If your business turnover over $75,000 annually, you’ll need to register to collect the Goods and Services Tax (GST) from your customers and lodge a Business Activity Statement (BAS) either monthly, quarterly or annually.
When you are registered to collect GST, you’ll need to include the GST in the price you charge your customers and then claim back GST credits on the purchases you have made to create your saleable items.
If you’re in the food industry, not all food is equal in the eyes of the Goods and Services Tax. Knowing what you can and can’t apply GST to is paramount. So, what is considered to be food and which foods to you need to charge GST?
GST free foods
Generally, most basic food staples are GST free and means that you won’t have to charge your customers GST and you won’t have to pay the GST to the Australian Taxation Office (ATO).
Examples of GST free foods are:
- bread and bread rolls without icing or filling
- cooking ingredients such as flour, sugar and cake mixes
- fats and oils for cooking
- milk, cream, cheese and eggs
- spices and sauces
- fruit juice containing at least 90% by volume of juice
- bottled drinking water
- tea and coffee (unless it’s ready to drink)
- baby food and infant formula
- meats for people to eat (except prepared meals or snacks)
- fruit, vegetables, fish and soup
- spreads, such as honey, jam and peanut butter
- breakfast cereals
- rice, cooked or uncooked (but not hot)
Pro Tax Tip: Although these items are GST free, under some circumstances you may have to charge GST when you on-sell them to your customers. For example if you purchase bread rolls and then sell them to your customers in your restaurant.
Which Foods Are Taxable?
Most foods that are made or sold in bakeries are taxable, as are non-staple foods such as sweets and desserts. These include:
- bakery products such as cakes, pastries and pies
- biscuits, cones and wafers
- savoury snacks such as potato chips
- chocolates and lollies
- ice cream
- soft drinks and flavoured milk such as chocolate milk
- food platters
- food marketed as prepared meals such as sushi, curry and rice dishes
- any food not for people to eat, such as food for pets
- all food and drinks sold in restaurants or for consumption on the premises – see ‘Where food is sold and consumed affects GST’ for more information.
Pro Tax Tip: You can always contact an ITP Tax Accountant who can advise if you should be charging GST, and on what items it would be incurred.
There are rules that apply to where food is sold and/or to be consumed that will require you to apply GST to your charge. You’ll need to charge GST if you are:
- selling food on your premises where it is supplied and consumed
- selling hot food for consumption away from your premises
- selling a beverage
- selling food or beverage that is a combination of GST free and GST applied ingredients
GST Food Chain
GST may be applied anywhere on the food chain. If your business has registered for GST, you can claim GST credits for any GST you pay in the price of food items that you purchase for your business.
Pro Tax Tip: You can’t claim GST for food supplied as an entertainment expense it you can’t claim a tax deduction for it.
GST is affected where the food is sold and consumed. All food and drink sold in a restaurant and consumed are taxable, even if they are GST free. As a business, you’ll need to charge your customers GST if you are a:
- a restaurant or cafe
- a snack bar or stand
- any venue associated with leisure, sport or entertainment such as
- a sports ground
- a golf course
- a gym
- a racecourse
- a theatre
- a museum
- a gallery
- a cinema
- an amusement park.
Pro Tax Tip: There are circumstances where GST will not need to be charged. For example if you are a charitable institution, a gift deductible entity or a government school (tuckshop).
What Is The Definition Of Food?
The ATO’s definition of food is not what a chef or is anything outlined in a cookbook. The ATO has a clear definition about what food it classified as taxable or not. For that is:
- consumed for human consumption (whether or not requiring processing or treatment)
- ingredients for food for human consumption
- beverages for human consumption
- goods to be mixed with or added to food for human consumption. These include condiments, spices, seasonings, sweetening agents or flavourings)
- fats and oils marketed for culinary purposes
- any combination of the above
Food does not include live animals (other crustaceans or molluscs), unprocessed cow’s milk, grains (cereal or sugar cane that has not been processed) or plants under cultivation, or water.
The rulings surrounding GST applicable on food can be complex. If you’re unsure, reach out to an ITP Tax Accountant who can help you work out where and when you’ll need to charge GST. They’ll even help you work out where you can claim back GST credits and lower your overall tax bill. Phone 1800 367 487 today or book online at www.itp.com.au
And yes – you’ll need to charge GST if you sell Easter eggs 😉