Excise on spirits and other excisable beverages

Spirits and other excisable beverages

Alcohol products are classified as spirits or other excisable beverages if they are not:

• beer (including home brew)
• alcohol products that wine equalisation tax (WET) applies to.

Spirits and other excisable beverages are subject to excise duty. You need an excise licence to manufacture them. You may also need permission to otherwise deal with them.

If you hold an excise manufacturer licence, you may be eligible to apply an automatic remission under the Remission scheme.

Spirits are alcohol products created through distillation (that is, using a still). Examples include brandy, whisky, rum, vodka and gin.

You need to understand your excise obligations if you are in the business of:

• manufacturing spirits or other excisable beverages
• storing spirits or other excisable beverages underbond
• delivering or selling spirits or other excisable beverages.

We don't grant licences to distil spirits for personal consumption. There needs to be a commercial purpose involved. For more information on whether your activities are a business for tax purposes, see Are you in business?

Brandy, whisky and rum

The Excise Act 1901 (the Excise Act) has specific definitions for brandy, whisky and rum. These are spirits that meet all the following requirements:

• distilled using either
  • grapes for brandy
  • cereal grain for whisky
  • sugar cane products for rum
• matured in wood for a minimum of 2 years
• possess the taste, aroma and other characteristics typically attributed to brandy, whisky or rum.

Blending of spirits

See EXC 2020/1 Excise (Spirit blending exemptions) Determination 2020 (No. 1) for detailed information about when the blending of spirits is not the manufacture of an excisable product.

Concessional spirits

Spirits are free of excise duty when used for concessional purposes or made unfit for human consumption (denatured).

You don't need a permit to buy spirit that has been denatured using a formula approved by us. However, you need a permit to buy spirit that has not been denatured using an approved formula.

For more information, including obligations for spirits approved for concessional purposes or denatured spirits, see Excise on concessional spirits.

Other excisable beverages

Other excisable beverages (OEBs) are beverages containing more than 1.15% alcohol by volume excluding beer, brandy or wine. OEBs include:

• liqueurs
• pre-mixed spirit-based drinks (which are a type of ready-to-drink (RTD) beverage)
• fermented products that aren't beer or wine (for example, cider that wine equalisation tax doesn't apply to).

If you mix 2 or more alcoholic beverages or mix alcoholic beverages with other substances to produce a new alcoholic beverage, the tax treatment will vary. This depends on both the ingredients and the alcoholic strength of the final product. Generally, if you mix alcoholic beverages with other substances, the final beverage is subject to excise duty and requires an excise manufacturer licence.

However if you mix an excisable alcohol product (including excisable alcoholic beverages) or other substances with wine that wine equalisation tax applies to, you should contact us to find out the correct tax treatment. For more information see When preparing mixed alcoholic beverages isn't manufacture.

When you don't need a manufacturer licence

Beverages that aren't produced by distillation, and don't contain any spirit produced by distillation, can be made without an excise manufacturer licence where they are made:

• for non-commercial purposes
• using non-commercial facilities and equipment.

These types of beverages typically include fermented products such as home-brewed beer, cider and wine.

When preparing mixed alcoholic beverages isn't manufacture

You don't require an excise manufacturer licence or need to pay excise duty when alcohol, that has been entered for home consumption, is used to prepare mixed alcoholic beverages (for example, cocktails) for a customer in a retail setting to either:

• consume on the premises
• take away in a sealed, single-serve container to consume soon after purchase. The container can't be one designed for medium to long-term storage, such as the types of cans or bottles that are used in manufacturing ready-to-drink (RTD) beverages.

Difference in excise duty rates for spirits

Spirits are divided into different classes (or tariff sub-items). Each has its own rate of excise duty per litre of alcohol (LAL).

In practice, the excise duty rates for spirits only differ between:

• brandy (spirit distilled from grape wine in such a manner that it has the taste, aroma and other characteristics generally attributed to brandy)
• concessional spirits (including denatured spirit)
• all other spirits including OEBs.

Permission to enter bulk spirits or other excisable beverages

You need our specific written permission to enter spirits or other excisable beverages (OEBs) other than concessional spirits into the Australian domestic market in a container with a capacity of more than 2 litres.

For example, a licensed distiller may want to sell spirit packaged in a 20-litre plastic container directly to pubs and clubs, where it will be used to prepare mixed alcohol beverages (such as cocktails) for consumption on the premises. The distiller can't sell the spirit to those pubs and clubs without first obtaining written permission from the ATO to enter the spirit packaged in the bulk container into the Australian domestic market.

To apply for permission, submit your request to us in writing and provide:

• product name
• alcohol strength
• the container size
• the intended market (for example, pubs and clubs).

We can't give permission to enter spirits or OEBs that are packaged in a container with a capacity of more than 2 litres where they are to be repackaged into any other container for retail sale.

Spirits or OEBs packaged in a container with a capacity of more than 2 litres can be supplied underbond and repacked for retail sale at an excise-licensed premises, prior to the goods being entered into the Australian domestic market.

You can contact us for more information.

Stills used to distil alcohol

To use a still of any capacity to distil alcohol, you must have an excise manufacturer licence. Penalties apply if you manufacture spirits without one.

For us to grant you a manufacturer licence we consider your situation, such as:

• that you intend to distil spirits for a commercial purpose (we don't grant licences to distil spirits for personal consumption)
• the security of your premises
• that you will pay the correct amount of excise duty when required.

Excise duty is generally payable on alcohol you distil, even if you don't have a licence.

To manufacture or sell alcohol, you may also need to check with:

• state or territory liquor licensing
• health agencies
• the Food Standards CodeExternal Link
• your local government.

Stills used for other purposes

You can own a still with a capacity of 5 litres or less without our permission, but only if you're not using it to distil alcohol.

For a still over 5 litres in capacity, if you're not a licensed excise manufacturer you must have permission from us to do any of the following:

• manufacture the still
• move or set up the still
• sell or buy the still
• import the still
• have possession, custody or control of the still.

Penalties apply if you don't have the appropriate permission for a still.

Find out how to apply for permission to use a still.