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  • Seafood and fishing

    8.1 Fishing

    8.1.1 Are live fish (Banded Morwong and Wrasse) sold for domestic consumption able to be considered as food for GST purposes and hence be GST-free?

    Explanation

    Under subsection 38-4(1) A New Tax System (Goods and Services Tax) Act 1999 (GST Act) food means any of these, or any combination of any of these:

    (a) Food for human consumption(whether or not requiring processing or treatment)

    But does not include:
    (g) live animals(other than crustaceans or molluscs);

    Therefore live animals, except molluscs and crustaceans (eg. lobsters, oysters and crabs), are subject to GST. Fish, once dead, will be GST-free.

    A full list of items considered to be food is contained in the following publication:

    Food Index - GST status of items

    8.1.2 Sale Of Fishing Business - Transitional

    Question

    What are the GST implications with regard to the sale of a fishing business as a going concern (this would include the sale of a fishing licence, fishing boat, equipment and any other items essential to conduct the business) if the contract is entered into pre 1 July 2000 and the settlement takes place after 30 June 2000?

    Answer

    The time of supply for GST purposes will be at settlement. A business supplied from 1 July 2000 will be subject to GST if the vendor is registered or required to be registered for GST. However, section 38-325 of the the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which deals with supplies of going concerns may be applicable.

    Section 38-325 of the GST Act provides:

    (1) The supply of a going concern is GST-free if:

    (a) the supply is for consideration; and
    (b) the recipient is registered or required to be registered; and
    (c) the supplier and the recipient have agreed in writing that the supply is of a going concern.

    (2) A supply of a going concern is a supply under an arrangement under which:

    (a) the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and

    (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of larger enterprise carried on by the supplier).

    The whole of section 38-325 must be satisfied.

    Explanation

    Due to the generality of the question the answer provided is in general terms.

    Section 6 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act) provides:

    (1) This section sets out how to determine when a supply or acquisition is made for the purposes of this Act.

    (2) A supply or acquisition of goods is made:

    (a) when the goods are removed; or
    (b) if the goods are not to be removed - when the goods are made available to the recipient; or
    (c) if the goods are removed before it is certain that a supply will be made (for example, if the goods are given or taken on approval, sale or return, or similar terms) - when it becomes certain that a supply has been made.

    (3) .....
    (4) .....
    (5) A supply or acquisition of any other thing is made when the thing is performed or done.

    Sections 6(2) and (5) of the Transition Act may apply to the sale of a business as a going concern.

    With regard to sections 6(2) and (5) of the Transition Act, the time of supply will be at settlement.

    A business supplied from 1 July 2000 will be subject to GST if the vendor is registered or required to be registered for GST. However, section 38-325 of the GST Act which deals with supplies of going concerns may be applicable.

    Section 38-325 of the GST Act provides:

    (1) The supply of a going concern is GST-free if:

    (a) the supply is for consideration; and
    (b) the recipient is registered or required to be registered; and
    (c) the supplier and the recipient have agreed in writing that the supply is of a going concern.

    (2) A supply of a going concern is a supply under an arrangement under which:

    (a) the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and

    (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of larger enterprise carried on by the supplier).

    The whole of section 38-325 of the GST Act must be satisfied.

    This means that there must be consideration for the supply (section 38-325(1)(a) of the GST Act). Consideration has a wide meaning for GST purposes. It is any payment (in money or kind) that the supplier (vendor) receives for making the supply (selling the business). Section 9-15 of the GST Act states that it includes any payment, act or forbearance done in connection with the supply of the thing. Therefore, doing something or not doing something in order to get the vendor to sell the business can be consideration.

    In addition for section 38-325 of the GST Act to apply the recipient (purchaser) must be registered. Registration is dealt with under Division 23 of the GST Act. Registration is compulsory for entities carrying on an enterprise (activity or activities done in the form of a business) and whose registration turnover threshold is $50,000 or more unless the entity is a non-profit making body.

    The supplier and recipient must agree in writing about the nature of the supply. That is, they must agree before the sale is made that what is being supplied is a going concern. Without this agreement section 38-325 of the GST Act cannot apply.

    Paragraph 38-325(2)(a) of the GST Act means that to be considered as a supply of a going concern the supply must include all the things necessary to operate a fishing business. For example, the sale of a fishing licence on its own may not meet this requirement. The facts of each case will need to be examined to determine whether a supply of a going concern has been made.

    A further requirement in relation to determining that a supply is a supply of a going concern is that the supplier (vendor) must carry on the business until the date of supply (paragraph 38-325(2)(b) of the GST Act).

    It is possible to sell a going concern that consists of an enterprise which is part of a larger enterprise. However, this does not apply if what is sold does not comprise an enterprise in itself. If surplus assets are retained, the exemption may still apply.

    See also GSTR 2001/5 Goods and Services Tax: when is a 'supply of a going concern' GST-free?

    8.1.3 - Diesel Fuel Rebate Fact Sheet and Commercial Fishing

    Question

    What are the claiming arrangements for commercial fishing for the Diesel Fuel Rebate Scheme?

    Answer

    Please refer to the Fact Sheet: The off-road diesel fuel rebate scheme - GST and special claiming arrangements for commercial fishing.

    8.2 Seafood

    8.2.1 - Oyster Spats

    Question

    Are supplies of oyster spat and adult oysters GST -free?

    Answer

    Supplies of oyster spat are subject to GST.

    Supplies of adult oysters are GST-free only when the oysters are of sufficient size and quality to be considered as food. However oysters that are supplied:

    • for consumption on premises, eg by cafes, fish shops, restaurants etc; or
    • as hot food for consumption away from the premises

    are not GST-free.

    Explanation

    In accordance with section 38-2 of A New Tax System (Goods and Services Tax) Act 1999 (the Act) a supply of food, as defined in the Act, is GST-free. Relevant paragraphs of the definition of food in subsection 38-4(1) of the GST Act include:

    '(a) food for human consumption (whether or not requiring processing or treatment);
    (b) ingredients for food for human consumption:...'

    but does not include:

    '...(g) live animals (other than crustaceans or molluscs);...'

    Live oysters, being molluscs, are not excluded by paragraph 38-4(1)(g) of the GST Act from being food for the purposes of the Act.

    In order to be considered as food according to the definition in the Act, oysters must be 'food for human consumption (whether or not requiring further processing or treatment)' or 'ingredients for food for human consumption'.

    Information from industry is that oysters supplied as food for human consumption are graded according to size and quality. The highest grade is the large premium table oyster. The lowest grade is the bottling oyster which is usually smaller than the table oyster. Where the oysters are supplied for bottling as a culinary delicacy, then this supply is GST-free as it is a supply of food for human consumption. Oysters are not normally marketable as food for human consumption until they attain a shell length of at least 50mm; more usually 60mm, however, information from the New South Wales Farmers Association indicates that oysters may be marketable as food when they attain a shell length of 30 - 40 mm.

    Once oysters reach a size and quality at which they are marketable as food for human consumption they satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. It does not matter that they are supplied in the shell since that paragraph refers to 'food for human consumption (whether or not requiring further processing or treatment)'. Removal from the shells would be 'further processing'. Once removed from their shells, food grade oysters will also qualify as 'ingredients for food for human consumption' as per paragraph 38-4(1)(b) of the GST Act.

    Oyster spat and juvenile oysters

    Information from industry is that oyster spat and juvenile oysters are sold by hatcheries and oyster growers to other oyster growers to be 'grown-on' until they reach a size at which they are marketable as food. Supplies of oysters below the size at which they are marketable as food will not be 'supplies of food for human consumption' and are subject to GST.

    Adult oysters

    When adult oysters of marketable size are sold as 'food for human consumption' they are GST-free. Such sales could be to seafood wholesalers, marketing organisations, food processors, restaurants or consumers. Supplies of adult oysters from one grower to another will also be GST-free provided they are of sufficient size and quality to be marketable as food for human consumption.

    Supplies of adult oysters that are below the size at which they are marketable as food for human consumption are not supplies of food for human consumption and are subject to GST.

    Example 1

    Grower A supplies seed stock to Grower B. The oysters are not of sufficient size to be marketable as food. The supply by Grower A is not a supply of food for human consumption so it is subject to GST.

    Example 2

    Grower C farms oysters and also sells oysters direct to the public. Grower C anticipates a high demand from the public during the coming holiday period. Grower C orders 80 mm oysters from Grower D. The oysters supplied by Grower D are food grade. Grower D has supplied food for human consumption. This supply is GST-free.

    Oysters supplied for consumption on premises or as hot takeaway food.

    Paragraph 38-3(1)(a) of the GST Act applies to make food that would otherwise be GST-free, taxable in certain circumstances. A supply of oysters is not GST-free if it is supplied:

    • for consumption on the premises* from where it is supplied (for example restaurants, cafes, snack bars or similar businesses that provide eating facilities); or
    • as hot takeaway food see paragraph 38-3 (1)(b) of the GST Act.

    *Note that the word 'premises' extends to include areas outside a food outlet that are designated for use by customers, such as open-air tables and chairs.

    For further details please refer to Issue 22 of the Food Industry Partnership - issues register.

      Last modified: 07 Jan 2005QC 17854