Small businesses selling a mixture of gst and non-gst food items may be able to choose one of five simplified GST accounting methods offered by the tax office to estimate the gst content of sales.
A small business retailer for Simplified Accounting Method “SAM” eligibility purposes is a business with turnover of less than $2 million.
The five simplified methods are:
- Business norms percentages (only certain businesses)
- Stock purchases
- Snapshot of trading
- Sales percentage (only certain businesses)
- Purchases snapshot
See full details of the “SAM” (Simplified Accounting Methods) here: Simplified GST accounting methods for food retailers
GST Free Food
In general, food and beverages for human consumption are GST-free unless it is for consumption at the place of supply, or if it is hot food for consumption elsewhere.
However, the food GST classification rules are somewhat complex in practice.
Determining whether food is subject to GST can variously depend on the ingredients and manner of preparation, the place of preparation and the place, or intended place, of consumption (or intended consumption).
The tax office provides a GST food classification decision tool with a detailed food list for major food items to assist food vendors to accurately classify food items.
The food list has Ruling status, and as such provides limited protection if relied upon in good faith.
Combination GST Foods – Draft Ruling
Draft determination GSTD 2023/D1 seeks to clarify the position when a food product is a combination of foods, at least one of which is taxable.
The ruling was issued in response to a tribunal decision in Chobani Pty Ltd and Commissioner of Taxation  AATA 1664 which found a flavoured yoghurt product was taxable.
The case revolved around Chobani’s Flip Strawberry Shortcake flavoured yoghurt. It had separately packaged dry inclusions like cookie pieces and chocolate chips, which were taxable foods.
The Administrative Appeals Tribunal determined that the term “combination” meant the product or outcome of merging multiple items.
See here for a discussion of that decision.
The draft tax ruling provides that:
- Combination food is a product made up of distinctly identifiable foods, with at least one being taxable.
- A food is distinct if it can be perceived separately upon normal visual inspection.
- The term “combination” indicates the outcome of joining two or more things.
- The decision if foods are adequately joined to be a combination food depends on various factors like physical appearance, packaging, labelling, marketing, and consumer experience.
- A combination food is not regarded as such if the taxable food is integrated so much that it doesn’t impact the overall product’s character.
Several examples are provided in the ruling. They include:
- A chocolate-hazelnut spread containing 20% roasted hazelnuts is not considered a combination food because the hazelnuts aren’t visually distinct.
- Meal kits, like a Nutty Chicken Pasta Kit, aren’t combination foods even if they contain taxable items, because the ingredients are distinct and need several steps for meal preparation.
- A peanut satay stir-fry sauce with visible roasted peanuts is not a combination food as the peanuts are integrated into the sauce’s character.
- Bakery bread with roasted sesame or poppy seeds on top isn’t a combination food since the seeds are too minor to affect the bread’s overall character.
- However, products like Tuna Lunch Pak, Crunchy Custard with nuts, and Tall Tales Trail Mix are considered combination foods.
See Draft determination GSTD 2023/D1.
- GST Simplified Accounting Method Determination (No.38) 2016 for Restaurants, Cafes and Caterers – purchases snapshot method
- Goods and Services Tax: Simplified Accounting Methods Determination 2017 for Retailers who sell Food – Business Norms, Stock Purchases and Snapshot Methods
This page was last modified 2023-10-11