Edited version of private ruling

Authorisation Number: 1011536895538

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Ruling

Subject: Frozen tiramisu

Question:

Is the supply of Frozen Tiramisu a GST-free supply of food to which section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act') applies and to which the exclusions in Item 20 of Schedule 1 to the GST Act do not apply?

Answer

Yes, the supply of a Frozen Tiramisu is a GST-free supply of food to which section 38-2 of the GST Act applies and to which the exclusions in Item 20 of Schedule 1 to the GST Act do not apply.

Relevant facts and circumstances:

In the ruling request you described the Frozen Tiramisu as consisting of, among other ingredients, X% mascarpone cheese, Y% coffee soak, and Z% sponge cake and as being cold set, not a baked product, and frozen in order to prolong its shelf life.

In fact the Ingredients listed on the packaging state that the Frozen Tiramisu consists of % 'mascarpone cream', not mascarpone cheese, and that 'mascarpone cream' comprises 2% full fat mascarpone cheese plus reconstituted skimmed milk powder, glucose syrup, refined coconut oil, milk solids, sugar, eggs, marsala wine, tapioca starch, alcohol, stabilisers and emulsifier.

In order to be consumed, the Frozen Tiramisu must be thawed. It is displayed in the dessert section of a freezer in supermarkets, alongside products such as frozen fruits and other frozen desserts.

You provided an image of the packaging for the Frozen Tiramisu which states among other things:

Leave the product at room temperature to thaw for about 45 minutes before use.

The packaging includes an image of the Frozen Tiramisu and states that it consists of layers of coffee liqueur soaked sponge and mascarpone cheese although the Ingredients listed on the packaging indicate that the sponge base is soaked in coffee and that it is the 'mascarpone cream' which contains the alcohol.

The image of the product on the packaging has two distinct layers - a thin base of sponge soaked with the 'coffee soak' and a thick layer of a custard or mousse-like mixture dusted with cocoa powder (cocoa powder is included in the list of ingredients on the packaging).

You submitted that the supply of Frozen Tiramisu was GST-free under section 38-2 of the GST Act and was not a supply of food of a kind specified in Schedule 1 to the GST Act, i.e.

cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings

You noted that the Compact Oxford English Dictionary definitions of 'cake' and 'pudding' described them as being 'baked' or 'cooked' respectively and pointed out that the Frozen Tiramisu was cold set, not baked.

You submitted that although the Frozen Tiramisu contained cake, that cake was not the principal ingredient and was incorporated into the product so that it lost its identity as cake.

You referred to a GST private ruling issued early in the recent year which ruled that the supply of a tiramisu dairy dessert which comprised 68.9% mascarpone, 22.2% coffee sauce, 1.1% cocoa powder and 7.8% sponge and which was not baked but cold set was GST-free and was not a supply of food of a kind specified in Item 20 of Schedule 1 to the GST Act. The ATO ruled that the tiramisu dairy dessert was neither a 'pudding' (because Issue No. 13 in the Food Industry Partnership Issues Register states that a pudding is a cooked dish that may be boiled or steamed or consists of a baked batter mixture) nor a 'cake' (because the small amount of cake which it contained had been combined to such a degree that it no longer retained a separate identity and had been incorporated as an ingredient into the dairy dessert).

In the tiramisu dairy dessert GST private ruling the ATO also ruled that the tiramisu dairy dessert was not covered by paragraph 38-3(1)(c) of the GST Act, that is, food that is a combination of one or more foods at least one of which is food of a kind specified in the third column of the table in Schedule 1, because the cake had been combined to such a degree that the tiramisu dairy dessert did not combine taxable food and GST-free food as distinct items.

In the present case you submitted that the tiramisu dairy dessert considered in the recent GST private ruling and the Frozen Tiramisu contained similar ingredients, including 7% sponge and that the only difference between the products was that Frozen Tiramisu was frozen in order to extend its shelf life.

You provided a copy of an edited version of a GST private ruling issued in respect of number of products sold as frozen Bavarian desserts, i.e. pie-shaped frozen dairy desserts packaged in cardboard boxes which were cold set and not baked and consisted principally of a smooth, creamy mousse-like mixture (consisting mainly of cream plus flavouring) deposited into a high-sided biscuit crumb base (23% of each product) and topped with a thin layer of cream sprinkled with chocolate flakes or chocolate icing. The frozen Bavarian desserts were thawed, sliced into portions and eaten as a dessert or snack.

In the GST private ruling the ATO ruled that the frozen Bavarian desserts were not food of a kind specified in Item 20 of Schedule 1 - they were not 'cakes' or 'slices' because they had the appearance and consistency of a dairy dessert rather than a cake or slice and were cold set and not baked; they were not 'cheesecakes' because they did not contain cheese or cheesecake flavouring; and they were not 'puddings' because they were cold set and not baked. The ATO also considered Item 32 in Schedule 1 to the GST Act, that is:

Food that is, or consists principally of, biscuits, cookies, crackers, pretzels, cones or wafers

Despite containing biscuit crumbs (which the Detailed Food List Fact Sheet states are taxable), the ATO considered that the frozen Bavarian desserts did not consist principally of biscuit crumbs as biscuit crumbs made up only 23% of each frozen Bavarian dessert. Nor were the frozen Bavarian desserts covered by paragraph 38-3(1)(c) of the GST Act (i.e. food that is a combination of one or more foods at least one of which is food of a kind specified in the third column of the table in Schedule 1) because the biscuit crumbs lost their separate identity when combined together to form the frozen Bavarian dessert.

In the present case you submitted that the Frozen Tiramisu was similar to the frozen Bavarian desserts and requested rulings that a supply of a Frozen Tiramisu was GST-free under section 38-2 of the GST Act and that the exclusions in Item 20 of Schedule 1 to the GST Act do not apply.

Reasons for decision:

Summary:

In our view the supply of Frozen Tiramisu is a GST-free supply of food pursuant to section 38-2 of the GST Act and is not a supply of food of a kind specified in Item 20 in Schedule 1 to the GST Act.

Detailed reasoning:

Section 38-2 of the GST Act provides that a supply of food is GST-free. 'Food' is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment).

Paragraph 38-3(1)(c) of the GST Act provides that a supply is not GST-free under section 38-2 of the GST Act if it is, inter alia, food of a kind specified in the third column of the table in clause 1 of Schedule 1 to the GST Act or food that is a combination of one or more foods at least one of which is food of such a kind. The third column in Item 20 in Schedule 1 refers to:

Cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings

Issue 30 in the Food Industry Partnership Issues Register states that the words 'of a kind' in paragraph 38-3(1)(c) of the GST Act indicated that foods are taxable if they are of the class or genus referred to in Schedule 1 to the GST Act and referred to Hygienic Lily Ltd v Deputy Commissioner of Taxation (NSW) (1987) 13 FCR 399 where Gummow J. held that cups made from wax-coated paper were goods 'of a kind ordinarily used for household purposes':

Further, the setting in which the phrase 'goods of a kind' appears suggests that it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of the goods in the class or genus in question. Thus goods are 'of a kind ordinarily used for household purposes' if they are to be recognised as members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes.

Issue 13 in the Food Industry Partnership Issues Register states that:

Cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings

are not defined in the GST Act and are therefore afforded their ordinary meaning.

Cakes:

The Macquarie Dictionary defines 'cake' as:

A sweet baked food in loaf or layer form, made with or without shortening, usually with flour, eggs, sugar, flavouring, usually with baking powder or soda, and a liquid.

The Frozen Tiramisu is cold set like a mousse or custard and not baked. Consequently it is not a 'cake' for the purposes of Item 20 of Schedule 1 to the GST Act.

From the description and image on the packaging, it appears that the base of the Frozen Tiramisu comprises a sponge which has had a 'coffee soak' added to it. Thus part of the product is a sponge (which falls within the dictionary definition of 'cake' - a sweet baked food in loaf or layer form) but is soaked in coffee before being topped with 'mascarpone cream' and cold set. This raises the issue of whether Frozen Tiramisu is not GST-free as being food that is a combination of one or more foods at least one of which is food of a kind specified in Schedule 1 to the GST Act (see below)

Slices:

The Macquarie Dictionary defines 'slice' as:

Any of several cakes or biscuits cooked or formed as a thin slab and cut into rectangular pieces.

Unlike 'cake', a slice does not have to be baked, a slice can be 'cooked or formed' and the Frozen Tiramisu does have the appearance of a slab, albeit not particularly thin. In the frozen Bavarian dessert GST private ruling, however, the ATO ruled that a Bavarian dessert was not a slice because it comprised mainly a mousse-like mixture with the appearance and consistency of a dairy dessert. The image and the listed ingredients of the 'mascarpone cream' which appear on the packaging of the Frozen Tiramisu suggest that the Frozen Tiramisu also has the appearance and consistency of a dairy dessert. Consequently we do not consider that the Frozen Tiramisu is a 'slice' for the purposes of Schedule 1 to the GST Act.

Cheesecakes:

The Macquarie Dictionary defines 'cheesecake' as:

A kind of cake or open pie filled with a custard-like preparation containing cheese.

The GST private ruling issued in respect of the frozen Bavarian desserts noted that a frozen Bavarian dessert was similar in nature and quality to cheesecake in several respects, i.e. the Macquarie Dictionary definition of 'cheesecake' encompassed products that were cold set, a cheesecake and a Bavarian dessert each had a biscuit base with a cold set filling, and a cheesecake and a Bavarian dessert each had the same shape. The GST private ruling nevertheless ruled that the frozen Bavarian desserts were not cheesecakes because they did not contain cheese.

In the present case, the Frozen Tiramisu also has the nature and qualities of a cheesecake referred to in the frozen Bavarian dessert GST private ruling as it is cold set and has a cold set filling over a base (albeit that the Frozen Tiramisu's base is not made of biscuits but a sponge with 'coffee soak' added).

Unlike frozen Bavarian desserts, the Frozen Tiramisu does contain cheese - the ingredients in the 'mascarpone cream' which makes up X% of the Frozen Tiramisu include 2% 'mascarpone full fat soft cheese'. Thus the 'mascarpone cream' is 'a custard-like preparation containing cheese' in terms of the Macquarie Dictionary definition of 'cheesecake'.

We note that, despite being described as a 'Tiramisu', Frozen Tiramisu does not follow the traditional recipe for Tiramisu which involves savaoiardi (lady finger biscuits) dipped in espresso (sometimes with marsala) being layered several times between a whipped mixture of egg yolks, mascarpone cheese, and sugar, and topped with cocoa. Instead the Frozen Tiramisu has a single layer of coffee soaked sponge and a single much thicker layer of 'mascarpone cream' dusted with cocoa powder on top of it. By adopting this construction and including mascarpone cheese as an ingredient in the 'mascarpone cream', the Frozen Tiramisu prima facie falls within the term 'cheesecake' in Item 20 in Schedule 1 to the GST Act.

We note, however, that approximately 1.5% of the Frozen Tiramisu comprises mascarpone cheese. We have examined the ingredients listed on the packaging of other frozen cheesecakes sold in supermarkets and found that they comprise between 15.5% and 23% Neufchatel cheese. Consequently we consider that the minimal amount of mascarpone cheese included in a Frozen Tiramisu does not result in the Frozen Tiramisu acquiring the nature and quality of a cheesecake.

Pancakes, waffles, crepes, muffins:

We do not consider that the Frozen Tiramisu falls within the meaning of these terms as used in Item 20 in Schedule 1 to the GST Act.

Puddings:

Issue 13 in the Food Industry Partnership Issues Register states that 'pudding' is defined to mean:

A cooked food that is a sweet or savoury dish made in many forms and of various ingredients, such as flour (or rice, tapioca, or the like) milk and eggs, with or without fruit, meat or other ingredients and is a cooked dish consisting of various sweet or savoury ingredients, especially as enclosed within a flour-based crust or mixed with flour, eggs etc. and boiled or steamed; a baked batter mixture

and that the ATO is of the view that 'puddings' in Item 20 only includes products which satisfy the above meaning. Issue 13 states that the following are examples of products that are 'puddings' and will be subject to GST:

Rice* pudding, tapioca pudding, self-saucing puddings, steamed puddings and Christmas pudding

* Products that are commonly known as creamed rice, creamed rice dairy dessert or rice puddings that consist of boiled rice in a milk or cream solution which are not baked, will be GST-free

and that the following are not considered to be 'puddings' and will be GST-free:

Yoghurt, dessert mousse (e.g. chocolate), crème caramel, dairy desserts, custard, jelly

Both the 'pudding' definition and the examples of what is and what is not a 'pudding' in Issue 13 make a clear distinction between products that are cooked (i.e. 'pudding' is defined as 'a cooked food') and products which are not cooked, such as cold set products. The Frozen Tiramisu, apart from the sponge which is soaked in coffee liqueur, falls into the latter category and is not a 'pudding' as that term is used in Item 20 of Schedule 1 to the GST Act.

Paragraph 38-3(1)(c) of the GST Act:

As stated above, because Frozen Tiramisu contains sponge (which is a cake), the issue arises as to whether the Frozen Tiramisu is food that is a combination of one or more foods at least one of which is food of a kind specified in the third column of Schedule 1 to the GST Act.

In the GST private ruling issued in respect of the frozen Bavarian desserts we ruled that the base of biscuit crumbs (biscuits are specified in Item 32 of Schedule 1 to the GST Act) did not result in paragraph 38-3(1)(c) of the GST Act applying and making the frozen Bavarian desserts taxable because individual ingredients lost their identity when combined together to form a frozen Bavarian dessert.

We take the same view in relation to the sponge used to form the base of Frozen Tiramisu.

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