Floor price

Contents


Introduction

The Northern Territory Government has introduced a minimum unit price for alcohol, commonly referred to as the ‘minimum floor price’, to minimise the harms associated with high-alcohol, low-cost alcoholic beverages.

A bill was introduced into the Legislative Assembly in May 2018, and passed on 22 August 2018.

The floor price will commence 1 October 2018.

The minimum floor price is not a tax.

Excessive consumption of cheap alcohol is linked by the evidence to alcohol‑related harm, which has serious negative social, health, and economic impacts on the Territory community.

The minimum floor price is a recommendation from the Alcohol Policies and Legislation Review Final Report, and an initiative under the NT Government’s Alcohol Harm Minimisation Action Plan 2018-19.

Licensees and retailers can download minimum floor price information below. For hard copies of the poster please call (08) 89997822 and email  LicensingNTExec.AGD@nt.gov.au

Floor Price A4 Poster

Floor Price Counter Card

Floor Price Counter Card 2

Floor Price Rate Card - to calculate the minimum price for alcohol

Interstate Liquor Licences

From 1 October 2018 interstate liquor retailers delivering alcohol into the Northern Territory are required to hold an interstate retail licence.

Applying for an interstate retail licence means simply providing the NT Liquor Commission with notice of your intention to sell or deliver retail liquor to persons in the Northern Territory, and a copy of the authority, or liquor licence under which you operate.

To read more about requirements and to apply for an interstate liquor license please follow this link.

Applications can be made online, and no fee applies. An interstate retail licence is issued in perpetuity, or until such time as it is surrendered, suspended or cancelled under the Act.

Applicants will be deemed to hold an interstate retail licence, under the Act, immediately following the successful submission of their online application with the licence issued shortly thereafter.

A minimum floor price means that one standard drink will cost a minimum of $1.30.

The minimum floor price is used to calculate the minimum cost at which a product can be sold, depending on how many standard drinks the product contains.

It does not mean the cost of a drink will increase by $1.30.

Licensed venues will not be able to use the new law as a reason to increase the cost of any of their products that are already sold above the minimum floor price.

Standard drinks are stated on alcohol product labels as required under Australia and New Zealand Food Standards Code made under the Food Standards Australia New Zealand Act 1991 (Cth).

Check your product label to determine how many standard drinks it contains.

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Definitions

Minimum floor price

The minimum floor price means the minimum price at which one standard drink can be sold, or offered for sale, in the Northern Territory.

From 1 October 2018 the minimum floor price will be set at $1.30 per standard drink contained in the alcohol product.

The legislative amendment prohibits selling alcohol below the price of $1.30 per standard drink. The legislation imposes the minimum price as an automatic condition of a liquor licence.

The Minister will be required to review the minimum floor price every three years.

Sale price

The sale price is the actual price paid by the customer to the retailer for the alcohol product.  Once the new legislation comes into effect it will be illegal to sell alcohol for a sale price below the minimum floor price.


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How it works

The minimum floor price of $1.30 per standard drink will apply to retail sale and supply of all alcohol products in the NT, including those from takeaway outlets and on premise sales. It does not apply to wholesale prices.

The floor price is used to calculate the minimum cost at which a product can be sold, depending on how many standard drinks the product contains.

Example of how the minimum floor price will be calculated:

A 750mL bottle of wine contains 7.7 standard drinks. It currently sells at a retail outlet for $8.00.

To determine the new price, multiply the minimum floor price by the number of standard drinks in the product.

$1.30 x 7.7 standard drinks = $10.01

Under the minimum floor price initiative, that bottle of wine cannot be sold for less than $10.01.

The price will be calculated using the standard drinks listed on the label.


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Frequently asked questions

The majority of alcohol products offered for sale in the NT will not be affected.

The minimum floor price targets products that are sold at a very low price per standard drink.

Beer, ciders, and spirits will either see no change in price or the change in price will be small.

Products that will see a price increase will be cheap, high alcohol content cask and bottled wine, and fortified wine.

The sale price is the actual amount of money a consumer ends up paying for the products as a bundle.

If they were to buy two $10 bottles of wine and get one at half price, the sale price is $15. If there are 15 standard drinks in total in those two bottles of wine, the minimum sale price would be $19.50 ($1.30 x 15). The sale price ($15) is less than the minimum sale price ($19.50) so this sale will be illegal under the floor price law.

The sale price is the total amount a consumer pays after factoring in any discounts or refunds.

If licensees are unsure of the effect of discounts on a bundle of products, the simplest way to ensure compliance is to:

- process liquor and non-liquor products in two separate transactions;

- ensure the transaction involving liquor has a sale price at or above the minimum sale price for those liquor products (this should not be a problem if your liquor products are individually priced at or above the floor price, and you have carefully worked out the rules of discounts and loyalty schemes so as to not bring any product below the minimum sale price);

- do not discount groceries on the basis liquor products have been purchased (even if they are purchased in a different transaction); and

- ensure that customers cannot earn discounts on liquor or groceries by purchasing liquor products.

The new law does not require alcohol and non-alcohol products to be processed in separate transactions. However, this may make it easier for licensees to ensure that liquor is not being effectively discounted below the minimum price. Licensees should consider the best approach to compliance for their business, given the systems and processes they have in place.

If licensees choose to use a different approach to that outlined in the dot points above, it would be prudent to seek legal advice to ensure compliance with the legislation.

The nominal price of the liquor must be $1.30 per standard drink. Licensees should ensure that the same discount meal package is available with an alcoholic or non-alcoholic beverage.

This will ensure that the licensee does not contravene new section 118G of the Liquor Act, which prohibits offering discounts on non-liquor products that only apply when liquor is purchased.

While such behaviour will not be an immediate breach of the floor price rule, the legislation provides that if a retailer is bundling products to get around the floor price, the Liquor Commission may impose additional restrictions on their licence, including prohibiting them from selling certain products together, prohibiting them from selling certain products below a particular price, or limiting the kinds of promotions or giveaways they can engage in.

Allowing bundling is a practical measure that has been used in floor price schemes internationally. It limits the impact of the floor price on moderate consumers while still allowing consumers the convenience of purchasing alcohol and non-alcohol products together, particularly with respect to ‘wine and meal’ offers. Requiring licensees to separately price the liquor in these transactions would be an artificial exercise, and an unnecessary interference with industry in a manner that would not be targeted at excessive drinking.

There is a history of the liquor industry in the Northern Territory cooperatively implementing measures to limit the sale of excessively cheap alcohol, and government expects most, if not all licensees to do the right thing. However, as outlined above, if a licensee relies on the technical rules of bundling to undermine the floor price, the Licensing Commission can impose additional restrictive conditions of that particular licensee to prevent this behaviour.

Gift cards are a method of paying for a product. If a gift card is purchased for $20, and then is worth $20 or less when purchasing liquor, there is no problem.

However, if a licensee was offering $40 gift cards for $20 and then accepting these gift cards in payment for alcohol in a way that meant effectively the alcohol was half price and below the floor price, the Liquor Commission may impose restrictive conditions on the licensee in response.

Licensees will have to take care that loyalty schemes do not result in purchases of alcohol below the floor price. Loyalty points will need to be earned through purchases of sufficient value to not undermine the floor price. For example, the floor price of a standard bottle of wine with 13 per cent alcohol is $10. If a purchaser earned $1 worth of loyalty points every time they purchased a bottle of $11 wine, then when the customer comes to spend those points, they will have already (in effect) paid above the minimum price in advance. The customer can use 10 loyalty points to pay for the standard bottle of wine, and this will be acceptable because they had to pay at least $10 to obtain the 10 loyalty points. The customer should not be able to use five loyalty points to purchase such a bottle of wine, because the loyalty points were only ‘purchased’ for $5 and the floor price of the wine is $10. It would, however, be acceptable to use five loyalty points together with paying $5, because the total sale price would be $10.

It is recommended that if a licensee wishes to develop a discount scheme that applies to liquor, the licensee should carefully devise rules for discount schemes that do not lead to breaches, and should seek legal advice as to whether their proposed approach complies with the minimum pricing conditions.

If a licensee is unsure about the suitability of a discount scheme, the two simplest options are:

- to not apply discounts to transactions involving liquor products; or

- if a licensee wishes to offer discounts to transactions involving liquor products, transactions are not completed unless an employee has checked and confirmed the sale price after the discount is applied is above the minimum sale price for those liquor products.

Licensees must acknowledge that it is an offence to offer liquor below the minimum price, so licensees would be advised to clarify that all discount offers are subject to minimum pricing conditions and cannot be used to reduce the sale price below the minimum sale price.

The floor price does not prevent licensees from donating liquor to a community event or club, as this is not a ‘sale’ of liquor for the purpose of applying the floor price.

The purchase of alcohol online will be subject to the minimum floor price where the destination of the product is in the Northern Territory. The sale price includes freight costs paid by the customer as part of the transactions.

If a licensee charges $15 to a customer then an additional $1.50 for goods and service tax (GST), then the sale price is $16.50.

If the licensee absorbs the $1.50 GST cost then the sale price is $15.

The NT Government does not intend to regulate the wholesale price of alcohol. Wholesaling to licensees is not a part of minimum floor pricing.

Sales of duty-free alcohol are not required to comply with the minimum floor pricing rule.

Details are still being developed but the intention is that indexation will occur once a year.

Research provided to the Alcohol Policies and Legislation Review shows that the heaviest consumers of alcohol and individuals at risk of harm disproportionately depend on the cheapest alcohol. Young drinkers were identified as being particularly sensitive to the price of alcohol.

The research also shows that at risk and dependent drinkers are more price sensitive than moderate drinkers. The evidence strongly suggests that the introduction of the minimum unit price will be effective in reducing the harms of excessive drinking through the closer targeting of access and cost of products.

Alcohol abuse and the associated impacts extend beyond the individual to family, friends and the wider Northern Territory community.