Manufacturing News

Food product innovation stifled under proposed new R&D tax legislation

Food and beverage product innovation would be stifled under the provisions of the federal Government’s proposed new Research and Development (R&D) Tax Incentive Legislation, Australian Food and Grocery Council (AFGC) Chief Executive Kate Carnell said on Monday, 8th February.

Carnell said AFGC was concerned that instead of encouraging necessary research and development, the proposed legislation would significantly undermine Australia’s largest manufacturing industry.

The problem stems from a definitional change which could exclude much of the work undertaken by the food and grocery industry.

“The proposed legislation is based around the premise that an effective R&D incentive needs to result in companies conducting R&D that they would not otherwise perform, which suggests that existing R&D activities will not be supported,” Carnell said.

“This will impact on a range of reformulation activities aimed at making food products healthier and stifle innovation necessary to ensure the industry maintains its competitiveness.

“R&D improvements in the food and beverage industry tend to be incremental in nature because many innovations involve modifications to food and beverage formulations, processing techniques and packaging materials.”

Carnell said that quantum leap, blue sky R&D often was often not possible in the food and beverage industry because of food safety regulations and the need to move at a pace that was acceptable to consumer taste and requirements.

“If the legislation doesn’t incentivise incremental R&D in the food and beverage industry, it will impact on the government’s own health and sustainability agenda,” Carnell said.

The restriction to the definition of eligible R&D in the proposed legislation is likely to limit the eligibility of a number of activities aimed at improving the healthiness and sustainability of the food supply.

This includes research activities aimed at reducing the salt, sugar and fat content of foods as well those aimed at increasing the amount of health promoting nutrients such as omega -3 and Vitamin C.

Carnell said that energy reduction and water-reuse R&D in the food and beverage industry may also be affected by the stricter definition and that this would impact on the industry’s ability to reduce emissions and maintain competitiveness.

Research to improve the sustainability of packaging and reduce waste could also be affected.

AFGC outlined its concerns in a submission to Treasurer Wayne Swann saying that it was unfortunate that the proposed restrictions to the R&D definition are in conflict with the government’s encouragement of AFGC members to enhance the health attributes of food and beverage products and to minimise waste and CO2 emissions.

“The government needs to go back to the drawing board on this issue,” Carnell said.

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