The 2016 Budget has delivered plenty of benefits for food and beverage manufacturers, although not everyone is happy. Here's a round-up of the major announcements.
COMPANY TAX
A 10-year-plan to stimulate higher business investment through progressive cuts to company tax was applauded by the Australian Food and Grocery Council (AFGC), because of its ability to drive growth and jobs.
“In this budget the government has recognised the importance of confidence and certainty as a prerequisite for investment. By laying out a 10-year-plan to progressively cut company tax, the Budget lays the foundation for higher economic growth and a pathway back to a balanced budget,” AFGC CEO Gary Dawson said.
“Lack of investment, reflecting uncertainty and lack of confidence, is the biggest weakness in the Australian economy. Finding the right levers to build confidence and encourage higher business investment is critical and recognised by the government in the Budget’s centrepiece measures.”
According to Dawson, the business and personal tax relief will have positive flow on effects through the food and grocery supply chain.
“The overarching priority of investment, jobs and growth must be carried through to other critical areas of government policy including foreign investment settings and regulatory reform,” he said.
INFRASTRUCTURE
The AFGC also welcomed the commitment to major infrastructure projects, including the inland rail link between Melbourne and Brisbane, to cut transport costs and boost efficiency, with particular benefits for the food and grocery sector.
Tony Pititto, Grant Thornton Australia's food and beverage national leader, also applauded the projects.
“Our clients are showing increased interest in expanding their footprint in the Asia region, with more than half looking to commence or increase export activity over the next two years. We welcome the opportunities that comes with the Government’s announcement to invest in crucial upgrades to infrastructure, that will support agribusiness in exploring new markets,”
One of the big positives of the budget was something it didn’t do, and that was play around with the R&D tax incentive, according to Ai Group Chief Executive, Innes Willox.
“No change there is a do no harm policy and something that we welcome,” he said. “Overall this is a very positive budget for Australian business and one that we welcome.”
Willox applauded the new program called PaTH to help young people find jobs and training in real businesses, but not the changes to the industry skills fund and a big cut in its funding, which he said would make it very difficult for business to build capacity.
WINE FUNDS
The Winemakers’ Federation of Australia and Wine Grape Growers Australia (WGGA) both welcomed a major injection of funds – $50m over the forward estimates – to grow demand and accelerate recovery of the nation’s grape and wine industry.
The recovery plan included changes to the Wine Equalisation Tax (WET) rebate and a substantial global investment strategy to restore confidence across the industry.
“We are pleased government has listened and responded to our industry recovery strategy and the need to provide these additional funds,” Federation President Tony D’Aloisio AM said.
Wine Australia chair Brian Walsh said: “We welcome this initiative and we look forward to working closely with the grape and wine sector to design and implement the $50 million support package to help boost domestic wine-related tourism and export assistance.”
However Des Caulfield, a director at business advisery firm MGI, said changes to the Wine Equalisation Tax Rebate could spell the death of the cellar door.
The changes to the WET Rebates will make a substantial difference to small producers – WET rebate will come down from a maximum of $500,000 to a maximum of $290,000 over the next two years. It will reduce to $350,000 on 1 July 17 and then to $290,000 on 1 July 2018. Anyone not making their own wine, but selling under their own label will not be eligible for the WET rebate from 1 July 2019.
“The Government is endeavouring to stop much of the current rorting of the WET rebate system with these measures and, to the extent that it removes the rebate where eligibility has been artificially created, is welcomed," Caulfield said.
“However we believe that it will impact on many genuine wine sellers who may be too small to be able to afford their own wineries but who are genuine winemakers. A number of these operate cellar doors and these changes may result in such vendors being uncompetitive and hence going out of business.”
SUGAR TAX
The Public Health Association of Australia (PHAA) said the latest budget shows a fundamental misunderstanding of the importance of prevention for the economy and the health of the Australian population.
The Budget saw the bulk of funding focused on treatment and clinical services instead of prevention initiatives, the PHAA said.
“We know prevention works. While we applaud the Government for reinvesting in initiatives such as the Health Star Rating and tobacco consumption rates but we would like to see a greater level of investment in public health prevention initiatives such as a sugar tax on soft drinks,” PHAA vice president David Templeman said.
“A sugar tax on soft drinks would not only improve the health of Australians but it would inject money back into the economy. The funds can be reinvested back into prevention initiatives and research,” he said.
“The Federal Government has missed an opportunity to consider how the pressure could be taken off the health system.”
Australian Beverages Council CEO Geoff Parker said he was pleased that the government had committed to its position of not being open to discussion on the issue of a sugar/soft drinks tax, despite a small but loud group of NGOs calling for it.
“It was also pleasing that the Shadow Treasurer also came out in the lead up to the Budget that Labor was similarly not in favour of such a tax. Naturally we are still expecting the topic to form part of the debate in the run up to the election,” Parker said.
BACKPACKER TAX
Vegetable industry body AUSVEG also expressed its disappointment, in its case at the lack of action taken by the Federal Government to change or eliminate the controversial backpacker tax, which it said would hurt Australian growers.
AUSVEG said the tax, which will remove the tax-free threshold and increase the amount of tax paid by workers who come to Australia under the Working Holiday Maker program, will act as a deterrent to work on Australian farms and jeopardise the viability of the vegetable industry.
“The decision by the Federal Government to keep the proposed backpacker tax unchanged in the Federal Budget could impact the ability for Australian vegetable growers to harvest their crops and potentially devastate the industry,” AUSVEG deputy CEO Andrew White said.
The National Farmers’ Federation (NFF) said it was angered by the lack of any plan to address the backpacker tax.
NFF President, Brent Finlay said new initiatives which build on last year’s $4 billion Agricultural Competitiveness White Paper were excellent news for the sector but enthusiasm for the Budget was tempered by the damage that would be incurred at the hands of the backpacker tax.
