Peak bodies are pushing for an urgent review of alcohol tax settings after researchers found almost one in three bottle shops visited across Victoria, NSW and Queensland contained suspected illicit alcohol products.
Current tax settings were creating incentives for illicit alcohol trade and the situation could not be allowed to continue, Spirits & Cocktails Australia executive director Steven Fanner said.
"We have a narrow window of opportunity to correct the course in spirits before it follows the same path we have seen in tobacco, where the illicit market now dominates," he said.
Australia had the highest spirits tax in the world outside of Scandinavia, the peak bodies said.
The excise on spirits is $107.99 per litre of pure alcohol, equating to more than $30 on a standard 700ml bottle.
The high levy was contributing to the spike in illegal activity, Retail Drinks Australia chief executive Michael Waters said.
Researchers from the National Drug and Alcohol Research Centre, UNSW and National Drug Research Institute found contaminants such as methanol and plastic debris in some products on store shelves.
Melbourne teenagers Holly Morton-Bowles and Bianca Jones, both 19, were among six tourists who died in a mass methanol poisoning incident in Laos in 2024.
Ms Jones's father, Mark, did not know what methanol was two years ago and said he was surprised to learn it was circulating within Australia.
"I would say, with my personal circumstance, it's much more serious than (illegal) tobacco," he told AAP.
"You might get cancer in 15 to 20 years time. Methanol can kill you instantly."
Mr Jones issued a warning to retailers and urged consumers to check that bottles had regular label warnings and looked authentic.
"If retailers are not buying through reputable suppliers and there is an incident where, God help us, someone suffers the same fate as my family ... those retailers need to be held to absolute account," he said.
"Consumers need to be incredibly vigilant ... if a particular product looks like it's too cheap, too good to be true, chances are it probably is."
Victoria Police is investigating whether the illicit alcohol trade is behind a firestorm of arson attacks on licensed venues in Melbourne's nightlife precincts.
Three males, two 18-year-olds and a 17-year-old, were arrested on Wednesday for a series of arsons and attempted arsons, including an attack on the La Di Da nightclub on May 5.
Opposition Leader Jess Wilson said Victorians were tired of waking up to another arson attack, and that she was open to alcohol excise reform.
Former Victorian treasurer Tim Pallas has also raised issues with a scheme that allows "fly-by-night operators" to keep up to $350,000 of the excise on alcoholic beverages released for domestic supply.
"The remission scheme, a great idea by the federal government, is now being manipulated by dodgy operators," he told 3AW radio.
A Victorian government spokesman said alcohol taxation was a matter for the federal government and pointed out it had set up a $10 million security fund to protect hospitality businesses.
The federal government has been contacted for comment.
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