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NAT 3338-07.2010
OUR COMMITMENT TO YOU ABOUT THIS GUIDE
We are committed to providing you with accurate, consistent
and clear information to help you understand your rights and Terms we use
entitlements and meet your obligations. When we say:
■ GST credits, we are referring to the GST term,
If you follow our information in this publication and it turns out to input tax credits
be incorrect, or it is misleading and you make a mistake as a
■ GST law, we are referring to the GST Act 1999
result, we must still apply the law correctly. If that means you
■ sale or sell, we are referring to the GST term supply.
owe us money, we must ask you to pay it but we will not charge
you a penalty. Also, if you acted reasonably and in good faith we We have developed this guide with the Australian Food and
will not charge you interest. Grocery Council and other major food industry representatives.
If you make an honest mistake in trying to follow our information This guide will:
in this publication and you owe us money as a result, we will not ■ help you to work out whether food you sell is taxable
charge you a penalty. However, we will ask you to pay the or GST-free
money, and we may also charge you interest. ■ address the food retailing sector’s main GST issues
If correcting the mistake means we owe you money, we will pay ■ help you to work out food and non-food items.
it to you. We will also pay you any interest you are entitled to. This guide has three sections:
If you feel that this publication does not fully cover your 01 Simple rules – in this section you can:
circumstances, or you are unsure how it applies to you, you can ■ use the simple rules to work out the GST status of food items
seek further assistance from us. you sell
We regularly revise our publications to take account of any ■ learn when GST is applied to food items in the supply chain.
changes to the law, so make sure that you have the latest If you can’t work out the GST status of a food item in section 1,
information. If you are unsure, you can check for a more recent go to section 2.
version on our website at www.ato.gov.au or contact us.
02 Food industry issues – in this section you can find out:
This publication was current at July 2010. ■ the GST status of food items you sell
■ the meaning of GST terms
■ where to find more information.
03
01 GST FOOD CLASSIFICATION FLOW CHART
MORE INFORMATION
9
02
FOOD INDUSTRY ISSUES 4
What is food? 4
Items that are not food 4
Pet food 4
Prepared meals 4
Platters and other similar arrangements of food 5
Marketing tests to define food 5
Food products that have alternative (non-food) uses 5
Snack packs 6
Hampers and mixed supplies 6
Food past its use-by date 6
GST and food packaging 6
Normal and necessary packaging 7
Confectionery 7
Savoury snacks 7
Hot food 7
Premises 8
These rules help you work out the GST status of most food
items you sell.
If you use the simple rules and are still not sure whether
a food item is taxable or GST-free, go to section 2 on page 4.
NOTE TAXABLE
You cannot claim GST credits for food supplied as an
‘entertainment expense’ that is non-deductible for income tax.
Market gardener
GST is only applied where the food item is either:
■ not for human consumption at a particular stage in the GST-FREE
supply chain
■ taxable under GST law.
Wholesaler
EXAMPLE: When GST is applied in the food supply chain
GST-FREE GST-FREE
A plant nursery sells punnets of lettuce seedlings to a
market gardener. The seedlings are taxable as they are
plants under cultivation, even though the lettuce is ultimately Retailer Restaurant
for human consumption. The:
■ plant nursery charges GST and pays it to us GST-FREE TAXABLE
■ a market gardener can claim a GST credit for the GST
they pay that is included in the price of the seedlings.
Consumer Consumer
The market gardener then grows the lettuce, picks it and sells
it to the wholesaler. The lettuce is GST-free as it is now a food
for human consumption.
The wholesaler sells the lettuce, GST-free, to a retailer.
The retailer sells the lettuce GST-free to a consumer and
GST-free to a restaurant.
The restaurant prepares the lettuce as part of a salad that
a consumer eats on the premises. The price of the salad
to the consumer is taxable. The restaurant pays the GST
it charges in the price of the salad to us.
GST law says the sale of food is GST-free unless it is: ■ sushi
■ food for consumption on the premises it is supplied from ■ cooked pasta dishes sold complete with sauce
■ hot food for consumption away from the premises ■ frozen TV dinners
■ food of a kind listed in the table in clause 1 of Schedule 1 ■ fresh or frozen complete meals (for example, a single serve of
of the GST Act a roast dinner including vegetables or a low fat dietary meal).
■ beverages and ingredients for beverages not listed in the table All these meals, except sushi, only need reheating for them to
in clause 1 of Schedule 2 of the GST Act be ready to eat. Sushi is ready to eat when it is prepared even
■ food as listed in the GST law. though part of it is raw. It does not matter whether prepared
meals are supplied hot or cold, or need cooking or reheating.
You can find Schedule 1 and 2 of the GST Act on our Salads, including pasta, rice, coleslaw, meat, seafood and
website www.ato.gov.au/foodindustry select ‘Basic topics’, green salad, sold from salad bars at supermarkets in either
‘Publications’ and ‘GST and food schedule 1 and 2’. the delicatessen section or from a self-serve bar, are GST-free
For more information about foods and beverages listed only if they are not marketed as prepared meals.
in GST law, visit the food industry section of our website Examples of food items that are not prepared meals include:
at www.ato.gov.au/foodindustry ■ frozen vegetables
■ kebabs (uncooked skewered meat)
■ marinated meats and stir-fries
ITEMS THAT ARE NOT FOOD ■ uncooked pasta products
Some animals and plants are not food under GST law until they ■ fish fingers
are processed or treated. These are:
■ baby food, baked beans, spaghetti and Irish stews that
■ live animals (other than crustaceans or molluscs)
do not require refrigeration or freezing.
■ unprocessed cow’s milk
■ any grain, cereal or sugarcane that has not been processed
Uncooked pasta products are not prepared meals. Canned
or treated to change its form, nature or condition baby food, baked beans and spaghetti are not prepared meals
as they do not need refrigeration or freezing (until opened)
■ plants under cultivation that can be consumed (without further
for their storage.
processing or treatment) as food for human consumption.
When you are working out whether food is a prepared meal, MARKETING TESTS TO DEFINE FOOD
consider: When thinking about marketing, consider:
■ how the goods are promoted or advertised ■ how goods are promoted or advertised
■ the name, price, labelling, instructions, packaging and ■ the name, price, labelling, instructions, packaging
placement of the goods in the store. and placement of the goods in the store.
The way the following products are marketed determines
EXAMPLE: Prepared meals their GST status:
■ fats and oils marketed for culinary purposes (GST-free)
A supermarket sells lasagne in a box from the frozen food ■ food marketed as a prepared meal, but not soup (taxable)
section. The instructions on the box say that the product ■ food marketed as confectionery (taxable)
can be reheated by oven baking or microwave. ■ food marketed exclusively as ingredients for
The lasagne is a prepared meal as the product only needs confectionery (taxable)
heating, before serving. ■ flavoured iceblocks (whether frozen or not) (taxable)
■ malt extract marketed mainly for drinking (GST-free)
■ preparations that are marketed mainly as tea, coffee,
PLATTERS AND OTHER SIMILAR ARRANGEMENTS or malted beverages (GST-free)
OF FOOD ■ preparations marketed mainly as substitutes for tea, coffee
Platters and other similar arrangements of food are taxable. or malted beverages (GST-free)
Platters can include fruit, vegetable, cheese, cold meat or a ■ dry preparations marketed to flavour milk (GST-free)
mixture of foods. ■ beverages and ingredients for beverages marketed mainly
A platter is a large shallow dish, commonly oval, for serving as food for infants or invalids (GST-free).
food items. Usually a platter or arrangement of food can be
uncovered and placed on a table ready for serving (for example, FOOD PRODUCTS THAT HAVE ALTERNATIVE
a catering product at a barbeque). (NON-FOOD) USES
Some GST-free food products have alternative non-food uses.
The GST status of a product depends on whether it is a sale of:
EXAMPLE: Prepared vegetables
■ food for human consumption
■ a non-food product.
Adam’s supermarket sells pumpkin that is chopped into
pieces ready for roasting. There are four to six pieces The supplier must work out the type of sale.
of pumpkin on a plastic tray covered in plastic wrap.
You can work this out by considering the:
This product is not a platter.
■ physical product
■ nature of the sale.
EXAMPLE: Gourmet platters For example, you might decide a food product is for non-food
use because the product is:
Susie’s Gourmet Foods sells trays of gourmet food to ■ called something other than food
customers for parties and other functions. One of these ■ stored in conditions or containers that are not suitable for food
trays contains an arrangement of antipasto products ■ packaged in a non-food type package or container
including: cold meats, sun-dried tomatoes, pickled ■ labelled, invoiced or marketed as a non-food product
vegetables, bread sticks, biscuits and other items chosen ■ delivered in a way not suitable for food.
by the customer. This product is a platter and is taxable.
However, if Susie sold each of the items in a separate
plastic container with a lid and the customer placed them
on a serving tray, the sale would not be a platter. Susie
would work out the GST status of each item individually,
for example the sun-dried tomatoes would be GST-free,
the biscuits would be taxable, and so on.
Packaging that is more than usual and necessary for the sale
of the food is taxable. For example, if you supply breakfast HOT FOOD
cereal in a re-useable plastic container, the container is taxable. Hot food means food for consumption that has been heated
The sale would be: above the surrounding air temperature.
■ partly taxable (container) Food you sell while it is still warm because it happens to be
■ partly GST-free (cereal). freshly baked is GST-free (unless it falls under another category
Special promotional food packaging (for example, a rack for of taxable food). For example, freshly baked bread is GST-free.
spices) is not normal and necessary. Promotional items that Hot and cold food supplied as a single item for consumption
accompany the food and packaging are also not normal and away from the premises (such as sausage and onion on a slice
necessary (for example, drink containers and recipe books of bread) is subject to GST.
of lasting value). You must work out separately the tax on:
■ promotional items accompanying the food
■ packaging and items that are usually supplied separately.
This flow chart provides steps, to help you work out whether
food and beverage items are taxable or GST-free.
Before using this flow chart, you should: 3. Is the product a fat or oil marketed for cooking
■ read Section 1 and 2 of the GST food guide or preparing food?
■ determine whether your food or beverage item is food
for GST purposes see ‘What is food’ page 4 YES NO
■ consider how your product is packaged and presented.
A product marketed and packaged as a ‘snack pack’
or ‘hamper’ will be treated differently from a product GST-free Go to question 4
individually packaged in normal and necessary packaging
■ check if your food or beverage item is listed on the
Detailed food list on www.ato.gov.au
4. Is the product considered to be food or an
ingredient for food or a beverage?
For a list of the GST status of more than 500 food See ‘What is food’ page 4.
items refer to the Detailed food list on our website
www.ato.gov.au/foodindustry select ‘Basic topics’,
‘Publications’ and ‘Detailed food list’. Beverages are drinks that are consumed to quench thirst
or provide nourishment.
YES NO
YES NO
2. Is the product an exempt food additive?
Condiments, spices, seasoning, sweetening and
flavouring agents such as tomato sauce, jam, cinnamon, Taxable Go to question 6
cloves, salt, saccharin and vanilla essence are GST-free
when packaged and marketed for retail sale.
Essential nutritional ingredients such as sugar, fat,
carbohydrate, amino acids, vitamins and minerals used
in the manufacture of food are also GST-free.
YES NO
GST-free Go to question 3
YES NO
Taxable Go to question 9
Taxable Go to question 7
YES NO
Taxable Go to question 11
Taxable Go to question 14
Taxable Go to question 12
YES NO
15. Is the product an unflavoured milk product?
Most processed milk beverages are GST-free – provided
Taxable GST-free they are not flavoured.
They can be supplied GST-free in liquid, powdered,
concentrated or condensed forms.
Processed milk beverage products also covers
If you are still unsure whether GST applies to your buttermilk, casein, whey and lactose.
food item:
■ refer to the GST food classification tool (NAT 73129) YES NO
■ or phone us on 13 28 66.
GST-free Go to question 16
16. Is the product an unflavoured soy milk or rice milk 19. Is the product a beverage for infants and invalids?
product? Beverages for infants and invalids are GST-free if they are
Soy milk or rice milk beverages are GST-free – provided marketed principally for infants and invalids.
they are not flavoured.
YES NO
YES NO
GST-free Go to question 20
GST-free Go to question 17
YES NO
GST-free Go to question 19