Introduction
Why do you want to know what the definition of an alcoholic beverage is, you may ask and how this relates to high alcohol distilled products.
Here, we discuss what an alcoholic beverage is, with greater than 10% alcohol, and what the Excise law is regarding alcoholic beverages and what the Australian Commissioner of Taxation has to say.
We know that tea is a non-alcoholic beverage, and adding 10% alcohol transforms it into an alcoholic beverage. But at what point does it become a ‘spirit-based beverage’ rather than just ‘tea’? And if you continue to increase the alcohol content, does it ever cease to be an alcoholic beverage under the law?
We argue that even at 95% alcohol, a tea-infused mixture remains, fundamentally, an alcoholic beverage.
Let’s start with Wikipedia definitions.
Alcoholic Beverages on Wikipedia
The introduction says: Drinks containing alcohol are typically divided into three classes—beers, wines, and spirits—with alcohol content typically between 3% and 50%. Drinks with less than 0.5% are sometimes considered non-alcoholic.
Distilled beverages (also called liquors or spirit drinks) are alcoholic drinks produced by distilling (i.e., concentrating by distillation) ethanol produced by means of fermenting grain, fruit, or vegetables.[36] Unsweetened, distilled, alcoholic drinks that have an alcohol content of at least 20% ABV are called spirits.[37] For the most common distilled drinks, such as whisky (or whiskey) and vodka, the alcohol content is around 40%. The term hard liquor is used in North America to distinguish distilled drinks from undistilled ones (implicitly weaker). Brandy, gin, mezcal, rum, tequila, vodka, whisky (or whiskey), baijiu, shōchū and soju are examples of distilled drinks. Distilling concentrates the alcohol and eliminates some of the congeners.
Distilled Beverages on Wikipedia
Rectified spirit, also called “neutral grape spirit”, is alcohol that has been purified by means of “rectification” (i.e. repeated distillation). The term neutral refers to the spirit’s lack of flavour that would have been present if the mash ingredients had been distilled to a lower level of alcoholic purity. Rectified spirit also lacks any flavouring added to it after distillation (as is done, for example, with gin). Other kinds of spirits, such as whiskey (or whisky) are distilled to a lower alcohol percentage to preserve the flavour of the mash.
Rectified spirit is a clear, colourless, flammable liquid that may contain as much as 95% ABV. 95% products are often used for medicinal purposes. It may be a grain spirit, or it may be made from other plants. It is used in mixed drinks, liqueurs, and tinctures, and also as a household solvent.
What is the definition of liquor?
Liquor is an alcoholic beverage made by distilling fermented grains, fruits, vegetables, or sugars. Also known as spirits, it generally contains no added sugar, is high in alcohol (typically 20% to 50% ABV), and serves as the base for many classic cocktails.
A legal definition of a beverage
The Commissioner of Taxation referred to the WET Act, Wine Equalisation Tax, definition and a case of law. This is the Bristol Myers case and a reference, the Macquarie Dictionary.
Wine Equalisation Tax
This consists of: A beverage, as defined in Wine Equalisation Tax Ruling 2009/1 at paragraphs 37 to 41, is a “drink of any kind, which is generally swallowed to quench thirst or for nourishment”.
The test of whether a product is a beverage is to be applied to the finished product, and not to the liquid that exists during the stages of production. In this case, wine products are designed to be consumed without dilution. They are a drink of any kind, generally swallowed to quench thirst or for nourishment.
The meaning of a beverage in the context of the WET Act
Intrinsic in the definitions of each of the products to which the WET Act applies (see paragraphs 10 to 36 of this Ruling) is that, amongst other things, the relevant product must be a ‘beverage’. That is, in addition to the other specified requirements, the product must be a ‘beverage’ for it to be subject to WET.
38. Beverage is not defined in the WET Act and so takes its ordinary meaning. We consider a ‘beverage’ to be a drink of any kind, which is generally swallowed to quench thirst or for nourishment.[11]
38A. Generally, a beverage will be capable of being consumed through a straw and is thin enough to be consumed from a glass.
39. As a matter of everyday usage and language, wine is considered to be a drink and therefore is a ‘beverage’ in accordance with the ordinary meaning of that term. This is reflected in the dictionary definition of wine, which refers to wine as a beverage.[11A]
40. The test of whether a beverage is wine is to be applied to the finished product intended and suitable for consumption, and not to liquid that exists during the stages of production.[11B]
41. Raw wine is the result of the initial (primary) fermentation of grapes or other fruits or vegetables. The wine is usually finished by stabilising, fining and filtering, secondary fermentation (malolactic fermentation) if needed, maturation and racking to clarify the wine by removing unwanted solids. In these circumstances, the test of whether a beverage is wine must be applied to the finished wine (intended and suitable for consumption), and not to the raw wine.
Further to the above, spirits are not wine and therefore the WET Act does not apply to this argument.
[11]Bristol Myers Company Pty Ltd v. Commissioner of Taxation 90 ATC 4553 at 4556 and 4557.
[11A]Macquarie Dictionary. ”beverage” by the Macquarie Dictionary, which is simply “a drink of any kind”.
Legal Definition of An Alcoholic Beverage.
The Excise Act 1901
Here we explore the three excise acts. See below regarding the Excise Act 1901.
Tariff Item 3 for spirits
The following table gives a description of the tariff sub-items and pricing.
| Tariff subitem Unit: $ per litre of alcohol | Description | From 5 Aug 2024 to 2 Feb 2025 | From 3 Feb 2025 to 3 Aug 2025 |
|---|---|---|---|
| 3.1 | Brandy (a spirit distilled from grape wine in such a manner that the spirit possesses the taste, aroma and other characteristics generally attributed to brandy). | 97.02 | 97.41 |
| 3.2 | Other excisable beverages exceeding 10% by volume of alcohol. | 103.89 | 104.31 |
| 3.10 | Spirit not elsewhere included. | 103.89 | 104.31 |
|---|
Other references to alcoholic spirits under the Excise Act can be found at the link below.
https://www.ato.gov.au/law/view/document?DocID=SAV%2FALCOHOL%2F00013
In an ATO guide, Excise guidelines for the alcohol industry, 12 SPIRITS AND OTHER EXCISABLE BEVERAGES, there are a couple of lines not directly related to 3.10.
For more information about concessional spirit, refer to Chapter 13, Concessional spirit.
Spirits not elsewhere included may include:
•denatured spirit that does not meet the requirements for subitem 3.8 of the Schedule, and
•concentrated wine flavours delivered for a use other than a concessional use.
Legal Review of the Bristol Myers case
The ATO Commissioner has relied on Justice Lockhart’s statement within Bristol Myers for their position that high alcohol products do not constitute a beverage.
However, his subsequent comments count against the position that the ATO commissioner attempted to extract from his comments, namely that a beverage is something consumed for nourishment.
You can read the Bristol-Myers Case judgment.
More Legal Definitions – Excise Acts
There are three Acts of the Australian Parliament regarding the Alcohol Excise. These are the Acts used by the Taxation Commissioner to enact the law.
- The Excise Act 1901
- The Excise Tariff Act 1921
- Excise Regulations 2015
Legal Issues Regarding Alcohol Taxation
Below are three extracts from the Excise Act, the Excise Tariff Act, plus the Excise Regulations 2015 regarding the definition of alcoholic beverages.
See https://www.legislation.gov.au/C1901A00009/latest/text for the complete text.
Excise Act 1901
No. 9, 1901 Compilation No. 66
Compilation date: 14 October 2024
Includes amendments: Act No. 38, 2024
About this compilation
This is a compilation of the Excise Act 1901 that shows the text of the law as amended and in force on 14 October 2024 (the compilation date).
In Part VIIA—Special provisions relating to alcoholic beverages
77A Definitions
alcoholic beverage means goods classified to item 1 or 2, or subitem 3.1, 3.2 or 3.10, of the Schedule to the Excise Tariff Act 1921.
and
Excise Tariff Act 1921
https://www.legislation.gov.au/C1921A00026/latest/text
No. 26, 1921 Compilation No. 56
Compilation date: 1 July 2024
There is some debate by the Commissioner regarding what constitutes an alcoholic beverage and whether it should be classed as 3.2 or 3.10. Some spirits greater than 10% alcohol by volume, namely whisky, rum and gin, are classed as 3.2 as they are mentioned in the Act. 3.10 of the Schedule to the Excise Tariff Act 1921 says spirits not elsewhere included.
I read in the definition of the Excise Act that all alcoholic beverages with an alcohol content of over 10% can be classified as either 3.2. As the sub-items are listed as alcoholic beverages in the Excise Act 1901, in Part VIIA—Special provisions relating to alcoholic beverages, they are therefore Alcoholic beverages.
To back the above up, we now look at the:
Excise Regulations 2015
Section 6 of the Excise Regulations provides that it shall be read as one with the other Excise Acts, which includes the Excise Regulations 2015 (Regulations) made under the Excise Act and the Excise Tariff Act 1921 (Tariff Act).
This is unequivocally supported by regulation 6 of the Regulations (Page 3), which states that for the purposes of the Regulations, “alcoholic beverage” has the meaning given by section 77A of the “Act”. The “Act” here being defined in the Regulations to mean the Excise Act.
An alcoholic beverage has the meaning given by section 77A of the Act.
This means, ” alcoholic beverage means goods classified to item 1 or 2, or subitem 3.1, 3.2 or 3.10, of the Schedule to the Excise Tariff Act 1921.”
Summary of the Legalities of Alcoholic Beverages
There are three key legislative instruments governing alcohol excise:
- Excise Act 1901
- Excise Tariff Act 1921
- Excise Regulations 2015
1. Definition of “Alcoholic Beverage”
Under Part VIIA, s77A of the Excise Act 1901, an alcoholic beverage is defined as:
Goods classified under items 1 or 2, or subitems 3.1, 3.2, or 3.10 of the Excise Tariff Act 1921.
2. Classification and Debate
- Spirits like whisky, gin, and rum are specifically listed under subitem 3.2 (alcoholic beverages over 10% ABV).
- Subitem 3.10 acts as a catch-all for other potable spirits not elsewhere included.
- There is debate over whether certain high-strength spirits fall under 3.2 or 3.10.
The Act’s definition confirms that goods under 3.10 are “alcoholic beverages”.
Excise Regulations 2015, section 6, integrates with the Acts and confirms that:
The term alcoholic beverage uses the definition in section 77A of the Excise Act 1901.
Summary of high alcohol products
The Commissioner’s interpretation regarding Bristol Myers is contrary to settled principles of statutory interpretation of an Alcoholic Beverage.
Primarily, where a definition purports to define an expression exhaustively and has been used in that sense throughout the legislation, as is the case with the expression alcoholic beverage, it is not appropriate to read the expression as if it has both its defined and its ordinary meaning.
In such a case, the definition displaces the term’s ordinary meaning. Moreover, the fact that the defined term has an ordinary meaning indicates that Parliament intended for its statutory definition to apply; otherwise, there would be no need for the definition at all.
Accordingly, it is clear that high alcohol products fall within item 3.2, as they will constitute an “alcoholic beverage”.
As you increase the alcohol percentage in your tea, it simply moves through these regulatory “tiers”.
Even at 95% alcohol, it remains an “alcoholic beverage” under the law. There is no point at which it “stops” being an alcoholic beverage because the alcohol percentage becomes too high; instead, it simply becomes a high-proof alcoholic beverage.
There is clear authority in favour of the legal position that the high alcohol products constitute an alcoholic beverage, but this is also clear-cut from the very definition of “alcoholic beverages” in the text of the Excise Act and the Regulations.
End.