The Australian Government's "alcopops" tax legislation will soon be voted on by the Senate. This is the first time in memory that an alcohol taxation measure has been informed principally by public health concerns. Much debate surrounds the utility of alcohol taxation as a measure to reduce alcohol-related harm. However, the harms resulting from alcohol misuse in Australia are at unacceptable levels and action to reduce them is overdue. There is good evidence from Australia and internationally that taxation and price measures are among the most effective and cost-effective in reducing alcohol consumption and related harms. Recent alcohol sales data give an early indication that the alcopops tax is being effective in reducing consumption. Current alcohol tax policy is unwieldy and not well directed towards improving public health. A proportion of tax revenues dedicated to alcohol programs would assist public acceptance of the measures. A broad review of alcohol taxation policy is needed as part of a comprehensive approach to alcohol problems in Australia.