Taxes That Hit Your Hip Pocket
Whether you’re enjoying a pint at the pub, filling your car with fuel, or considering a new set of wheels, a series of taxes are impacting how much you pay. These taxes contribute to the federal budget, which Treasurer Jim Chalmers will present.
The Goods and Services Tax (GST) applies to most items sold in Australia. However, specific goods attract additional duties, often aimed at discouraging their consumption. Some of these taxes fund infrastructure projects, while others are remnants that help bolster government revenue.
Taxes on Beer, Wine, and Spirits
Beer
Enjoying a pint at the pub has become increasingly expensive, partly due to excise duties on alcoholic beverages. The excise rate for draught beer ranges from $10.57 to $43.49 per liter of alcohol, according to the latest increase.
For a pint of full-strength draught beer (5% alcohol), excise adds roughly $1. The government expects to collect $7.8 billion in excise from alcoholic beverage sales this fiscal year, with about $2.7 billion of that from beer.
To appeal to pub-goers before the election, Prime Minister Anthony Albanese announced a two-year freeze on excise hikes. This initiative, set to begin with the next indexation rate in August, could provide a slight reprieve, saving drinkers around 10 cents per beer.
Wine
Wine drinkers do not have to pay an excise duty, but have to contend with the Wine Equalisation Tax (WET). This tax is set at 29% of the wholesale value of the wine and is paid by winemakers, importers and sellers, but it can also be passed on to consumers.
In 2004, to support small wine producers, the government introduced a tax rebate, capped at $290,000. The government also announced an increase to this rebate cap for wine producers, starting July 1 of the following year.
For example, a bottle of wholesale wine valued at $25 will be taxed just over $7.
Spirits
Spirits attract higher excise duties for those who prefer the stronger stuff. Brandy has an excise of $97.41 for a litre of alcohol, meaning a 700ml bottle with a 40% alcohol content would be taxed around $27.
Other spirits with an alcohol content above 10% (and not used for science, medicine or manufacturing) face an excise of $104.31 per litre of alcohol. A 700ml bottle of whisky (40% alcohol) would thus have an excise charge around $29.
Taxes on Cigarettes and Petrol
Cigarettes
The rise in tobacco excise rates has significantly impacted smokers, leading many to seek supplies on the black market. Tobacco excise was the federal government’s fourth-largest revenue source as recently as 2021-22, and the tax primarily aimed to discourage smoking.
The increasing popularity of vaping and the growth of the black market have created a $31 billion hole in the budget revenue since 2019. Revenue from tobacco excise is expected to keep declining in the coming years.
Excise on tobacco increases with average earnings, but the Albanese government has implemented additional 5% annual increases since September 2023. As of March this year, most cigarettes had an excise duty of $1.40 per stick. This means a pack of 20 cigarettes is taxed approximately $28, pushing the overall cost to about $40.
Due mainly to the high excise, the price of tobacco has skyrocketed in the last few years, increasing by 5.8% last year. However, tobacco excise is expected to generate about $8.8 billion this fiscal year, which is 42% less than expected a few years ago, due to consumers switching to illegally imported, under-the-counter cigarettes.
Petrol
Fuel prices fell by 7.9% in the 12 months leading up to December of last year, largely due to lower global oil prices. However, drivers pay about 50 cents per litre of petrol and diesel in fuel excise, which is adjusted twice a year in line with inflation.
In February, fuel excise reached 50.8 cents per litre. This means that about $25 of the cost of filling a 50-litre petrol tank goes to government coffers, regardless of the petrol price.
It is an indirect way to charge drivers for the cost of road maintenance. In 2024-25, the government estimates fuel excise will generate $24.6 billion in revenue, or about $1171 from every motor vehicle.
Luxury Car Tax
Buyers of luxury cars, such as Lamborghinis, have to pay a bit more than the base value of the car. The drive-away price of high-end vehicles often includes the luxury car tax (LCT) of 33%.
This tax applies to any value over $80,567 for luxury cars — including accessories and customization added before delivery. There is a higher threshold of $91,387 for luxury cars with lower fuel consumption, and these thresholds are adjusted with inflation yearly.
As an example, a fuel-efficient luxury car valued at $100,000 (excluding GST) would have the 33% tax applied to $8,613, resulting in the buyer paying about $2,842 in LCT as part of the drive-away price, which equals to nearly 3% of the original value. Ultra-luxury cars priced at $1 million could incur hundreds of thousands in taxes.
The luxury car tax was originally intended to protect Australia’s car manufacturing sector, but since the industry’s demise, it has become another source of government revenue. The government estimates the tax will generate $1.2 billion in revenue in the 2024-25 financial year.
