Updated March 18, 2017 02:15:59

Photo: Pat McInerney says the current tax regime is preventing his business from expanding (ABC News: Dan Conifer)

Australia's booming craft beer industry is demanding a fairer deal from the Federal Government, saying the current tax regime is holding it back.

The number of craft breweries has more than doubled in the past five years to over 400 nationwide.

Despite standing out as a bright spot in the flailing manufacturing sector, craft brewers say they are being hurt by Australia's two-tier beer tax regime.

"It's just crazy, it's outdated, it's from another era," Willie the Boatman brewery co-owner Pat McInerney said.

"It should be just one levy across the whole spectrum of beer."

The tax office slugs brewers based on how much pure alcohol is in their beer.

Pure alcohol is taxed at about $34 a litre if full-strength beer is sold in a 50 litre keg.

The identical beer in smaller packaging, such as bottles or more compact kegs, attracts an excise of $49 per litre.

Boutique breweries say they want to supply restaurants and bars with smaller kegs, providing fresher beer and allowing venues to rotate their selection, but say the discrepancy makes it uneconomical.

"The fact that we are unable to sell a 30 litre keg at the same tax rate as a 50 litre keg is ridiculous," Mr McInerney said.

Tax holding Aussie businesses back

Willie the Boatman began in 2012 after Mr McInerney and co-owner Nick Newey met picking up their children from pre-school.

Later that year, Mr McInerney left his job as a television producer and focused on the business, which he ran from possibly Australia's only bedroom with a liquor licence.

Willie the Boatman brewery and bar is now based in an inner-Sydney warehouse and has six staff — including the pair.

But Mr McInerney said the biggest barrier to expansion remained the amount of excise paid.

"As a small business owned by two local families, we pay between $15,000 and $17,000 a month in excise tax," he said.

"That's not GST, that's not payroll tax; that's just a tax on the booze that we've sold that month."

Time to catch up

The Federal Opposition is set to join the craft brewers' fight.

Senior Labor frontbencher Anthony Albanese's electorate of Grayndler covers about a dozen micro-breweries, including Willie the Boatman (which produces an Albo Corn Ale in honour of the local MP).

Mr Albanese said the two-tier system made "no sense at all" and was hurting small businesses.

"Some of the excise regime was written assuming there'd just be the big brewers," Mr Albanese said.

"This is a classic example of where the policymakers are behind what's actually happening in the economy and they need to catch up because breweries like this didn't exist just a few years ago."

In response to questions about the tax divide, a spokeswoman for Revenue Minister Kelly O'Dwyer said: "Any changes to taxation arrangements are always considered as part of a budget".

Wine vs Beer

Brewers also want their annual tax rebate brought closer to the winemakers' rebate.

Wine producers can claim up to $500,000 annually under the Wine Equalisation Tax (WET) rebate scheme.

The rebate effectively means about $1.7 million of each wine producer's domestic sales are WET-free.

Beer producers can claim back $30,000 in excise a year.

"Some leniency in policy towards small breweries — small businesses — would see the industry grow exponentially," Mr McInerney said.

"That would not only grow the industry, it would grow every brewery.

"It wouldn't go into our pockets, it'd go back into the business; on buying new stainless steel and on training new staff."

The ministerial spokesperson said the tax refund scheme for brewers had been made more generous in recent years.

"The brewery excise refund is now $30,000 with no minimum production volume," the spokesperson said.

Topics: alcohol, tax, government-and-politics, manufacturing, australia, nsw

First posted March 17, 2017 21:34:36