• Issue 22

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

    For source of ATO view, refer to the Detailed food list.

    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) 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) 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 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 Oyster Committee indicates that oysters may be marketable as food when they attain a shell length of 30-40mm.

    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). 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).

    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

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

    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.

    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.

    End of example

     

    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.

    End of example

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

    Paragraphs 38-3(1)(a) and (b) of the Act apply 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 - paragraph 38-3(1)(b) of the Act.

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

      Last modified: 05 Aug 2016QC 16451