Tax offsets a must for craft brewers

While excise rebates draw most attention, attendees at the Independent Brewers Association’s recent conference learned of several grants, tax offsets and rebates that may be going begging.

Ben Adams from the Investment and Government Incentives team at Ernst & Young, addressed the brewing industry at BrewCon last month and pinpointed some of the key taxation offsets available to brewers.

Adams cited the government’s Tariff Concession Order (TCO) as one of the most appealing tax offsets available to brewers, especially if they are scaling up.

A TCO, of which there are currently 15,000, is an Australian Government revenue concession that may be granted for imported goods if there is no known “suitably comparable product” available in Australia.

As it stands, importing goods into Australia generally costs businesses a five per cent duty.

“If a brewer imports $1 million worth of brewery equipment, they’re paying $50,000 worth of tax,” Adams explained.

“If there is a TCO for the item intended for import, say a canning line from Germany, the government will wave that five per cent duty,” he said.

“So, that’s definitely an opportunity for breweries who are operating in a pretty competitive market now.”

Certain Inputs to Manufacture is a similar scheme to the Tariff Concession Order, which aims to provide Australian manufacturers importing chemicals, plastics, paper goods and metal materials, or goods used in food packaging, with duty-free tariff concessions to help reduce their import costs.

“If you’re getting your ingredients from overseas for some reason and you can show that you can’t achieve the same goal by using an Australian product, there’s also some tax savings here available to brewers.”

“It may be your cans, your packaging, the cardboard for your boxes – it’s whatever your consumable materials are, which go into producing your final product.”

“If you can specify exactly why you need these specific cans from China or Europe or wherever, it puts you in the game to get those tax benefits.”

Another grant for up-and-coming breweries is the R&D Tax Incentive. The scheme provides a tax offset for some of a company’s cost of doing eligible research and development (R&D) activities by reducing a company’s income tax liability.

“For a small brewery starting out, it would be eligible for a 43.5 per cent refund on whatever it spends on R&D, providing it turns over less than $20 million per year in aggregated turnover,” Adams explained.

“And if a business is in losses, the government will give them a cash refund.”

”Most of the craft brewers in Australia are turning over less than $20 million, so it’s really only for the small guys,” he said.

For breweries that turn over more than $20 million per year in aggregated turnover, they will only be eligible for a 38.5 per cent refund. What’s more, they will not be eligible for a cash refund from the government.

Adams said that if a brewery’s aggregated income is marginal, “it’s probably worth getting some advice”.

“It can have a pretty significant effect, firstly on whether you are eligible to get cash from the government, or if it’s a five per cent change, it’s a 10 per cent difference in the amount you get back if brewers are over or under that $20 million.”

Adams also raised the South Australian Government Trade Waste Initiative as another example of how brewers can apply for government grants. While only available in that State, the initiative aimed to help businesses make improvements to the way trade waste is managed, focusing on quality improvements and volume reduction.

“If a brewer managed to run a project to reduce their trade waste, the South Australian government said that they would fund half of the project up to the value of $300,000,” Adams explained.

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