By Millie Muroi
Whether you’re sinking a beer at the pub, filling your car with fuel, or buying a flashy new set of wheels, a handful of taxes are widening the hole in your hip pocket and helping to bolster a budget that Treasurer Jim Chalmers will hand down on Tuesday.
The goods and services tax (GST) applies to most things sold in Australia, but there are items that attract further duties, often in a bid to drive down their consumption. Some of these taxes are used to pay for infrastructure like roads, but others are relics used to pad the government’s coffers.
Luxury cars, cigarettes and beer purchases are helping to prop up the budget.Credit: Aresna Villanueva
Here’s how much additional tax you’re paying for your vices and – in some cases – your essentials.
Beer
It’s no secret that hitting the pub has become a pricey endeavour, with draught beer attracting an excise rate of $10.57 to $43.49 for every litre of alcohol after the latest increase of 2 to 3 per cent in February.
A pint of full-strength draught beer – with alcohol content of 5 per cent – attracts excise of about $1.
This financial year, the government expects to collect $7.8 billion in excise from alcoholic beverage sales, of which $2.7 billion is expected to come from beer.
In a pre-election bid to woo pub-goers, Prime Minister Anthony Albanese last month said there would be a two-year freeze on excise hikes, set to come into effect from the next indexation rate in August and costing the budget up to $200 million over two years. But it will only save drinkers about 10¢ a beer.
Wine
Wine-lovers are not weighed down by excise duty, but they are hit by the Wine Equalisation Tax (WET): a tax of 29 per cent of the wholesale value of wine, which is charged to winemakers, importers and sellers, but can also be passed on to consumers.
In 2004, a few years after WET was introduced, the government introduced a tax rebate, capped at $290,000 to support small wine producers. The government said last month it would lift the rebate cap for wine producers from July 1 next year.
Nonetheless, a bottle of wholesale wine valued at $25 will cop a tax of just over $7.
Spirits
For drinkers who prefer the stronger stuff, the excise duty is heavier.
Brandy attracts an excise of $97.41 for a litre of alcohol, meaning a 700ml bottle with an alcohol content of 40 per cent will be slapped with an excise of about $27.
Other spirits with alcohol volume exceeding 10 per cent – and not being used for purposes such as science, medicine or manufacturing – attract an excise of $104.31 for every litre of alcohol. That means a 700ml bottle of whisky with an alcohol content of 40 per cent comes with an excise charge of $29.
Cigarettes
Smokers have been smoked by the jump in excise duty rates on tobacco, although many have turned to the black market for their supplies.
As recently as 2021-22, tobacco excise was the federal government’s fourth-largest source of revenue, with the tax primarily intended as a way to discourage smoking.
But the rise of vaping and growth in the black market have burned a $31 billion hole in budget revenue since 2019, with the revenue from tobacco excise expected to continue falling in future years.
Excise on tobacco rises in line with average earnings but the Albanese government decided to push it up even higher, with three extra 5 per cent annual increases kicking in from September 2023.
In March this year, most tobacco and cigarettes had an excise duty of $1.40 a stick. That means a pack of 20 cigarettes is hit with excise of about $28, pushing the average cost to about $40.
Largely as a result of the excise, the cost of tobacco has surged over the past few years, rising 5.8 per cent last year. But this financial year, tobacco excise is expected to bring in around $8.8 billion, 42 per cent less than was expected just a few years ago, as buyers turn to illegally imported cigarettes sold from under the counter.
Petrol
In the 12 months to December last year, automotive fuel prices fell 7.9 per cent, largely reflecting lower global oil prices.
But about 50¢ of the price paid by drivers for every litre of petrol and diesel covers fuel excise, which is adjusted twice a year in line with inflation. In February, fuel excise hit 50.8¢ a litre.
That means that from the cost of filling a 50-litre tank of petrol, about $25 flows from the driver’s pocket to government coffers, regardless of what price is being charged for the petrol.
It’s an indirect way to charge drivers for the cost of the nation’s roads. In 2024-25, the government estimates fuel excise will generate $24.6 billion in revenue, or about $1171 from every motor vehicle.
Luxury cars
Those looking to cruise in a Lamborghini will need to be able to cough up a bit more than just the value of the car. The drive-away price of high-end vehicles often includes the luxury car tax (LCT) of 33 per cent.
It applies to any amount over $80,567 of the value of a luxury car – including accessories and customisation added before delivery – although there is a higher threshold of $91,387 for luxury cars that guzzle less fuel, with these thresholds updated in line with inflation every year.
For example, a fuel-efficient luxury car valued at $100,000 (not including GST) will have the 33 per cent tax applied to $8613 of its value. That means the buyer would pay about $2842 in LCT as part of the drive-away price, or nearly 3 per cent of the original value whereas an ultra-luxury car priced at $1 million would incur hundreds of thousands in taxes.
The luxury car tax was originally introduced to protect Australia’s car manufacturing sector from imports, but since the industry’s demise it has become just another way for the government to collect revenue. In the 2024-25 financial year, the government estimates the tax will generate $1.2 billion in revenue.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.