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2022-2024
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TAX LAWS AMENDMENT (INCENTIVISING FOOD DONATIONS TO
CHARITABLE ORGANISATIONS) BILL 2024
EXPLANATORY MEMORANDUM
(Circulated by authority of Senator Dean Smith)
TAX LAWS AMENDMENT (INCENTIVISING FOOD DONATIONS TO
CHARITABLE ORGANISATIONS) BILL 2024
OUTLINE
This Bill amends the Income Tax Assessment Act 1997 and the Income Tax (Transitional
Provisions) Act 1997.
It introduces a tax offset (called the food donations tax offset) for companies that are
constitutional corporations for certain expenditure incurred in undertaking food donations
activities for registered food charities.
The food donations tax offset is a refundable tax offset if a company's aggregated turnover is
less than $20 million. Otherwise, the offset is a non-refundable tax offset.
The amount of the tax offset is capped at the lower of $5 million or a specified percentage of
the expenditure incurred in undertaking the food donations activities. The specified
percentage is calculated according to the company's aggregated turnover in an income year.
The incentive outlined in this Bill is a temporary measure to deal with present challenges,
with an independent review of the merits of extension or not ordered by the relevant Minister
after three years.
It also contains integrity measures, aimed at avoiding abuse of the incentive.
Food stress and wastage in Australia
Recent years have witnessed a sharp growth in the cost of living, causing increasing financial
hardship for Australians and spiking levels of food stress.
As a result, food relief charities have seen a dramatic increase in the number of clients relying
on their assistance, as families struggle to buy groceries while trying to meet housing, utilities
and other expenses.
The 2022 Foodbank Hunger Report revealed 59% of those presenting to Foodbanks across
Australia were employed and 23% had a mortgage. These are generally demographics which
Australian charities have, until recently, not expected to require support.
Demand for food support is currently outstripping supply. Research conducted by KPMG on
the tax incentive introduced in this Bill confirmed food insecurity in Australia is alarmingly
high.
This was confirmed by the most recent Foodbank Hunger Report in 2023, which highlighted
that over the 12 months to July last year, 3.7 million homes across the country experienced
moderate to severe levels food insecurity.
Meanwhile, heightened demand for food assistance presents at a time where 7.6 million
tonnes of food are wasted every year, costing the economy an estimated $36.6 million
annually.
Of that waste, about 70% is still edible, but is discarded rather than donated because it is
cheaper to do so.
The Food Donation Tax Incentive
To better match supply and demand, and ultimately reduce food stress in Australia, this Bill
provides for a food donation tax offset.
This has been developed in close consultation with Australian charities and other relevant
sectors with an emphasis on simplicity and effectiveness.
Like similar initiatives in place around the world, Australian corporations would be eligible
for a tax offset relating to the expenditure they incur through these food donation activities.
It builds on a concept originally developed by Foodbank Australia and subsequently
modelled by KPMG.
This modelling resulted in two reports - A National Food Waste Tax Incentive 2020 and
Australian National Food Donation Tax Incentive Implementation Analysis 2023 - many of
whose recommendations are reflected in this Bill.
It implements a common-sense approach, with the potential to help address food stress in
Australian communities in an immediate and meaningful way.
NOTES ON CLAUSES
Clause 1: Short Title
1. Clause 1 is a formal provision specifying the short title of the Bill.
Clause 2: Commencement
2. This clause provides the whole of the Bill commences on the day after the Royal
Assent.
Clause 3: Schedules
3. Each Act specified in a Schedule to this Act is amended or repealed as is set out in the
applicable items in the Schedule. Any other item in a Schedule to this Act has effect
according to its terms.
Schedule 1--Amendments
Part 1--Main amendments
Income Tax Assessment Act 1997
Item 1 - At the end of Part 3-45
4. This item adds Division 419 at the end of Part 3-45 of the Income Tax Assessment Act
1997, introducing a new Division for the food donations tax offset.
5. Section 419-1 is a guide that explains the operation of the Division.
6. Section 419-5 outlines the conditions a company is required to meet to be entitled to
the food donations tax offset for an income year. The company must incur expenditure in the
income year in, or in relation to, undertaking food donations activities for a registered food
charity, be provided with a receipt for the activities containing relevant information as
prescribed by the regulations, be a constitutional corporation and claim the offset in its annual
tax return. The expression constitutional corporation is defined in the Income Tax Assessment
Act 1997.
7. Section 419-10 outlines the amount of the food donations tax offset that a company
can claim, being the lower of $5 million or an amount that is a specified percentage of the
food donations expenditure incurred by the company in undertaking food donations activities
for a registered food charity. The specified percentage is:
- For a company with an aggregated turnover of less than $20 million--45%
(refundable tax offset).
- For a company with an aggregated turnover of at least $20 million and less than $50
million--40% (non-refundable tax offset).
- For a company with an aggregated turnover of at least $50 million--30% (non-
refundable tax offset).
8. Section 419-15 defines when a company undertakes food donations activities for a
registered food charity. This includes donating or selling food that is fit for human
consumption to the charity, providing services to the charity in connection with donating or
selling food (whether the company or another entity donates or sells the food, or another
entity is engaged to provide those services on the company's behalf), or any other activities
prescribed by the regulations. The regulations can also exclude activities.
9. Section 419-20 defines when a company's expenditure is food donations expenditure.
Generally, food donations expenditure is expenditure that a company incurs in, or in relation
to, undertaking food donation activities for a registered food charity.
10. Subsection 419-20(2) lists expenditure that is specifically included in the definition of
food donations expenditure, including expenditure for the production, storage and
transportation of food donated or sold to a charity. Regulations may prescribe other
expenditure that is specifically included.
11. Subsection 419-20(3) lists expenditure that is specifically excluded from the
definition of food donations expenditure, including the company's general business
overheads, insurance, accounting and human resources expenses, travel, hospitality, visas or
work permits, expenditure on activities incidental (rather than directly attributable) to food
donations activities, or expenditure claimed for the purposes of a deduction or another tax
offset. Regulations may prescribe other expenditure that is specifically excluded.
12. Subsection 419-20(4) excludes expenditure from the definition of food donations
expenditure in situations where the company or its associate receive, or could reasonably be
expected to receive, consideration as a result of the food donations activities and that
consideration is equal or greater than the expenditure for the activities.
13. Subsection 419-20(5) limits the amount of expenditure that is food donations
expenditure in a situation where the company or its associate receives consideration in the
circumstances set out in subsection 419-20(4), but where the consideration is less than the
expenditure. Only the expenditure exceeding the consideration is food donations expenditure
of the company.
14. Subsection 419-20(7) outlines that where a company incurs goods and services
expenditure to another entity in relation to food donations activities, and the company and the
entity do not deal with each other at arm's length, or the entity is the company's associate,
and the expenditure exceeds the market value of the goods and services, only the expenditure
equal to the market value is food donations expenditure.
15. Subsection 419-20(8) outlines that the decline in value of a depreciating asset is not
food donations expenditure.
16. Section 419-25 requires that the Minister cause independent reviews of the new
Division 419 to be undertaken within the 36-month period after of the Bill's commencement,
and within each successive 36-month period if applicable. These reviews must examine the
merits of continuing the operation of the Division and a written report must be provided to
the Minister no later than 30 days prior to the end of the 36-month period. The Minister must
table a copy of the report in each chamber within 15 days of receiving it.
Part 2--Other amendments
Income Tax Assessment Act 1997
Item 2 - Section 13-1 (after the table item headed "film")
17. This item makes a consequential amendment to insert the food donations tax offset
into the list of tax offsets in section 13-1 of the Income Tax Assessment Act 1997.
Item 3 - Subsection 63-10(1) (after table item 33)
18. This item inserts a new item in the table in subsection 63-10(1) of the Income Tax
Assessment Act 1997. That table item determines the priority order in which the non-
refundable food donations tax offset may be claimed against a company's basic income tax
liability and what happens to any excess. The non-refundable food donations tax offset may
be carried forward to a later income year under Division 65.
Item 4 - At the end of section 67-23
19. This item inserts a note at the end of section 67-23 of the Income Tax Assessment Act
1997 to refer to new section 67-35 (which sets out when the food donations tax offset is
subject to the refundable tax offset rules).
Item 5 - At the end of Division 67
20. This item adds section 67-35 to the end of Division 67 of the Income Tax Assessment
Act 1997. That section outlines that where a company is entitled to a food donation tax offset
under section 419-5, the offset is subject to the refundable tax offset rules if the company's
aggregated turnover for the income year is less than $20 million. Where the company's
aggregated turnover exceeds this, the offset will be non-refundable as per subsection
63-10(1).
Item 6 - Subsection 995-1(1)
21. This item inserts new definitions into subsection 995-1(1) of the Income Tax
Assessment Act 1997.
22. Signpost definitions are included for the expressing food donations activities, food
donations expenditure and food donations tax offset.
23. A definition of registered food charity is included. The definition covers an entity
registered as a charity under the Australian Charities and Not-for-profits Commission Act
2012 that has a charitable purpose of advancing social or public welfare (within the meaning
of the Charities Act 2013).
Income Tax (Transitional Provisions) Act 1997
Item 7 - At the end of Part 3-45
24. This item adds Division 419 at the end of Part 3-45 of the Income Tax (Transitional
Provisions) Act 1997, introducing a new Division to deal with application and transitional
matters for the food donations tax offset.
25. Section 419-1 states that a food donation tax offset, under Division 419 of the Income
Tax Assessment Act 1997, would be claimable for income years starting on or after the
commencement of the bill.
26. Section 419-5 is a sunset provision which states that Division 419 of the Income Tax
Assessment Act 1997 ceases to be in force 36 months after commencement of the bill, or
when a subsequent 36-month extension of the Division expires. More than one extension can
be prescribed by regulations, but each extension must be for the period of 36 months.
Regulations may also deal with transitional matters in connection with the sunset of the
Division.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Tax Laws Amendment (Incentivising Food Donations to Charitable Organisations)
Bill 2024
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
This Bill amends the Income Tax Assessment Act 1997 and the Income Tax (Transitional
Provisions) Act 1997. It introduces a tax offset for companies that are constitutional
corporations regarding certain expenditure incurred in relation to undertaking food donations
activities for registered food charities.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
Senator Dean Smith