

Introduction

In September, the Australian Tax Office (‘ATO’) released a draft ruling where the definition of beer was narrowed to include the manufacturing processes and inputs when creating alcoholic beverages. This draft ruling has been heavily criticised by the Australian beer trade as Australian local and independent brewers argue that they are constantly trying to innovate beverages through unique brewing styles to compete in the highly aggressive market, and if this draft ruling is enacted it would stifle their innovative brewing processes. Though the draft ruling is reportedly going to be enacted in February 2025, it will be interesting to see if the ruling is successful considering the intense opposition to it.

Draft Ruling to be implemented in Excise Tariff Act 1921

In Australia, the excise duty rate applies to various goods to promote reduced consumption, and The Schedule in the Excise Tariff Act 1921 (‘Excise Act’) provides the conditions in which the definition of beer is statutorily considered as beer for the purposes of excise tax. The ATO has stated that the proposed drafting ruling to amend the definition of beer has been created with the purpose of ‘helping’ manufacturers of beer-based beverages, such as beer-based seltzer brewers, to correctly classify their products for appropriate excise tax to apply. However, the trade disagrees.

The opinion of the Australian Beer Trade to the ATO’s draft ruling

The trade is heavily unimpressed by the draft ruling as they believe the ATO is not considering Australian independent and local brewers who are constantly trying to develop new beer-based beverages. The trade argues that the Federal Government’s draft ruling will exploit Australian brewers as it fails to support or encourage a fair and reasonable market for smaller breweries who are simply trying to compete against industry giants, such as the Japanese companies Asahi and Kirin who also own and dominate Australia’s largest breweries. The trade notes that the brewing process is crucial in allowing local breweries to stand out, as their creations of alcoholic seltzers and variations of lagers are what differentiate them in the market and entice consumer consumption.

Additionally, there is argument that this draft ruling provides tax officers with too much power as they will be able to determine which beverages are simply beer due to its brewing process. This has led to fears that years of work, testing and advertising will have to be abandoned due to the beverages being ‘brewed’.

Such strong disapproval to the draft ruling places the ATO in a difficult position and it will be interesting to see if the amendment to the definition of beer is successfully enacted as this will significantly alter the production processes of various breweries in the industry and drive up the consumer price index for ‘brewed’ beverages.