Chapter 2Issues raised
2.1Much of the evidence to the inquiry was similar in content and argument. This included a large body of evidence calling for particular amendments to the bill. However, some submitters and witnesses raised particular areas of concern about the bill.
2.2This chapter sets out the concerns that submitters and witnesses raised about the bill as it stands, including whether the bill would:
offset food donations from large supermarkets, and thereby indirectly increase their profit margins;
lead to supermarkets rejecting food in the knowledge that it could be donated;
incentivise the donation of packaged rather than fresh and culturally safe food;
encourage donations of food close to its expiry date;
lead to an unsustainable increase in food volume to the food relief sector, without corresponding resourcing and infrastructure;
lead to unintended messages, such as that people in receipt of food relief deserve to eat food that others do not want;
unnecessarily exclude registered food relief charities from receiving additional donations; and
disincentivise and discourage food businesses from efforts to eliminate food waste.
2.3A further issue raised in evidence concerned the need for other government programs to address food insecurity and a broader strategy.
2.4The chapter also sets out reasons provided by submitters and witnesses for supporting the bill, and sets out, in brief, proposed amendments from submitters and witnesses who supported the bill.
2.5The chapter ends with the committee’s view and recommendation.
Issues raised about the bill
2.6As outlined above, submitters and witnesses raised various concerns about the bill. These are set out below.
Increased supermarket profits
2.7The Western Australian Council of Social Service (WACOSS) argued that short-term incentives to encourage donations to food relief ‘will not solve food insecurity in the longer term’ and ‘may result in increased profit margins for major supermarkets’. WACOSS argued that the cost of groceries needs to be brought ‘down to an affordable level for all community members’.
2.8However, other witnesses suggested that large supermarkets would be either ineligible to claim the offset, or would not obtain any additional benefit as they are already able to claim a tax deduction for food that they donate.
2.9KPMG Australia provided the committee with further information on this matter:
One issue discussed at the hearing is whether large entities (for example large supermarkets) can claim under the proposed food donation tax offset. Under the current drafting, large taxpayers are technically eligible to claim the offset, however, we expect it would only be in limited circumstances that such taxpayers would claim an incremental benefit. This is because, where the taxpayer has an aggregated turnover of $50M or above, they are only able to claim a tax offset for 30% of their food donation expenditure, and in the majority of cases this will be equivalent to the tax deduction that is able to be claimed under existing law. To illustrate, if a taxpayer (paying tax at 30%) has food to donate costing $100, then the tax-deductible amount is $100 and the ‘benefit’ to the taxpayer is the tax saved of $30 ($100 x 30%). This is equivalent to the ‘benefit’ under the food donation offset, which would also be $30 ($100 eligible costs x 30% offset = $30).
Therefore, we would expect that large taxpayers will only claim an incremental benefit from the offset where they incur food donation costs that are not already claimable as a tax deduction under existing law, such as for transport costs. For large taxpayers, in the unlikely event they sought to claim under this tax offset, the amount of such incremental claims is not likely to be significant (and the administration costs of claiming may well outweigh the benefit).
2.10Treasury informed the committee that the current tax system, under the deductible gift recipient regime, allows ‘donations of food to any deductible gift recipient to be deducted at market value’, which typically ‘results in a similar outcome as if the food had been disposed of’. In other words, ‘the tax system allows donations from anybody, whether that’s a primary producer or anybody else, to provide food to a deductibility gift recipient’.
2.11However, Treasury advised the committee that it appears ‘the concession would be open to large supermarkets’, noting that the bill provides a tax offset, which is generally ‘more generous’ than the tax deduction that already exists. Because an offset is more generous, ‘generally speaking … you would find that a taxpayer would naturally seek the outcome that provides them with the greatest economic benefit’.
2.12Treasury noted, in response to questioning, that it is a possibility that a large corporation could maintain their current level of donations yet still claim a new benefit—in other words, the Australian Government would be subsidising existing activity, and not necessarily incentivising increased activity.
Justification to reject food
2.13The National Farmers Federation, while supportive of the bill, argued that any incentives should not be ‘disingenuously used by parties in the supply chain as a justification for product rejection, particularly in fresh food supply chains’. It suggested incentives for donations need to be ‘targeted at those instances whereby food waste cannot be avoided’.
Incentivising packaged rather than fresh food
2.14Some evidence expressed concern that the bill would incentivise donations of processed, packaged and/or unhealthy food being donated over fresh food, which people experiencing food insecurity need greater access to.
2.15The Uniting Church in Australia—Synod of Victoria and Tasmania argued that the bill had ‘no safeguards to promote donations of healthy foods’ and would ‘allow food corporations to dump unhealthy foods into the system for people in desperate need of food support and get a tax break for doing so’. As such, the Synod proposed that the committee recommend that the bill not be passed, and the committee instead recommend that the Australian Government implement measures to ‘prevent people from being in food insecurity and give people on low incomes more significant opportunities to access affordable healthy food’.
2.16Dr Rebecca Lindberg noted that ‘nutritious foods that have been generally more affected by the recent food price increases’ in supermarkets and ‘these types of foods … can become deprioritised when people face multiple financial pressures’. Further, ‘foods that cater for cultural, religious and dietary requirements are far less available in food relief settings compared to ultra-processed shelf-stable and discretionary food’. She argued that ‘[w]e don't want this bill to encourage dumping unhealthy or unsafe products on community agencies’.
2.17Dr Lindberg also furnished the committee with an excerpt from an interview she had conducted with a woman who received food from a food relief provider, highlighting the limited types of food sometimes made available:
I've got, like, 10 tins of water chestnuts sitting in my cupboard. I've got—I don't know—10 types of tinned fruit. You go because you need some food, but it tends to be that you get the same stuff. They always have spaghetti and baked beans, and they go into every single food pack, and usually boxes of cereal. I've still got some of those out there that are probably maybe 12 months past their use-by. I don't like wasting them. And one day, when you lose your job and you're only on $160 a fortnight and you've run out of milk, you drag that thing out of the cupboard and you use it. When you're under duress and you're screwing your face up, you have it. It's better than none.
2.18Dr Lindberg called for core foods, including fruit, vegetables, grain, meat and dairy, to be ‘the only foods eligible for tax offsets’, given they are the foods included in the Australian Dietary Guidelines, the Australian Government’s key nutrition policy directive. She suggested that such a change would ensure the bill aligned in policy with Australian Government policy.
2.19Similarly, Professor Svetlana Bogomolova of the Centre for Social Impact at Flinders University proposed the bill include incentives for primary producers to ‘donate fresh and nutritious produce’.
2.20WACOSS argued that as it stands, the bill ‘does not guarantee that donated food is suitable for food relief, is high quality and safe for human consumption, or of high nutritional value’. WACOSS noted that the ‘health, cultural and dietary requirements of consumers are often unmet when accessing food relief’. It pointed to research which indicated that most foods donated to the food relief sector are unhealthy sweet and savoury snacks, with most of these donated by supermarkets.
2.21WACOSS foreshadowed the risk of food donors receiving tax offsets for inappropriate food donations that cannot be used, are not fit for purpose or are of low nutritional value. It called for products donated to food relief to ‘meet quality and nutritional standards and be suited to consumer needs’, with a food classification system to determine the types of food eligible for the offset and to regulate the nutritional value of this food.
2.22On the other hand, Ms Brianna Casey from Foodbank Australia suggested that the bill could lead to a ‘dramatic increase in supply’ of nutritious staples, like dairy products, fruit and vegetables, meat, fish and other forms of protein, which are ‘in particularly high demand at food banks across Australia’ as households reduce their purchases of those products.
2.23The Salvation Army, meanwhile, noted that it was ‘very cognisant’ of the need to provide ‘access to really high quality food’. It pointed to one program providing nutritionally balanced meals in Melbourne, but acknowledged that there ‘are other places where we wish we could do a lot better. We want to be providing a lot more protein options and a lot more fresh food options’.
Encouraging donations of food close to its expiry date
2.24The Uniting Church in Australia – Synod of Victoria and Tasmania argued that the bill has no safeguards to ensure food close to its expiry date is not donated. This, it contended, would allow ‘a food corporation to gain a tax advantage for food it might not otherwise be able to sell’.
2.25The Synod suggested that the bill ‘broadly grants power to the food corporations about what food will end up in the food system for people in food insecurity’, and may result in a skewed environment with the food charities sector lowering their standards in terms of what food donations they will accept.
Disincentivising the elimination of food waste
2.26Dr Jorja Collins, a practising dietician and Senior Lecturer at Monash University, expressed concern that the bill would disincentivise and discourage food businesses from eliminating food waste in the first place, ‘which is what they should be working towards because it is the most preferred strategy’ to reduce food waste. In particular, she argued that ‘larger food companies with the resources to optimise their processes to eliminate food waste should not be excused from doing this'.
2.27Dr Collins further clarified that incentives for businesses to donate their food waste may allow ‘them to feel that they are doing the right thing and to say, “That’s all sorted” rather than actually thinking about, “How can I reduce the creation of food waste in the first place?”’ In addition, policy makers may think “’We’ve done this great thing; food waste is sorted”’. She argued, ‘if that food is not successfully redistributed in the food system, it is still going to be wasted and it is still most likely going to end up in landfill’.
2.28Dr Collins suggested that the bill is ‘well-intended … but it is flawed’. She questioned the messages the bill could be sending:
Do people accessing food relief deserve to eat food that is aesthetically imperfect, approaching or past its best-before date or left over, while the rest of us eat our better food? Is this just passing the buck from food companies to the food relief sector? Will food waste now just end up dumped and rotting in the food rescue warehouses? Do we want to reward food businesses for doing good, or is being responsible for the outputs of your business amid a climate crisis a reasonable minimum expectation?
2.29On the other hand, the Salvation Army noted that the bill ‘requires that the food donated must be fit for human consumption ... to ensure that the [offset] is not utilised to hand off expired or unfit food’.
Inadequate resourcing and infrastructure to deliver food relief services
2.30WACOSS considered that the bill may lead to an increase in food donated, but not necessarily the amount of food relief provided to people in need, because the bill ‘does not address infrastructure shortages, and in some instances may make bottlenecks worse’. WACOSS noted that the food relief sector heavily relies on a volunteer workforce. It suggested that any tax offset should be considered alongside corresponding additional support for the food relief sector. Without such resourcing, food relief providers may be left to deal with food waste.
2.31In addition, WACOSS noted that many emergency relief services in remote and regional communities are not equipped to receive food donations. As such, the bill ‘is unlikely to deliver substantial benefit to the communities most in need of food relief’.
Need for additional programs and a broader strategy
2.32Various submitters and witnesses considered that there is a need for programs to address growing food insecurity and a broader strategy, not just offsets for businesses. Of note, Dr Collins also questioned whether ‘growing the food relief sector’ is ‘distracting from reforms that are needed to address the underlying, root causes creating disadvantage in society and food systems in the first place’.
2.33Dr Collins noted that the ‘government is acting’ on measures to address food waste, but other strategies to promote the elimination of food waste rather than its redistribution should be considered. In particular, Dr Collins argued that policies ‘and actions that address the socio-ecological determinants of food insecurity must be prioritised over growth to the food relief sector’.
2.34Professor Bogomolova suggested the ‘bill has the potential to create meaningful change’. However, she noted that ‘tax incentives alone won’t solve food insecurity’ and suggested that a broader strategy aimed to strengthen the entire food system include measures to:
address poverty;
create a diverse and sustainable supply chain; and
improve coordination between stakeholders, to make supply chains more efficient.
2.35Similarly, Dr Rebecca Lindberg called for the committee to ‘explore additional programs and policies to support people who are struggling’, noting that food insecurity affects one in eight Australian households, with this number on the rise. She argued that food insecurity is ‘an issue of national significance’, given ‘there are very few options available to households’ if they are priced out of supermarkets.
2.36Dr Lindberg noted that ‘many people who are food insecure will never use a food relief organisation’. As such, Dr Lindberg proposed ‘a nationwide food security policy’. She proposed ‘a constellation of synergistic and joined-up approaches’, which could include:
healthy, universal school meals;
maternal and infant nutrition programs;
increased income support for people in receipt of income support; and
local, affordable fresh food markets.
2.37The Salvation Army noted that some people accessing its services ‘are experiencing prolonged, even multigenerational poverty. This includes people in households where the cost of food and necessities is beyond the income they receive’ from work or government payments. It was of the view that food ‘relief of any form is not a solution to the fundamental causes of food instability, and is unable to provide security in the long-term’.
2.38Representatives from the Salvation Army noted that ‘no one action is going to address the systemic’ increased demand for food relief, which extends before and beyond the cost-of-living crisis. The Salvation Army acknowledged that the bill ‘by itself is not going to fix the desperate need for food relief in Australia’ and called for ‘[l]ong-term consideration’ of ‘broader disadvantage’, particularly housing and income support. WACOSS also called for increases to income support payments to help address food insecurity.
Support for the bill
2.39Many submitters expressed their support for the bill, though most of these called for similar (or identical) amendments, as outlined below. Of note, most of these submissions were similar to and reflected many of the arguments made by the Food Relief Sector.
2.40KPMG Australia, for example, was of the view that such a tax offset could ‘provide up to 5 times as much benefit as a cash donation from the government to a food relief charity’—namely, ‘if the government provided $100 cash to a food relief charity, this allows the charity or family to acquire $100 worth of food’. However, ‘a 20% tax offset to a small business with a cost-to-revenue of $100 … would equate to $500 of food expenditure donations to a food charity’.
2.41Reasons given for supporting the bill included that it would:
help to address increased demand for food relief services;
incentivise increased food donations as opposed to existing settings, which incentivise food waste;
help to end food waste;
include an offset for storage, transportation and packaging of products; and
boost employment in rural and regional areas.
Help to address increased demand for food relief services
2.42The committee heard that there has been unprecedented demand for food donations. Ms Brianna Casey, Chief Executive Officer of Foodbank Australia, emphasised this increased demand, noting that:
3.4 million Australian households had experienced food insecurity in the last 12 months;
some households, particularly low-income households, were experiencing food insecurity at the highest rate since the beginning of the cost-of-living crisis; and
more than half of food insecure households needing food relief are needing it more often.
2.43St Vincent de Paul Society National Council informed the committee that it was helping people in some instances for the first time, including middle-income earners. In New South Wales, it reported, 30 per cent of the people seeking assistance from the Society were doing so for the first time.
Incentivise food donations rather than food waste
2.44Some evidence noted that the significant cost of disposing food under current settings, as compared with donating, can act as a disincentive to donating food. Ms Casey stated that ‘one of the biggest barriers to providing more food relief is actually having the food that we need in the right places at the right time’, with issues arising largely because the cost to businesses of donating surplus food is higher compared with disposing of it.
2.45Ms Casey argued that farmers are the food relief sector’s ‘most generous donors of food’ and they are ‘desperate to see this incentive because this is not about a lack of desire to contribute more; it is about recognising the barriers to being able to do more’. She argued:
We need to make it easier for farmers to donate to that product. At the moment it costs a great deal to pick the product, pack it, store it, transport it, provide it to Foodbank and for us to distribute it. When we look to the current tax system, the tax treatment of donating is no better than dumping, and we need to find a way to use clever policy to make it easier for farmers to do that … [W]e think this will unlock up to 100 million meals a year in addition to what we're receiving currently. To look at Foodbank specifically, last year we sourced the equivalent of 92 million meals. That would effectively double our ability to get food relief out into communities that really need it, so for us this is a game changer.
2.46Ms Alia Lum, Partner, Tax Policy Lead at KPMG Australia, noted that under current tax settings, ‘many businesses get the same tax outcomes from disposing excess food as they do from donating it’. She argued that the bill would ‘enable an estimated $2 billion per annum social, economic and environmental benefit and positively contribute to Australia's ambition to halve food waste by 2030’.
2.47Mrs Tanya Barden from the Australian Food and Grocery Council similarly informed the committee that manufacturers may face ‘significant’ costs to donate food and groceries, including costs associated with transportation, handling and storage. These costs can act as a disincentive to donate, particularly in rural and regional areas.
2.48The Treasury told the committee at the public hearing on 23 October 2024 thatthe costs of transport, logistics and other services provided to a charity as part of food donations activities are not deductible under the charity regime ‘for integrity reasons’. However, there are certain limited circumstances in which those costs are deductible under general tax provisions.
Ending food waste
2.49Some submitters suggested that the bill would help to reduce food waste without imposing a financial burden on primary producers.
2.50AUSVEG noted that once produce is packed, there are often no alternative markets should a supermarket or grocer reject it. As a result, the packed produce is rendered ‘virtually useless, and dumping is often the most cost-effective alternative’. AUSVEG’s General Manager of Public Affairs, Ms Lucy Gregg, suggested the bill would help to address the issue of this food going to waste, as well as provide more vegetables to members of the community in need, thereby improving nutrition and health outcomes.
2.51Foodbank Australia’s Chief Operating Officer pointed to the former government’s National Food Waste Strategy, arguing that the bill fulfilled a priority of the strategy to use enabling legislation to better support food waste reduction and repurposing.
Bill includes storage, transportation and packaging of products
2.52The Salvation Army expressed its support for the bill’s provisions that would allow companies to claim for storage and other expenses incurred relating to food donations, noting that food relief ‘goes beyond simply having food. It touches on storage, transportation and packaging of products’. The Salvation Army suggested the ‘bill’s focus on … transport costs is so critical’ because of the challenges involved in providing fresh food options in remote areas.
Boost employment in rural and regional areas
2.53Mrs Tanya Barden from the Australian Food and Grocery Council noted that almost 40 per cent of the food and grocery manufacturing industry is based in rural and regional areas. She suggested that the bill would lead to an increase in volume of food provided from those areas, meaning an increased number of people working on the transport, handling and logistics of transporting the food to major centres.
Proposed changes to the bill
2.54As noted above, many submissions—all of which were very similar, if not identical – proposed particular changes to the bill, as follows:
expanding eligibility of the types of organisations able to claim the proposed offset to trusts and partnerships;
including public benevolent institutions as a type of charity able to receive food donated under the proposed system; and
increasing the turnover threshold of businesses wishing to claim the offset.
Expanding eligibility to trusts and partnerships
2.55Various submitters and witnesses expressed support for expanding eligibility of the type of organisations able to claim the proposed offset to trusts and partnerships. KPMG, for example, noted that many small businesses that operate through different structures, such as partnerships and trusts, would be ineligible to claim the offset as currently drafted under the bill.
2.56The Chief Operating Officer of Foodbank Australia informed the committee that ‘many family farms are structured as trusts, and therefore we would potentially be excluding the very people we want to target’.
2.57Similarly, Ms Alia Lum from KPMG Australia was in favour of trusts and partnerships to be eligible to claim, given ‘a lot of small businesses that … operate through trust or partnership structures’, such as family farms.
2.58On the matter of whether small businesses are operated through partnerships, trusts or as sole traders, the Treasury was of the view that this ‘is a valid proposition. There would be a lot of small businesses that are not run through corporations’.
Changes to types of charities
2.59The same submitters were largely in favour of expanding the types of registered charities eligible to claim the offset to include entities with the purpose of advancing social or public welfare, or public benevolent institutions, as proposed by KPMG.
2.60Food Bank Australia explained at the public hearing on 23 October 2024 why the Food Relief sector would like to see this amendment:
We find that food relief charities have registered themselves under a couple of different categories ... The categories are not mutually exclusive. It's just a trick of history that different charities have registered themselves under different categories. Just for completeness: we'd like to see two different categories used in the bill in order to ensure all genuine food relief organisations are captured.
Increasing turnover threshold
2.61The same submitters and witnesses as above largely called for an increase of the turnover threshold under which businesses would be eligible to claim.
2.62KPMG suggested that there may be ‘minimal incentive’ for companies that can only claim the 30 per cent offset, suggesting that the $50 million threshold be expanded ‘to allow for all businesses classified as medium sized businesses (defined by the [Australian Taxation Office] as turnover of between $10 million and $250 million) to be eligible for the 40 per cent offset rate’. In particular, many businesses in the food supply chain may operate with high turnover but low profit margins, therefore exceeding the proposed threshold. These businesses, KPMG argued, may struggle ‘to bear the additional costs of donating excess food in the absence of an incentive’.
2.63The Food Relief Sector was of the view that without ‘this adjustment, we will be hampering the ability of the bill to have a meaningful impact on the volume of food redirected to food relief’.
Other proposed amendments to the bill
2.64Other submitters and witnesses had further amendments they declared they would like to see made to the bill, including:
explicit provisions that the bill would incentivise the donation of healthy, nutritious foods, including a requirement for foods to be consistent with the Australian Dietary Guidelines;
simpler methods to determine the value of food donations expenditure by allowing businesses to claim for the market price of a donation;
incentives for activities that present major cost barriers for farmers and producers who do not have enough of a buffer to cover costs, such as harvesting, sorting, cleaning, storage and transportation of food;
removal of the sunset clause, with the bill’s provisions to be made permanent or for the provisions to provide for the option of extension;
that the bill allow for the Minister to make rules related to the tax offset by legislative instrument, including to address integrity and to correct any unforeseen consequences quickly that would arise from the implementation of the bill;
the bill and Explanatory Memorandum to make clear that companies may only claim expenses on a proportionate basis to the extent of the food donations activities;
tax depreciation be included as an eligible cost;
if tax depreciation is to be retained as an excluded cost, that it be extended to also exclude capital works deductions;
growers to retain the ability to decide what to do with rejected produce and receive the tax incentive where they decide to donate; and
food donated to charities to be exempt from horticulture levies.
Committee view
2.65The committee thanks Senator Dean Smith for the opportunity for the Senate to consider this business tax-offset mechanism in relation to the food relief sector.
2.66The committee also thanks the food relief organisations who appeared before the committee for their important work, and participation in this inquiry.
2.67As it is currently drafted, the committee cannot recommend the bill be passed because it is flawed in a number of ways.
2.68The committee notes this bill would preference larger companies like supermarkets, large food manufacturers and large established food relief organisations to be the primary beneficiaries of the bill’s generous tax concessions and supports.
2.69Concerningly, the bill’s generous tax concessions—including tax refunds—are inclusive of donation activities already occurring, potentially leading to no additional food being donated.
2.70As drafted, it is concerning that many small businesses, family farms and food relief charities would be unable to claim or benefit from these incentives at all.
2.71The committee is particularly concerned this bill presents an uncapped and unaccounted-for cost to the budget, with this cost growing significantly if the bill was to be expanded.
2.72The committee notes that the Budget is providing targeted cost of living support, including tax cuts for all taxpayers, energy bill relief, a tripling of the bulk billing incentive, cheaper childcare, fee-free TAFE and reducing student debts.
2.73The committee also notes concerns from inquiry participants that this bill is counter to the bipartisan goal to reduce national food waste, by creating a financial incentive for the over production of food. It is also disappointing that guardrails have not been included in the bill to avoid the dumping of poor-quality foods.
2.74The committee recommends that the Senate not pass the bill.
Senator Jess Walsh
Chair
Labor Senator for Victoria