Food distributors, charities call for incentives for food donations

Blue Seas Food Services boss Colin Passfield has survived three recessions but says 2021 is the worst year he has experienced after 40 years in the food service distribution business.

The company normally supplies 450 to 500 food service businesses in Greater Sydney every week with fresh, frozen and packaged food. But for the past 11 weeks more than half of his customers have been closed under NSW lockdown rules, sales have fallen 65 to 70 per cent and most of his 20 staff have been stood down.

“It’s very tough at the moment, it’s hard to know where we’re going,” Mr Passfield said.

“It’s worse than any recession I’ve been through because you can’t see how business is going to get back to the level it was.”

As the weeks in lockdown have gone by, Mr Passfield has been forced to throw out or donate fresh and frozen stock nearing its use-by date.

It is a similar story across the entire food service distribution sector in NSW and Victoria, where small and medium-sized and family-controlled businesses have been forced to discard or donate thousands of tonnes of food worth millions of dollars.

Independent Food Distributors Australia, which represents more than 200 independent distributors, has called on the federal government to compensate distributors for food thrown out during lockdown or to increase the tax deductibility of donations or stock write-downs.

“Distributors’ revenues are down 70 per cent – that’s $50 million a week in wholesale revenue in NSW alone in the independent food service distribution sector,” IFDA deputy chairman Brad Lee said.

No compensation

“We’re doing everything we can to donate the product rather than dump it … but there’s no compensation other than the company tax rate, so 70¢ in every dollar purchased is being donated with no compensation.

“Roughly 30 per cent of all products sold in our industry is of a perishable nature – stock in the millions of dollars has either been written off or donated

“Something needs to be done, even in a temporary fashion, to support the sector.”

Food charities such as Foodbank and SecondBite, which are facing unprecedented demand during the latest lockdowns, have also been lobbying the government for higher incentives for food donations.

In a report in September 2020, KPMG proposed specific food waste tax incentives, including a two-tiered non-refundable or refundable tax offset and an enhanced deductibility regime similar to that in the US, to reduce food sent to landfill and alleviate food insecurity.

In the US, businesses can deduct 200 per cent of the cost or 120 per cent of the market value of goods or services donated to food relief agencies.

“It is often cheaper for companies and farmers to dump food than to donate it to charities such as Foodbank,” said KPMG tax partner Catherine Dean, one of the authors of the report.

“There’s never been a better time to introduce a national food waste incentive,” Foodbank chief executive Brianna Casey said.

“At the moment there is no economic incentive to donate product that might be surplus … and it seems an anathema that when we have a hunger problem in Australia, and we produce enough food to feed our population three times over, but we can’t get the policy and taxation settings right to be able to bridge the gap.

Social benefits

“The proposed tax reforms KPMG has put together would not only deliver extraordinary outcomes in terms of environmental benefits and reduce the volume of food that goes to landfill, but more importantly the social benefits it would bring to ensure food that’s perfectly edible … ends up in the tummies of the most vulnerable people in Australia.”

However, none of the KPMG recommendations have been adopted, despite meetings in recent months with ministers, including federal Treasurer Josh Frydenberg.

“In an ideal world these reforms would have been championed long before now because it would have set us up for success through periods of supply chain disruption, but that’s not a reason not to pursue it now,” Ms Casey said.

KPMG has estimated a national food waste tax incentive would cost $50 million to $100 million a year, an immaterial amount given the estimated $2 billion economic and environmental benefits and the $20 billion annual cost of food waste sent to landfill.

“Something needs to be done urgently,” IFDA’s Mr Lee said. “This has been going on since March 2020, when it [lockdowns] all began.”

Sue Mitchell, Senior Reporter
Source: Australian Financial Review. 10 Sep, 2021

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