Australia Loses AU$1.23bn to Illicit Alcohol Trade
The Australian Tax Office has reported an alcohol tax gap that has more than doubled since 2015-2016.
Updated on Nov. 9, 2026 in Cocktails
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The Australian Tax Office reported an alcohol tax gap of AU$1.23 billion (US$800 million) in lost tax revenue for 2024-2025. The gap has grown by AU$685 million (US$472 million) since 2015-2016 and now represents 13.7% of expected alcohol excise revenue.
Why it matters
Lost excise revenue reduces funds available for public services, and the Spirits Council of Australia argues that high taxes and loopholes push consumers toward cheaper illicit alternatives. Policy responses to the gap will shape how the spirits and alcohol manufacturing sectors are taxed and regulated.
The Australian Tax Office estimates the alcohol tax gap at AU$1.23 billion (US$800 million) a year, a figure more than double its 2015-2016 level. The breakdown by illicit activity category has not been disclosed in the source material.
The players
Australian Tax Office
The federal agency responsible for administering Australia's tax system, including alcohol excise collection and the estimation of the alcohol tax gap.
Spirits Council of Australia
The industry body representing Australian spirits producers, which has urged the government to address the spirits tax and the Alcohol Manufacturer Remissions scheme.
The details
Illicit alcohol activity includes unauthorised manufacturing and unpaid excise duty, as well as product diversion, cross-border transactions, and deliberate fraud or evasion. Separately, the government wrote off about AU$2.3 billion in forecast spirits revenue over 2024-25 to 2027-28, and the Alcohol Manufacturer Remissions scheme, introduced in 2021, now costs almost three times what was expected.
Timeline
2015-2016: Baseline year for the alcohol tax gap growth comparison.
2021: The Alcohol Manufacturer Remissions scheme was introduced.
2024-2025: The alcohol tax gap reached AU$1.23 billion.
August 2026: The spirits tax rose to AU$110.15 per litre of alcohol.
August 2026: The Australian Tax Office announced a crackdown on exploitation of the Alcohol Manufacturer Remissions scheme.
Industry Dynamics
The Alcohol Manufacturer Remissions scheme, introduced in 2021, now costs the government almost three times what was originally expected. The growing gap between projected and actual costs has prompted renewed scrutiny of how spirits taxation and distiller relief are designed.
Australian spirits prices are set to rise with the August 2026 tax increase to AU$110.15 per litre of alcohol. Consumers who find taxed spirits expensive may be tempted by cheaper alternatives, though the source does not quantify how much this will shift purchasing.
The takeaway
Higher spirits prices can drive demand toward unregulated products, so the tax gap affects both government revenue and the consumer market. Readers who buy spirits should expect continued price increases as the government adjusts its alcohol tax settings.
Further reading
For more on the spirits and mixology scene shaped by these tax changes, explore Cocktails.
Source note: This article includes information reported by The Spirits Business.
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