A recent case before the AAT demonstrates how fine the dividing line is between GST-free and taxable foods.
Back in 2000 when the Goods & Services Tax (GST) was first introduced, basic food was excluded to secure the support of the Democrats for the new tax regime. Thirteen years later, the result of this exclusion is an definitive dividing line between GST-free and taxable foods that is consistently tested and altered. It is this dividing line that US yoghurt giant Chobani Pty Ltd recently tested in a case before the Administrative Appeals Tribunal (AAT).
At the centre of the case was Chobani’s Flip Strawberry Shortcake flavoured yoghurt and whether the product, composed of a tub of strawberry flavoured yoghurt with a separate tub of baked cookie and white chocolate pieces, is subject to GST. If the two components were sold in isolation, the baked cookie pieces would be taxable and the yoghurt GST-free.
Chobani had originally treated the flip yoghurt range as GST-free, relying on a 2001 GST ruling that allowed “a supply that appears to have more than one part but is essentially a supply of one thing” to be a composite supply. A product that is a composite supply could be treated as GST-free if the other components did not exceed the lesser of $3 or 20% of the overall product. In Chobani’s case, this meant that they could treat the flip yoghurt as GST-free.
Then in 2021, the ATO advised Chobani that its position had changed and it intended to treat the flip yoghurt as a combination food and therefore taxable.
Under the GST system, ‘combination foods’ where at least one of the food components is taxable, are subject to GST. Lunch packs of tuna and crackers, for example, are a combination food and therefore GST applies to the whole product because it is intended that the tuna and crackers are eaten together. But, where the food is a ‘mixed supply’, where each item is separate from the other and not intended to be consumed together, the GST will apply (or not) to each individual product. An example would be a hamper.
In the Chobani case, the AAT found in favour of the Commissioner’s interpretation that the flip product was a combination food and therefore subject to GST on the whole product.
So this got us thinking…what is considered GST food?
Even though your food item appears in the GST-free list below, it may still be subject to GST under one of the taxable rules. For example, bread rolls are GST-free unless they are sold in a restaurant. Always check the Taxable food list when working out the GST status of a food item.
The following are some examples of foods and beverages that are GST-free:
bread and bread rolls without a sweet coating (such as icing) or filling – a glaze is not considered a sweet coating
cooking ingredients, such as flour, sugar, pre-mixes and cake mixes
fats and oils for cooking
unflavoured milk, cream, cheese and eggs
spices, sauces and condiments
bottled drinking water
fruit or vegetable juice (of at least 90% by volume of juice of fruit or vegetables
tea and coffee (unless ready-to-drink)
baby food and infant formula (for children under 12 months of age)
all meats for human consumption (except prepared meals or savoury snacks)
fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)
spreads for bread (such as honey, jam and peanut butter)
breakfast cereals.
Find out more on the ATO website here.
* Chobani case information courtesy of the Knowledge Shop article, November 2023.