Excise Tax Australia 2026: What It Means for Consumers

Excise tax is a federal tax applied to specific goods produced or manufactured in Australia. Unlike the broad-based Goods and Services Tax (GST), excise targets particular products—primarily fuel, alcohol, and tobacco. These goods are often chosen for excise because they are widely used, have social or health impacts, or are considered luxury items.

Where Does Excise Tax Apply?

• Fuel: Every litre of petrol and diesel sold in Australia includes an excise component. This tax is reviewed and updated regularly.
• Alcohol: Beer, spirits, and ready-to-drink beverages (RTDs) are taxed based on their alcohol content. Wine is subject to a separate system called the Wine Equalisation Tax (WET).
• Tobacco: Excise is charged per stick or by weight, making tobacco products significantly more expensive.

Excise tax is a major source of revenue for the federal government, helping to fund public services and infrastructure.

In 2026, several updates to excise tax rates and policies have come into effect. These changes reflect ongoing government efforts to balance revenue needs with public health and economic considerations.

Fuel Excise

Fuel excise rates are indexed to inflation, meaning they are adjusted in line with the Consumer Price Index (CPI). This ensures that the real value of the tax is maintained over time. In 2026, the rate for petrol and diesel has increased compared to previous years, reflecting both inflation and policy decisions. For drivers, this means a higher portion of the price at the pump is due to excise tax.

Alcohol Excise

Alcohol excise is calculated based on the type and strength of the beverage. Spirits and RTDs are taxed according to their alcohol content, while beer is taxed differently depending on whether it is packaged or sold on tap. The Wine Equalisation Tax (WET) applies to wine and is calculated as a percentage of the wholesale value. Small wine producers may be eligible for a rebate, which helps them remain competitive in the market.

Tobacco Excise

Tobacco excise continues to rise as part of the government’s public health strategy. In 2026, the excise on tobacco products has increased again, both through regular indexation and additional policy-driven rises. This makes tobacco products more expensive, with the aim of reducing smoking rates across the country.

Excise tax changes have a direct impact on household budgets and business costs. Here’s how these adjustments are being felt in 2026:

Fuel Costs

Higher excise rates mean motorists are paying more each time they fill up. This is particularly noticeable for those who rely on private vehicles for commuting or living in regional areas where public transport options may be limited. Businesses that depend on transport and logistics also face increased operating costs, which can flow through to the prices of goods and services.

Alcohol Prices

The cost of alcoholic beverages continues to rise as excise rates increase. Consumers may notice higher prices at bottle shops and venues, especially for spirits and ready-to-drink options. Brewers and distillers often pass these costs on to customers. For smaller wine producers, the WET rebate provides some relief, allowing them to compete with larger businesses.

Tobacco Expenses

Tobacco excise is a significant component of the retail price of cigarettes and loose-leaf tobacco. For those who continue to smoke, this means a substantial portion of their weekly budget goes toward excise-loaded products. The ongoing increases are designed to discourage smoking, but they also contribute to the overall cost of living for affected households.

Business Impacts

Small brewers, regional fuel retailers, and hospitality venues must manage the effects of higher excise rates. This can lead to price increases for customers or reduced profit margins for businesses. The flow-on effects can be particularly challenging for small operators and those in regional communities.

Excise tax is more than just a revenue tool. It is also used to influence consumer behaviour and support broader policy goals.

Public Health and Social Outcomes

Raising excise on tobacco and alcohol is intended to reduce consumption and improve public health outcomes. While these measures have been credited with helping to lower smoking and heavy drinking rates, there is ongoing debate about their impact on low-income households, who may spend a higher proportion of their income on these products.

Funding Infrastructure and Services

Revenue from excise tax helps fund essential public services and infrastructure projects. Fuel excise, for example, contributes to the maintenance and development of Australia’s road network. As the economy evolves, the government continues to review how excise revenue is allocated to meet changing needs.

The landscape for excise tax is changing as new technologies and consumer habits emerge.

Electric Vehicles and Fuel Excise

With more Australians adopting electric vehicles (EVs), traditional fuel excise revenue is expected to decline over time. Some states are trialling alternative models, such as road user charges, to ensure ongoing funding for road infrastructure. This is likely to be an area of continued policy development in the years ahead.

Ongoing Indexation and Inflation

Excise rates are automatically adjusted in line with inflation, which means they will continue to rise as the cost of living increases. This is an important consideration for both consumers and businesses as they plan for the future.

Policy Debates and Reforms

There is ongoing discussion about the role of excise tax in addressing public health, environmental concerns, and economic fairness. As the government reviews its approach, further changes to excise policy may be introduced to reflect shifting priorities and societal needs.

Understanding how excise tax affects the price of everyday goods can help you make more informed choices about your spending. Whether you’re budgeting for fuel, planning a night out, or considering the cost of tobacco, being aware of excise tax is an important part of managing your finances.

For more insights on how tax policy and inflation affect your household budget, visit our finance section.