In this report, we find that Australia has an extensive regime for the tax deductibility of charitable donations, but it does not presently provide tax incentives that specifically target food waste or food relief as a policy objective.
Under the current policy framework, donations of services for food transportation and logistics, pallet hire and storage, and refrigeration – all food relief services which are required in the food donation process – can only attract limited deductions in limited circumstances. This is a barrier to many companies actively participating in food waste reduction and food relief in Australia.
Given the cost of immediately disposing 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 is the same in many instances, it is often more practical and cost effective for businesses to discard food rather than donate it under the current policy framework. As a result, the hunger relief and food waste reduction sectors are currently experiencing difficulty in attracting donations of food and relevant services that are essential to their objectives.
To address these issues, we recommend a tax policy be developed 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. The main purpose of this proposed tax policy is to achieve food waste reduction targets and alleviate the food insecurity experienced by many Australians.
A new incentive would support primary producers, processors, manufacturers, the logistics and transport industry, as well as other service providers who are committed to the alleviation of food waste and insecurity in Australia.
Globally, food waste tax incentives have been introduced in many key global jurisdictions (including OECD countries) including United States, United Kingdom, France, Canada and Netherlands.
In this report, we consider the tax incentives offered globally to put forward design options for the introduction of a specific food relief tax incentive in Australia.
There are two options to consider for a specific food waste tax incentive to be implemented (the ‘National Food Waste Tax Incentive’). The first option has features broadly in line with the current R&D tax offset with appropriate limitations and safeguards.
The second option would be for an enhanced deduction option 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.
If enacted, the proposed National Food Waste Tax Incentive would contribute materially to stimulating activity in the economy at a time when this is greatly needed. An incentive of this kind would not only support the donation of food but would also potentially create important flow-on economic activity including job creation by stimulating relevant supporting activities and services.
We estimate a National Food Waste Tax Incentive to have a direct cost to Federal Government of approximately $50 to $100 million per annum which is minimal in comparison to the large offsetting social, economic and environmental benefits of approximately $2 billion per annum1 and against the current cost of food waste to the Australian economy of over $20 billion annually.
The National Food Waste Tax Incentive 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 Strategy2, giving rise to large net social, economic and environmental returns for all Australians both now and into the future.
1. Social, economic and environmental benefits of approximately $2 billion per annum may be estimated by multiplying the estimated $23 of social, economic and environmental value created per kilogram of food donated against an estimated donation of 87 million kilograms of food.
2. Refer Commonwealth of Australia, 2017, National Food Waste Strategy: Halving Australia’s food waste by 2030; Food Innovation Australia Limited, 2019. A Roadmap for reducing Australia’s Foodwaste by half by 2030 Report. This strategy aligns with Australia’s obligations in accordance with the United Nations Sustainable Development Goal 12 (ensure sustainable consumption and production patterns as set out in the United Nations Transforming our World: 2030 Agenda for Sustainable Development) and under the United Nations Framework Convention on Climate Change in reducing greenhouse gas emissions, principally through diverting food waste from landfill.