Excise tax

Published Monday 22 June 2026

Table of contents

• What is excise tax?
• Types of excise tax
• Common excise taxes in Australia
• Who pays excise tax?
• Excise tax rates and charges in Australia
• Excise tax vs GST
• Excise tax vs excise duty
• Why excise tax matters to small business
• Manage your business finances with Xero
• FAQs on excise tax
• Related terms
• Learn more about excise tax

Excise tax is a tax applied to specific goods produced or manufactured in Australia. Here are the key points you should know.

• Excise tax is a government-imposed tax on specific goods such as alcohol, tobacco, and fuel, designed to discourage consumption and raise revenue. In Australia, it's governed by the Excise Act 1901 and administered by the Australian Taxation Office (ATO).
• Businesses that manufacture or produce excisable goods in Australia are responsible for paying excise tax, but the cost is typically passed on to consumers through higher prices.
• Excise tax rates in Australia are indexed to the Consumer Price Index (CPI) and are adjusted twice a year, in February and August, which means the amounts you pay can change regularly.
• If your business manufactures, produces, or deals in excisable goods, you may need an excise licence from the ATO and must meet specific reporting and payment obligations.

What is excise tax?

Excise tax is a tax levied on specific goods that are manufactured or produced in Australia. It's collected by the Australian Taxation Office (ATO) under the Excise Act 1901.

Unlike broad-based taxes such as the Goods and Services Tax (GST), excise tax targets particular product categories. Governments use excise taxes to discourage the consumption of goods that may be harmful to health or the environment, and to raise revenue. In Australia, the main excisable goods are alcohol, tobacco, and fuel.

Excise tax rates can be substantial, so if your business deals in these goods, you'll need to account for them carefully in your pricing and cash flow planning.

Types of excise tax

There are 2 main types of excise tax, and understanding the difference helps you work out how the tax applies to your products.

Specific excise tax

A specific excise tax is a fixed amount charged per unit, volume, or weight of a product. This is the most common type in Australia. For example, fuel excise is charged per litre, and tobacco excise is charged per stick.

Ad valorem excise tax

An ad valorem excise tax is calculated as a percentage of the product's value. This type is less common in Australia but is used in other countries for goods like luxury vehicles. In Australia, ad valorem approaches appear in related taxes such as the Luxury Car Tax, which applies a percentage above a certain price threshold.

Common excise taxes in Australia

The ATO categorises excisable goods into several groups under the Excise Act 1901. If your business produces or manufactures any of these goods, you're likely to encounter excise obligations.

The most common excise taxes in Australia are charged on:

• alcohol, including beer, spirits, and other excisable beverages
• tobacco and tobacco products
• fuel and petroleum products, including petrol, diesel, and liquid petroleum gas (LPG)

Each of these categories has its own rate schedule, and the rates vary depending on the specific product. For example, beer is taxed at different rates depending on its alcohol content and packaging, while spirits attract a higher per-unit rate.

Who pays excise tax?

In Australia, excise tax is paid by the manufacturer or producer of excisable goods. If the goods are imported rather than produced locally, a customs duty applies instead, which works in a similar way.

Although the business pays the excise, the cost is typically passed down the supply chain and built into the price consumers pay. This means that even if you don't manufacture excisable goods yourself, excise tax can affect your business costs if you purchase or resell products like fuel or alcohol.

Excise tax rates and charges in Australia

Excise tax in Australia is charged on top of the base price of goods, and GST is then calculated on the combined amount. Rates vary by product type and are set out in the Excise Tariff Act 1921.

To give you an idea of the scale, fuel excise is charged per litre for petrol and diesel, and the rate is adjusted regularly. Tobacco excise is charged per stick and represents a significant portion of the retail price. Alcohol excise rates depend on the type of product, its alcohol content, and how it's packaged. You can check the latest excise rates on the ATO website.

A key feature of Australia's excise system is CPI indexation. Excise rates are adjusted twice a year, in February and August, in line with the Consumer Price Index. This means the amount you pay increases over time, and you'll need to stay up to date with the latest rates from the ATO.

Excise tax vs GST

Excise tax and GST are both taxes on goods, but they work quite differently. Understanding the distinction is important if your business deals in excisable products.

GST is a broad-based tax of 10% applied to most goods and services in Australia. Excise tax, by contrast, targets only specific product categories like alcohol, tobacco, and fuel. Excise is charged per unit or volume, while GST is a percentage of the sale price.

Another key difference is the point of collection. Excise tax is paid by the manufacturer or producer before the goods reach consumers. GST is collected at each stage of the supply chain and remitted through your Business Activity Statement (BAS).

It's also worth noting that GST applies on top of excise tax. So if you sell excisable goods, the GST is calculated on the price that already includes the excise component.

Excise tax vs excise duty

The terms excise tax and excise duty are often used interchangeably, but they can mean different things depending on the context.

In some countries, both terms refer to the same type of tax. In Australia, excise tax applies to goods manufactured or produced domestically, while customs duty applies to equivalent goods that are imported. The customs duty rate is typically set to match the excise rate, so imported goods aren't cheaper than locally produced ones.

In other regions, the term excise duty specifically refers to the tax on imported goods, while excise tax covers locally produced goods. If your business both manufactures and imports products, it's worth understanding which term applies in each situation.

Why excise tax matters to small business

If your business manufactures, produces, or deals in excisable goods, understanding excise tax is essential for staying compliant and managing your finances effectively.

First, excise tax directly affects your pricing. Because the tax is charged per unit or volume, it can make up a significant portion of your product's final price. You'll need to factor excise into your pricing strategy to maintain healthy margins.

Second, you may need an excise licence from the ATO if you manufacture or produce excisable goods. Holding a licence comes with reporting and payment obligations, including lodging excise returns and paying the excise by the due date. Failing to comply can result in penalties.

Finally, because excise rates are indexed to CPI and change twice a year, you'll need to keep your pricing and cash flow forecasts up to date. Accounting software like Xero can help you track your expenses and stay on top of your obligations.

Manage your business finances with Xero

Staying across excise tax obligations is just one part of running a compliant, profitable business. With the right tools, you can spend less time on financial admin and more time growing your business.

Xero brings your finances together in one place, giving you real-time visibility into your cash flow, expenses, and tax obligations. Whether you're tracking costs, reconciling transactions, or preparing for tax time, Xero makes it simpler to stay organised and in control. Get one month free.

FAQs on excise tax

Here are some frequently asked questions about excise tax in Australia.

What is an example of excise tax in Australia?

Fuel excise is one of the most common examples. Every litre of petrol or diesel sold in Australia includes an excise component, which is paid by the fuel producer and passed on to consumers at the pump.

How is excise tax different from GST?

Excise tax applies only to specific goods like alcohol, tobacco, and fuel, and is charged per unit or volume. GST is a broad 10% tax on most goods and services, calculated as a percentage of the sale price.

How is excise duty calculated?

In Australia, excise is typically calculated as a fixed dollar amount per unit, litre, or kilogram of the product. The ATO publishes current excise rates, which are adjusted for CPI twice a year.

Do small businesses need an excise licence?

You'll need an excise licence from the ATO if you manufacture or produce excisable goods in Australia. The licence comes with reporting and payment obligations, so it's important to understand the requirements before you start production.

Related terms

Explore other financial terms that relate to excise tax and business compliance.

• Goods and Services Tax (GST)
• Business Activity Statement (BAS)
• Cost of goods sold
• Indirect tax
• Tax compliance

Learn more about excise tax

These resources can help you understand how excise tax fits into your broader business finances.

• GST and BAS guide
• Pricing strategies and cost of goods sold
• Tax for small business
• Xero accounting software