Taxing time for sugary drinks

The Grattan Institute has renewed calls for a sugary drinks tax, as soft drinks remain the single biggest source of sugar in Australian diets, increasing the risk of type 2 diabetes and obesity.

The number of Australians with type 2 diabetes has nearly tripled since 2000, at a cost of nearly $2.3 billion in 2020-21 — mostly due to pharmaceuticals, hospital care, and dental care – and it contributed to one in 10 deaths.  

And while the price of diabetes has been projected to rise by 17% by 2045, it is still dwarfed by the direct health and indirect community costs of obesity, which were estimated at $11.8 billion in 2018. 

Lead authors Peter Breadon, the institute’s Health Program Director, and Jessica Geraghty said that while many policies were needed to reverse these trends, one was cheaper and easier to implement than all the other: a tax on sugar-sweetened drinks.  


  1. Introduce a sugary drinks tax
  • The federal government should target drinks with the most sugar, and the tax should have three tiers: 
  • less than 5 grams of sugar per 100ml: no tax 
  • between 5 and 8 grams of sugar per 100ml: 40 cents per litre 
  • 8 or more grams of sugar per 100ml: 60 cents per litre. 
  • The tax should be indexed to inflation, and there should be at least one year’s notice before it is introduced. 
  1. Monitor the impact and adjust if needed. 
  • The Australian Centre for Disease Control should regularly assess whether the tax is working to reduce sugar consumption, and whether it should be improved, or other complementary policies should be introduced. 

The Grattan Institute first proposed a sugary drinks tax in 2016 and since then, Australian levels of consumption have remained high, with the average Australian consuming 67 grams of sugar per day, or more than 1.3 times the recommended amount. 

Many drinks have almost the entire maximum recommended daily intake of sugar for an adult in just one can – as much as 10 teaspoons of sugar, and they have little or no nutritional value, Mr Breadon said. 

 It was time for Australia to catch up with the rest of the world. To encourage manufacturers to put less sugar in our drinks, the tax should target the drinks with the most sugar, with a top rate of 60c per litre, and no tax on low-sugar drinks. 

Grattan Institute modelling showed that the proposed tax would reduce consumption of the drinks with the most sugar by about 275 million litres a year, or the volume of 110 Olympic swimming pools. The average Australian would drink nearly 700 grams less sugar each year. 

“The tax is all about health, not revenue, but it would still give the federal government an extra half a billion dollars in the first year. None of the objections to a sugary drinks tax stack up,” Ms Geraghty said. 

“Disadvantaged people drink more sugary drinks, but they would have lots of options to avoid the tax. Because there would be no tax on low-sugar drinks, half of all products would be tax-free. More would be tax-free over time, as manufacturers reduced the amount of sugar in their recipes. And disadvantaged people would get bigger health gains, making them better off over time.” 

The authors said the financial impact on households, industry, and sugar farmers would be small, as demonstrated by other nations.