Edited version of your written advice

Authorisation Number: 1011566302340

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This edited version has been found to be misleading or incorrect. It does not represent the ATO's view of the relevant law.

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Ruling

Subject: GST and Baby Food

Questions

1. Are you required to be registered for goods and services tax (GST)?

2. If you are not required but choose to register for GST, would you be making a GST-free supply of pureed baby food?

Answers

1. No. You are not required to be registered for GST at present because your GST turnover is under the registration turnover threshold but you may choose to register for GST.

2. Yes. If you choose to register for GST, you will be making a GST-free supply.

Facts and Circumstances

You (an Australian entity) have an Australian business number (ABN) but are not registered for GST at present because your turnover is below the registration turnover threshold of $75,000.

You are carrying on an enterprise of running a business of selling pureed baby food for 6 to 12 month old babies and would like to know if the baby purees will be subject to GST if you were to register for GST.

Your products do not compete against takeaways and restaurants as they are food for babies. Your food products are prepared in that they are assembled, and no further activity is required apart from heating before consuming.

All the food is pureed. In your range you have a variety of baby food that come in different flavours. The food for 9 months plus meals being a little thicker and lumpier, though still a puree.

The pureed baby food comes in easy to remove individual serves.

You only sell online and you deliver via couriers anywhere within Australia. Your foods are made with natural products and thus you pack products in ice to ensure that your delivery remains frozen throughout the journey. Furthermore you advise that the food should be placed in the freezer immediately upon arrival.

Reasons for decisions

Question 1

Under section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you are required to be registered for GST if: 

● you are carrying on an enterprise; and

● your GST turnover meets the registration turnover threshold. 

So you are required to be registered if you are carrying on an enterprise and your annual GST turnover exceeds the registration turnover threshold (currently $75,000 for businesses or $150,000 for non-profit entities).

In your case, you are carrying on an enterprise (business) as a manufacturer and supplier of foods for infants. However you have advised that your GST turnover is less than the registration turnover threshold. Therefore you are not required to be registered for GST.

An entity may choose to register for GST under section 23-15 of the GST Act if the entity carries on an enterprise but its annual GST turnover does not meet the registration turnover threshold.

In other words, while your GST turnover is below $75,000 you may still choose to register for GST.

Question 2

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

A supply is a taxable supply if all the requirements of section 9-5 of the GST Act are met. The requirements under section 9-5 of the GST Act are:

a) you make the supply for consideration; and

b) the supply is made in the course or furtherance of an enterprise that you carry on; and

c) the supply is connected with Australia; and

d) you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

From the facts provided, where you choose to register for GST you will satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as the supply would be for consideration (by way of payments), made in the course of your business, and the goods are made available in Australia (that is, connected with Australia).

There is nothing in the GST Act which would make your supply of the baby food input taxed. We also need to consider if the supply is of GST-free food.

Division 38 of the GST Act specifies the types of supplies that are GST-free.  

A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act.

Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment). Your food products are food for human consumption and satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

Under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act. Of specific relevance is Item 4 of Schedule 1 to the GST Act (Item 4), which provides that food marketed as a prepared meal (but not including soup) is not GST-free. Item 4 is intended to cover a range of food products of a kind that have the conditions below:

● directly compete against takeaways and restaurants

● require refrigeration or freezing for its storage, and

● are marketed as a 'prepared meal'.

You have advised that your food products for babies do not directly compete against takeaways and restaurants but require refrigeration or freezing for their storage. You have classified your food products as baby food. The GST Food Guide (NAT 3338-07.2005) published on our website www.ato.gov.au (food guide) does list baby food as GST-free but only to the extent that it is in tins or jars and does not require refrigeration or freezing. If a baby food is correctly classified as a prepared meal that requires refrigeration or freezing for its storage, it will not be GST-free in accordance with Item 4.

There is no definition of the term 'prepared meal' in the GST Act, so the ordinary meaning of the term applies. A relevant definition of 'meal' in The Australian Oxford Dictionary 1999, Oxford University Press, Melbourne (dictionary) is 'the food eaten on one occasion'. The dictionary also relevantly defines 'prepare' as 'make ready or assemble (food, a meal etc.) for eating'.

You have advised that your food products are prepared in that they are assembled, that is, no further activity apart from heating is required.

In determining whether food is marketed as a 'prepared meal', the food guide provides that consideration should be given to how the goods are promoted or advertised, and the name, price, labelling, instructions, packaging and placement of the goods in the store. 

However, these factors do not conclusively indicate that the product is marketed as a prepared meal. The food guide gives further assistance by providing examples of prepared meals including:

● curry and rice dishes, mornays and similar dishes sold cold that only need reheating to be ready for consumption

● fresh or frozen lasagne

● sushi

● cooked pasta dishes sold complete with sauce

● frozen TV dinners, and

● fresh or frozen complete meals (for examples, single serves of a roast dinner including vegetable and low fat dietary meals).

All of the above meals, except for the sushi, are of a kind that are duly assembled, cooked or partly cooked and require heating and completion of the cooking process for them to be ready for consumption. Sushi is by its nature ready for consumption when it is duly assembled even though part of it is raw.

In your case we have considered the GST status for the supply of your pureed baby food products in accordance with the product's differentiation. The food products which are pureed food for babies do not belong to the class of a prepared meal and therefore are not of a kind covered by Item 4. Consequently these products do not fall under Item 4 and are not excluded from being GST-free. 

Therefore, if you choose to register for GST, you will be making a GST-free supply under section 38-2 of the GST Act when you supply your pureed baby food products.