What you need to know about GST and food

Did you know some food items are exempt from GST? Understanding which items attract GST and which don’t can improve your margins significantly and save both you and your customers money.

Disclaimer: GST is a complex area of taxation. This guide provides general information, but we recommend seeking professional tax advice tailored to your circumstances before making any changes to your sales structure.

What is GST?

Goods and Services Tax (GST) is a 10% tax added to most goods and services in Australia. If you run a business, you need to understand how GST works.

If your business is registered for GST, you must:

• Include GST in the price of each customer sale

• Claim GST credits for business purchases where GST has been paid

Should your food business be registered for GST? 

If your business earns $75,000 or more per year, you must register for GST. Once registered, include GST in your sale prices and claim credits on GST-paid purchases.

For full details, refer to the ATO’s guide: Registering for GST

Which food items are subject to GST? 

Generally speaking, items sold as wholly complete "prepared meals" are subject to GST, whereas items that are unassembled and need further preparation at home are not subject to GST

According to the ATO, a food item is generally considered a taxable prepared meal if it has been cooked or assembled, includes multiple components (such as a protein, vegetable and starch), and is sold in a single container ready to heat and eat. The key factor is whether the item is designed and marketed to be eaten as a complete meal, rather than requiring additional ingredients or assembly at home.

Examples of prepared meals that DO attract GST:

• Lasagne

• Curry with rice

• Roast lamb with vegetables and gravy

• Cooked pasta dishes sold complete with sauce

• Pies, sausage rolls and quiches

Examples of food items that DO NOT attract GST include:

• Marinated meats sold without sides

• Sauces for pasta dishes sold without cooked pasta

• Curry sauces sold without rice

• Cooked rice sold as a side

• Bread and bread rolls without a filling or a sweet coating

• Salads sold as an addition to another dish or as a side

• Soup (soup is GST-free)

If your item is not a complete meal, make this clear on your packaging by adding instructions for the consumer to prepare and serve with other items. For example: “Serve with..”

How can I check the GST status of a food item?

The ATO website has a detailed food list and this tool that allows you to search for the tax status of specific food items.