New KPMG research finds that tax policy could be developed to optimise Australia’s food donation incentives, achieving food waste reduction targets and alleviating food insecurity experienced by many Australians at a critical time.
Key findings of the report, A National Food Waste Tax Incentive: Boosting food relief through Australia’s tax system, are that a National Food Waste Tax Incentive would:
- help Australia achieve its food waste reduction target of 50 percent by 2030.
- encourage companies to actively reduce food waste and provide food relief through the donation of food and related services to Australian charities for people in need in the community.
- stimulate the economy by creating flow-on economic activity including job creation by boosting relevant supporting activities and services as a result of the incentive.
KPMG has indicatively estimated a National Food Waste Tax Incentive to have a direct cost to Federal Government revenue of approximately $50 – $100 million per annum which is minimal in comparison to the large offsetting social, economic and environmental benefits of approximately $2 billion per annum and against the current cost of food waste to the Australian economy of over $20 billion annually.
Catherine Dean, KPMG Tax Partner, said: “Currently, it is often more practical and cost effective for businesses to discard food rather than to donate it. Given that the costs of immediately disposing of food can be far lower than the cost incurred in donating food, and the tax deductions allowed for donating food compared to simply discarding food are the same in many instances there are not incentives for success.”
“The hunger relief and food waste reduction sectors are currently having difficulty attracting donations of food and related services that are essential to their objectives. An incentive of this kind would support not only the donation of food, but also spur on economic activity including the creation of jobs and services.”
Under the current policy framework, donations of services for food transportation and logistics services, pallet hire and storage and refrigeration – all food relief services which are required in the food donation process – can only attract deductions in limited circumstances. This creates a barrier to many companies actively participating in food waste reduction and food relief in Australia.
To address these issues, KPMG recommends a tax policy to optimise Australia’s food donation incentives by leveraging global examples of food donation policies, as well as the current tax incentive framework established under Australian tax law.
KPMG’s report considers two options for a specific food waste tax incentive to be implemented:
Option 1:
The first option is in the form of a refundable or non-refundable tax offset with appropriate limitations and safeguards and drawing on international precedents of food relief donation incentives.
Option 2:
A second option would be for an enhanced deduction similar to that adopted by the United States, which would provide the taxpayer with a choice to deduct 200 percent of the cost or 120 percent of the market value of goods or services provided.
A new incentive based on these options would support primary producers, food processors, manufacturers, wholesalers and retailers, the logistics and transport industry, as well as other service providers who are committed to the reduction of food waste and food insecurity in Australia. It would also directly assist in achieving the 50 percent target for reduction of food waste in Australia by 2030 as announced by the Federal Government in the National Food Waste Strategy.
Globally, specific food waste tax incentives have been introduced in several key jurisdictions (including OECD countries) including the United States, the United Kingdom, France, Canada and the Netherlands.
