Domestic sugar levy has been abolished to boost manufacturing

09 January, 2007

The domestic sugar levy, which was originally introduced on 1 January 2003 to partly fund the Sugar Industry Reform Programme, has been abolished.

The removal of the 3 cents per kilogram levy is an important cost reduction for sugar users such as Australia’s food manufacturing and beverage industries.

The levy was introduced at a time when sugar prices were low, to fund an exit and restructuring package for growers.

The marked improvement in world sugar prices since 2003 has meant that input costs have risen for users. The abolition of the levy will offset some part of this.

1 December 2006 was the first opportunity for early removal after the Government amended the necessary regulations. The levy was originally scheduled to expire on 31 December 2007. 

The early removal of the sugar levy will result in a substantial saving for both businesses and consumers of around $28 million in forgone revenue.

The Government expects any reductions in business costs resulting from removal of the levy to be passed through to consumers in the form of lower prices.

The 2002 industry package was subsequently broadened to create the $444.4 million 2004 Sugar Industry Reform Programme, but the levy, introduced in January 2003, was not increased or extended to fund this package.

The levy has raised approximately $80 million to date, with most of the funding for the 2004 sugar package having come from consolidated revenue.

The removal of the levy will not affect the Australian Government’s commitment to the reform programme. The Government will continue to fund the Programme and work with all sectors of the sugar industry to ensure a viable and sustainable sugar industry into the future.