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GST on Food

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 On Prepared Food

The Tax Office has published a draft determination GSTD 2024/D3 which aims to clarify how GST applies to food which is marketed as a prepared meal.

The ruling implements a definition of ‘prepared meal’ drawn from a recent Federal Court decision which determined that certain frozen foods were not GST free. (See Simplot Australia Pty Limited v Commissioner of Taxation [2023] FCA 1115).

Commentary on this case can be found in the following articles:

The draft ruling sets out a number of examples.

The examples seek to clarify the distinction between what qualifies as a GST-free food product and what is subject to GST, based on the product’s characteristics and marketing approach.

  1. Example 1 – Quantity (Large Quantities)
    Large trays of lasagna (5 kg and 10 kg) are considered food of a kind marketed as a prepared meal, despite being more than one person would consume in one sitting. The lasagna has the attributes of a prepared meal in terms of quantity, composition, and presentation.
  2. Example 2 – Composition (Breakfast Products)
    Pots of bircher muesli (150 grams) with rolled oats, yogurt, and fruits are treated as food marketed as a prepared meal, suitable for breakfast due to its composition.
  3. Example 3 – Composition (Single Element Meals)
    A frozen mashed potato product is not considered a prepared meal because it consists of only one component, making it more of a meal component rather than a meal itself.
  4. Example 4 – Composition (Nature of Ingredients or Elements)
    A chilled trifle containing custard, fruit, and cake is deemed a dessert rather than a prepared meal. Despite its multiple ingredients, it is not perceived as a complete meal.
  5. Example 5 – Presentation (Sufficiently Prepared)
    A frozen pasta product with chicken, vegetables, and sauce, sold partly cooked, qualifies as a prepared meal. Minimal preparation (heating or microwaving) is required, making it sufficiently prepared.
  6. Example 6 – Presentation (Not Sufficiently Prepared)
    A chicken stir-fry meal kit containing raw chicken and vegetables is not considered a prepared meal because it requires significant cooking and preparation.
  7. Example 7 – Presentation (Not Sufficiently Complete)
    Meatballs in tomato sauce are not considered a prepared meal. Although it is a sufficient quantity, it lacks the necessary components (e.g., pasta) to be a complete meal on its own.
  8. Example 8 – Presentation (Sufficiently Complete)
    A microwavable container of dumplings with a sauce sachet is considered a prepared meal. It is complete and can be eaten directly from the packaging after minimal preparation.
  9. Example 9 – Coleslaw (GST-Free)
    Pre-packaged coleslaw, sold in various quantities or from a deli counter, is not marketed as a prepared meal and is GST-free.
  10. Example 10 – Coleslaw with Corn and Sultanas (GST-Free)
    A coleslaw product with additional ingredients like corn and sultanas still qualifies as GST-free since it is not food marketed as a prepared meal.
  11. Example 11 – Caesar Salad Kit (Taxable)
    A Caesar salad kit containing lettuce, croutons, and dressing is marketed as a prepared meal, even though the components are separately packed and need assembling.
  12. Example 12 – Mediterranean Salad Kit (GST-Free)
    A salad kit with a majority of leafy greens, chickpeas, and other vegetables does not meet the criteria for a prepared meal, and thus remains GST-free.
  13. Example 13 – Mediterranean Salad Kit (Taxable)
    A salad kit with a more balanced mix of ingredients like olives and feta is considered a prepared meal because of its composition and presentation.
  14. Example 14 – Mediterranean Lamb Salad Bowl (Taxable)
    A Mediterranean lamb salad, sold as a single serving in a bowl, is treated as a prepared meal because it includes a variety of ingredients and is ready to eat with minimal preparation.
  15. Example 15 – Mediterranean Lamb Salad from a Deli Counter (Taxable)
    A Mediterranean lamb salad, sold from a deli counter where the consumer chooses the quantity, is still considered a prepared meal based on its composition, even though it is sold by weight.

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 detailed food list and a search tool to enable food vendors to accurately classify food items for GST purposes.

The food list has Ruling status, and as such provides limited protection if relied upon in good faith.

Combination GST Foods Ruling

The determination GSTD 2024/1 Goods and services tax: supplies of combination food (released Feb 28, 2024) seeks to clarify the position when a food product is a combination of foods, at least one of which is taxable.

The determination finalises the earlier draft GSTD 2023/D1.

The determination follows a tribunal decision in Chobani Pty Ltd and Commissioner of Taxation [2023] AATA 1664 which found a flavoured yoghurt product was taxable.

The Chobani 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 AAT held that Chobani Flip Strawberry Shortcake flavoured yoghurt was a combination food that was not GST-free.

The Administrative Appeals Tribunal determined that the term “combination” meant the product or outcome of merging multiple items.

See here for a further discussion of that decision.

The determination 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 Determination. 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 also:

This page was last modified 2024-10-16