A BIG taxation advisory firm says the intensifying debate about the goods and services tax (GST) is a clear warning bell to farmers to plan ahead to protect profit margins against the tax being extended to fresh food.
Focusing on export possibilities is one income diversification option being urged.
"Most would agree GST reform is necessary and will more than likely cover fresh food in the new reforms," said national head of food and beverage business at international tax and professional services network, Grant Thornton, Tony Pititto.
With some changes "seemingly imminent" food producers and processors needed to think deeper about how a tax on food may hurt their bottom line, particularly those heavily reliant on sales to supermarkets.
"Given the current competitive retail landscape you need to consider what happens if supermarkets adopt a policy that protects their customers from any price increase, leaving you as the supplier to absorb the cost?" Mr Pititto said.
"Diversifying your customer base and channels to market will reduce your exposure to tax policies that may impact profit margins."
Now was probably a good time to be looking beyond local market channels to explore selling opportunities overseas, particularly the Asia Pacific region.
Despite the federal opposition's pre-election stand against any increase to the 10 per cent GST (which currently excludes food), Treasurer Scott Morrison has all but confirmed the government is moving towards a potentially explosive GST rise, arguing tax reform is essential.
Accounting giant Deloitte Access Economics estimates up to $30 billion a year could be raised by lifting the tax to 15pc and broadening the base to include fresh food.
Elsewhere around the world GST or value added taxes typically range around 15pc to 20pc, including nearby New Zealand's flat 15pc.
In Europe GST typically ranges up to 25pc, although taxes on food are often discounted to around 10pc.
Victorian rural Liberal Dan Tehan has called the GST "half-baked", saying it should cover fresh food, education and health services.
Mr Pititto said food producers needed to understand their true costs of production to determine their profit margins and the impacts of possible tax policy changes.
Some clients were already diversifying their market channels into US, UK or Asia.
"We're also seeing clients diversifying their local retail customer base, with newer players Aldi and Costco providing options to break away from the traditional supermarket chains.
“A lot of innovation from our clients involves ready-to-eat convenience products, for example pre-packed fruit and vegetables.”