Why craft brewing is a bitter battle to stay ale and hearty thanks to the government’s tax squeeze

SO you walk into a pub, order a lovely fresh glass of local beer, then watch as the landlord pours it – and promptly drinks about 25% of it. You would, rightly, be furious, but that’s roughly the scenario facing every small brewer in NSW.

Brewer Mike Jorgensen at the Ekim Brewing Company microbrewery in Mt Kuring-Gai just outside Sydney.

SO you walk into a pub, order a lovely fresh glass of local beer, then watch as the landlord pours it – and promptly drinks about 25% of it. You would, rightly, be furious, but that’s roughly the scenario facing every small brewer in NSW.

Thanks to antiquated tax laws, the Treasury demands that every brewery stump up 25% of the value of the beer it makes, as soon as it leaves the brewery. Before anyone says that breweries need to pay their way like anyone else, take a look at the wine industry.

To go with that glass of beer that the barman just poured you, you also order a glass of shiraz, say, made by a small vineyard in the Hunter Valley. Not a drop gets drunk by the barman, because wineries get substantial help from the government.

In a nut-shell, wineries can claim back up to $350,000 of excise duty paid to the government. Small breweries have their own version of a rebate – and it’s a paltry $30,000 a year.

To make it even more uneven, breweries pay more tax on a 30L keg than they do on one that’s 50L, and any landlord will tell you which size he prefers moving.

For years, the politicians weren’t interested. Blair Hayden, managing director of The Lord

Mike Jorgensen at the Ekim Brewing Company in Mt Kuring-Gai.

Nelson pub in The Rocks, lobbied the federal government more than 20 years ago, and got nowhere.

But there is one four-letter word that catches politicians’ attention: J-O-B-S. Quite apart from being fresh, local and delicious, craft brewing is seriously good for the economy.

This is the thing: many people might still think of it as a niche industry, but there’s cold, hard evidence to show how it could become a major growth area, given a bit of government love.

Earlier this year the Independent Brewers Association commissioned research to back their case (yes, the IBA is hardly neutral, but the research was done by a well-credentialled consultancy whose clients include Coles, the NSW Government, the Victorian Government and Sydney Airport).

In 10 years the size of the independent brewing scene nationally has risen tenfold; it still only makes 3% of the beer consumed in Australia, but employs three-quarters of all people with a job in Australian brewing.

Put it another way: the big breweries (most of whose profits are heading offshore) employ half a person per 1m litres of beer they make. The independents employ 20 people for the same amount of beer. In doing so they pay about $90m in wages, and three-quarters of them are based in regional areas.

We could go on, but the point is there’s a double whammy here of significant tax levels on beer

Craft brewing is labour intensive. Picture: Craig Wilson

(higher than the US, UK, Canada or NZ) and negligible government support – especially in NSW and at national level. At the stroke of a pen, the Treasurer, Scott Morrison, could make beer cheaper, stimulate investment, encourage new jobs, and then buy himself a well-earned craft beer to celebrate.

“If that $30,000 rebate was just doubled, let alone any more, I’d be completely sustainable and looking to employ people more freely,” says Mike Jorgensen, owner of Ekim Brewing in Mt Kuringai.

“I’m a very small operation, making maybe 8-10,000L a month, but we’re a local firm that’s debt free and we’ve worked hard for seven years to get to this point.

“In Sydney the cost of living, of buying a house, is extremely high, and now the craft beer market here is far more competitive than when we started.”

Some politicians do get it: Anthony Albanese moved a motion supporting the craft beer industry in the House of Representatives and continues to lobby.

“If we get the policy settings right, craft brewing could deliver thousands of new jobs,” he said.

Labor’s Anthony Albanese is behind the case for a fair tax deal.

That’s the point: it’s not just brewers who would love a bit of help. Sydney Beer Week has just finished, with 130 events across the Sydney basin, and attracting visitors from interstate and overseas.

“Being in Sydney is almost a blessing and a curse for us,” says festival director Dave Phillips. “We’ve got a larger population base to market too, but we don’t get a lot of local government support, ie zero.

“Ironically if we were in regional NSW we might get some form of funding support. We get good love and messaging from local government, but it costs money to put on one of these things. At this moment, everything going into this festival comes from us.”

BEER OF THE WEEK

Goose Island IPA ($24/sixpack)

Yes, it’s an American beer - hailing from Chicago - but the bottles popping up all over Sydney have been made here to exacting standards, even changing the chemical composition of the local water. It’s mostly an old-school IPA, with the resiny bitterness of the traditional English version, but with with a hint of new-world fruit pith.