If You Thought Excise Tax Was High, Now You Know Why

If you thought excise tax on spirits in Australia was just padding the government’s health budget, think again. Illicit alcohol is chewing through our tax base like termites in a whisky barrel, and it’s not just a “somewhere else” problem. It’s here, in our own backyard, and it’s big business.

Whisky bottle close-up with counterfeit seal

Last year, Melbourne authorities seized $2 billion worth of illicit alcohol — an eye-watering pile of bottles that never paid a cent in excise. Here’s the kicker: excise on spirits in Australia sits at $105 per litre of pure alcohol. Do the maths for your average 700ml bottle of spirits at 40% ABV and you’re looking at $29.40 per bottle. Multiply that across the estimated 20 million bottles in that seizure, and the excise loss is $588 million — gone. No wonder the government keeps hiking the tax; they’re bleeding cash from the other side of the ledger.

For perspective, the entire Australian small-to-medium distilling sector wouldn’t generate that much excise in years of honest graft. While they’re hand-labelling bottles in sheds and paying their dues, the crooks are pumping out fakes in warehouse factories with margins that would make a Bond villain blush.

And let’s be clear — this isn’t about the occasional dodgy bottle. This is a full-blown industry. Every untaxed bottle undercuts legitimate producers, inflates costs for law-abiding businesses, and poisons the trust between brands and their customers. Meanwhile, the government’s excise policy treats boutique distillers the same as multi-national giants, all while letting hundreds of millions slip away to criminals.

If you still think illicit alcohol is just some back-alley problem in Vietnam, you’ve missed the plot. The only difference is the marketing: in Australia, it’s happening in industrial estates instead of tin shacks.

We like to think the taxman’s sting is the price of quality and safety. But when half a billion in tax revenue vanishes into the black market each year, you start to realise maybe the problem isn’t that our excise is too high — it’s that someone else isn’t paying it at all.

Excise Taxes Don’t Just Burn Wallets—They Ignite Illicit Markets

Let’s be clear: sky-high excise on spirits isn’t just painful for your hip-pocket—it’s lighting a bonfire for illicit booze to flourish.

Take the Canberra Distillers and Tumut River Brewing Co.—they’re not flouting the law; they’re begging for extinction under a levy so heavy it drives consumers to choose cheaper, illegal options—even suggesting it’s now cheaper to buy illicit drugs than a spirit in a pub. 

Now peek at tobacco as a cautionary tale. In the past decade, skyrocketing taxes triggered a threefold surge in illicit cigarette supply—and now roughly 14–25% of Australia’s tobacco market is undercut by black-market alternatives. Legal packs clock in at $50+, while contraband goes for pocket change. 

The logic is brutal and simple: push legitimate goods too pricey, and people will hunt the same fix—but cheaper, unregulated, and far more dangerous. Spirits follow the same curve—if you make water expensive enough, the charlatans will sell sewer juice as aging scotch without a second thought.

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