Australia’s alcohol tax gap reached A$1.23 billion in 2024-25, the ATO says

Australia’s illicit alcohol market kept growing in 2024-25, with the tax gap reaching A$1.23 billion and accounting for almost 14% of the market, according to figures confirmed by the Australian Taxation Office on Monday, November 9.

The ATO uses the alcohol tax gap to estimate how much excise and customs duty is lost each year through illegal production, unreported sales and other forms of non-compliance. The new figures show the gap has more than doubled since 2015-16, rising by A$685 million to A$1.23 billion in 2024-25.

The data add to concerns about the size of Australia’s black market for alcohol at a time when the legal spirits business is under pressure. Food & Drink Business reported that the federal government has written off about A$2.3 billion in forecast spirits revenue over the four years from 2024-25 through 2027-28, which it said points to a decline in the legitimate spirits market.

Steven Fanner, executive director of the Spirits Council of Australia, said the ATO figures confirmed what legal producers had been seeing for years. He said illicit alcohol was expanding as high taxes, loopholes in the system and weak regulation made it easier for untaxed products to move through the market.

He said the trend was hurting government revenue, squeezing compliant producers and exposing consumers to products of uncertain origin and quality. He also said Australia’s spirits tax had reached A$110.15 per liter of alcohol, which he described as the highest level in the world outside Scandinavia.

Fanner used the new figures to press for policy changes, arguing that the tax structure is making legal products less competitive against untaxed alcohol. That debate matters across the drinks business, not only for distillers. Any change in excise settings or enforcement could affect how legal beer, wine and spirits compete with illicit supply, while also shaping tax collections and the government’s broader response to black-market trade.

A second point of dispute is the Alcohol Manufacturer’s Remission Scheme, which gives eligible distillers a tax break of up to A$400,000. Fanner said the program was being exploited by some organizations that are not actually distilling products but are moving tax-free spirits through the market. He said that, instead of giving relief to genuine distillers, the scheme was blurring the line between legal and illegal trade.

According to Fanner, the remission scheme is now costing the government almost three times as much as originally expected when the Morrison government introduced it in 2021. He said the rising cost of the program, the growth of the alcohol black market and weaker revenue from legal spirits sales all point to the need for a review.

The ATO figures are likely to strengthen calls from parts of the industry for tax reform and tighter oversight of alcohol concessions. They also put fresh attention on how Australia balances excise policy with enforcement, especially as producers argue that rising duties can push some consumers and traders toward cheaper untaxed alcohol.

Fanner said there was still time for the government to act before the problem became harder to control. He urged officials to address both the level of spirits taxation and the operation of the remission scheme, saying the current settings were allowing the illicit market to expand while legitimate operators faced a tougher trading environment.