Australian distillers are being crippled by excise tax

They are calling on the federal government to freeze excise duty to allow them to compete with international rivals.

Spirit producers currently pay $1.24 per standard drink, in comparison to brewers who are charged a lower rate between $0.39 and $0.56 for the same level of alcohol.

Winemakers, who are subject to a different tax - 29 per cent of wholesale value - are sometimes paying as little as $0.06 per standard drink, according to Australian Taxation Office data.

Husk Distillers chief executive Paul Messenger told ACM excise duty was the biggest challenge to becoming profitable.

Because distillers are charged "10 times or more" than other parts of the industry, Mr Messenger said they were falling behind lower taxed competitors, as well as big international rivals.

He said it was much easier for these large multinational companies to absorb the cost of excise.

"We don't have the economies of scale of those big foreign owned spirit producers, and so in an inflationary environment it's a very difficult mix for us," he said.

While it was a difficult time for distillers, Mr Messenger said the craft was still growing, particularly in regional Australia.

"The industry is contributing disproportionately to the economy compared to where it was 10 or 15 years ago, and I think that the tax laws haven't kept up with the times and they're not reflecting that," he said.

"We do need some of those barriers which are discriminatory against our products and our consumers to be looked at, so that it's a more balanced and level playing field for us all."

Spirits and Cocktails Australia is also pleading with the federal government to update their excise laws.

Chief executive Greg Holland told ACM it was advocating for a freeze on excise, while long-term the association wanted an overhaul of the system that forced distillers to pay significantly more than brewers and winemakers.

"We're asking for it to be equal, there's no rhyme or reason why one should be that cheap, that low on tax, and one should be that expensive," he said.

If this relief doesn't come, Mr Holland feared the consequences for the industry could be huge.

He said there was already a trend of people moving away from high cost spirits, which if it continued, would stunt distilleries' growth.

"I'm a bit fearful now, that you will start to see job losses, because people will stop producing, because it's just too expensive," he said.

"In a bottle of spirits, the majority of the cost of that is actually going back to the tax man."

"So, the government makes more out of a bottle of Australian spirits than the producer does."

"If it keeps on getting taxed, it'll get taxed out of existence basically."

Karu Distillery owner Nick Ayres told ACM rising costs were making it difficult to operate their small business.

He said they were experiencing increased costs "everywhere", including packaging, postage and excise tax.

While this would be stressful in itself, he said it was difficult to increase prices as it would become unaffordable for consumers in the current cost of living crisis.

"You're costing more than overseas [brands], and that's really hard for us to say, 'hey this is made locally, but you have to pay more'," he said.

"We've had to try and keep our prices fair, but again we're trying to compete with massive overseas companies and we're only a little guy, we're only a little company that my wife and I started everything from scratch."

While a tax freeze would be "fantastic", with rates already so high it wasn't a long-term solution, he said.

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"It's very hard for us ... we keep getting asked, 'well why are you so much more expensive?' And for us it's very hard, like we would love to not charge all the tax on it," he said.

"The more the consumer understands it, the easier it is for us, because us having to say taxes are high, it's like that age old thing, taxes are always high."