Edited version of private advice

Authorisation Number: 1051932018986

Date of advice: 10 December 2021

Ruling

Subject: GST and food marketed as a prepared meal

Question 1

Are the sales of the take-away salads by you, GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Question 2

Are the sales of the packaged salads by you, GST-free under section 38-2 of the GST Act?

Answer

No.

Relevant facts and circumstances

You are registered for GST.

Your business involves the retail sale of take away food products including take-away salad products.

You own a take-away food store. Your store is located in proximity of other fast/take-away outlets.

You provided photos of your store and its surroundings including images of the boards and signage displayed in your store promoting your food products.

You do not have a dedicated seating area in your store for dine in. There are seating areas available near your store but are not exclusive to your customers.

You do not have separate ordering and/or serving processes for dine-in and takeaway customers. You only offer take-aways and do not have dine in options. You do not provide different packaging for dine-in and takeaway food and do not have different menus or product lines for dine-in and takeaway customers. You do not make any distinction between customers that wish to eat their purchased products in the seating areas near your store or elsewhere.

You provided details of your store's trading hours.

Your menu sets out the food products on offer through your store. You offer breakfast food, salads, sandwiches, rolls and wraps as well as some other food and beverages.

The salads, sandwiches, rolls and wraps are made fresh daily in your store.

You provided details of how you conduct your marketing campaings.

The concept underlying your business model is to provide healthy meal alternatives that are fast, fresh and tasty.

You provided a graph of your hourly sales of salads. The graph shows that the sale of the take-away salads is at its highest during the lunch hours. The packaged salads sold after lunch period make only a small percentage of your sales of salads.

You only advertise your products including the salads and meal deals on social and digital channels.

Your online menu includes an appealing/appetising image of each salad presented as a prepared meal. Your website also includes other information about each salad such as the name of the salad, its ingredients and nutrition information. Each salad is described and named after its key ingredients.

Your website and social media pages show that you promote the salads as convenient healthy meal alternatives that are fast, fresh, healthy and ready for consumption. Consistently, the feedbacks from your customers on your social media pages also indicate that your customers regard your salads as prepared meals.

The salads require refrigeration for their storage.

Take-away salads

The salads are placed in large platters and placed in the display cases in your store.

The customer indicates to the shop assistant their choices of salads and chooses which dressing, if any, they want on the salads. The salads are placed in an unmarked disposable resealable take-away container with lid when sold to a customer.

Customers are offered and can request salad dressings on take-away salads in store. Your menu boards reflect this option.

Cutlery and serviettes are automatically provided with the take-away salads.

The customers have the option of purchasing various combinations of salads and choose a salad dressing.

You also offer salads and drinks as meal deals.

None of the take-away salads is served with hot food or contain hot food and there is no option for consumers to request for hot food to be added to their salads.

You provided detail of the price of the salads as well as the price of other prepared meals such as sandwiches and wraps that you sell. The price of the take-away salads is comparable to the price of the sandwiches and wraps. The price of the take-away salads is also comparable to the price of fast/take-away food sold by other similar outlets.

You do not pack any literature or instructions with the take-away salads.

You offer home delivery services through your food delivery partner. Salads are available for online ordering during specified hours. Lunch time salad meal deals are also available for online ordering.

Packaged salads

At the end of the day, you transfer the leftover salads into disposable resealable take-away containers with lids.

The packaged salads are placed with other clearance items, such as sandwiches, rolls and wraps, in a prominent position.

Cutlery and serviettes are not provided with the salads but are placed on the counter available to customers.

The packaged salads are not offered with dressing as standard. However, if customers specifically request that their packaged salads are dressed, store will do so.

The price of the packaged salads is lower than the price of the regular take-away salads. You adopt the same practice in selling other leftover food such as sandwiches and wraps at a reduced price at the end of the day.

You do not pack any literature or instructions with the packaged salads.

The packaged salads are not available for online ordering.

Your provided further specific details about how the packaged salads are presented and advertised.

The packaged salads are sold outside lunch hours may be taken home by the customers.

Consumer comments on your social media pages indicate that they perceive the packaged salads as prepared meals.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 7-1

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 38-2

A New Tax System (Goods and Services Tax) Act 1999 section 38-3

A New Tax System (Goods and Services Tax) Act 1999 section 38-4

A New Tax System (Goods and Services Tax) Act 1999 Schedule 1

Question 1

Are the sales of the take-away salads by you, GST-free under section 38-2 of the GST Act?

Summary

The take-away salads are food of a kind that is marketed as a prepared meal and therefore covered by item 4 in the table in clause 1 of Schedule 1 to the GST Act (item 4).

It follows that the sales of the take-away salads are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Therefore, the sales of the take-away salads are not GST-free supplies under section 38-2 of the GST Act. The sales of the take-away salads are taxable supplies under section 9-5 of the GST Act.

Detailed reasoning

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 (paragraph 38-4(1)(a) of the GST Act).

The take-away salads are food for human consumption, and therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act.

However, paragraph 38-3(1)(c) of the GST Act provides that 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 (Schedule 1).

Accordingly, the take-away salads will be GST-free unless they are food 'of a kind' specified in Schedule 1.

The approach to food classification issues established by the case law

The Federal Court (in the first instance) in Lansell House Pty Ltd v Commissioner of Taxation [2010] FCA 329 (Lansell House 2010). considered whether a product known as 'mini ciabatte' was of a kind of cracker, and therefore not GST-free. The product was described on its packaging as 'Italian flat bread'.

Sunberg J concluded at [108] and [109] that the product was not GST-free as follows.

108. Classification decisions for sales tax, GST and VAT purposes are often described as questions of fact and degree (Ferrero at 884), value judgments (Procter & Gamble at [13]), a matter of impression (Procter & Gamble at [19]) and a combination of fact finding and evaluative judgment (Procter & Gamble at [47]). In Procter & Gamble the VAT and Duties Tribunal did not "grade" the relevant factors in coming to its decision. It stood back and took all the factors of appearance, taste, ingredients, process of manufacture, marketing and packaging together in deciding the proper classification of "Regular Pringles". The Court of Appeal approved that approach. Lord Justice Jacob said at [19]:

"It was not incumbent on the Tribunal in making its multifactorial assessment not only to identify each and every aspect of similarity and dissimilarity (as this Tribunal so meticulously did) but to go on and spell out item by item how each was weighed as if it were using a real scientist's balance. In the end it was a matter of overall impression."

109. Adopting that approach, I am not persuaded that the Commissioner's classification of Mini Ciabatte as an item 32 product was wrong. In my view the Mini Ciabatte is a cracker. Its ingredients are substantially the same as those of a cracker...the manufacturing processes are largely the same... Mini Ciabatte and crackers are put to the same use. The two products are displayed in supermarkets as comparable products... the supermarkets, who know the local buying scene, treat it and sell it either as a cracker or in the company of crackers and biscuits. I find this a more powerful and independent indicator than the name Lansell attaches to the product. A supplier cannot by a label govern the classification of a product for the purposes of the Act. That is especially so where, as here, the manufacturer's website described the identical product, mini lingue, as a cracker ...

On appeal, the Full Federal Court in Lansell House Pty Ltd v Commissioner of Taxation [2011] FCAFC 6) (Lansell House 2011), upheld the Federal Court's decision. The Full Federal Court held that the primary judge had not erred and dismissed the appellants' appeal. The Full Federal Court endorsed Sunberg J's approach to food classification and stated at [24]:

Where the question to be answered as to the characterisation or classification of a product is one of fact and degree, as it was for biscuits in Ferrero, Lord Wolf MR said that it is a "perfectly satisfactory statement of the approach" to be taken to consider different characteristics of the product and, if the product has the characteristics of two categories, to place it in a category in which it has sufficient characteristics to qualify (at 885). As Jacob LJ said in Procter & Gamble at [14], this sort of question, being a matter of classification, "is not one calling for or justifying over-elaborate, almost mind-numbing, legal analysis. It is a short practical question calling for a short practical answer". In a case where scientific analysis does not form part of the characterisation of the product, its classification is not a scientific question.

This approach was endorsed by the Full Federal Court in Comptroller General of Customs v Pharm-A-Care Laboratories Pty Ltd [2018] FCAFC 237 as follows at [24(2)]:

Secondly, subject to statutory context, function or purpose, courts should be cautious of subjecting words in legislation that have an ordinary everyday meaning to intensive analysis. Decision-makers should use "their local knowledge, experience of the world and common sense, to give a sensible interpretation" to the words used; an appellate court "required to review such decisions should endorse those that have been reached and confirmed in this way": Lansell House Pty Ltd v Federal Commissioner of Taxation [2010] FCA 329; 76 ATR 19 ("Lansell House") at [57] per Sundberg J (upheld on appeal at (2011) 190 FCR 354 per Bennett, Edmonds and Nicholas JJ); Seay v Eastwood [1976] 1 WLR 1117 ("Seay v Eastwood") at 1121 per Lord Wilberforce.

Consistent with the above approach is the leading Sales Tax decision in respect of the classification of food, by the High Court in Herbert Adams Pty Ltd v. FCT 47 CLR 222. The issue in this case was whether the product at issue described as 'sponge' was 'pastry but not including cakes or biscuits'. The taxpayer sought to argue that with reference to the trade meaning, sponge was a pastry and not a cake. The High Court in finding for the Commissioner, accepted the ordinary meaning of cake which included sponge.

Evatt J at pages 229-230 said:

Samples of the appellant's manufacture were produced, and in my opinion the goods made were undoubtedly "cakes." According to the Oxford Dictionary a "sponge" is "a very light sweet cake made with flour, milk, eggs and sugar." A dictionary reference may not be necessary. Perhaps this is one of the few things that every schoolboy knows.

Accordingly, what is required in food classification cases, as the courts inform us, is a common sense, practical approach to form an overall impression. Not an overly pedantic, highly legal or scientific analysis.

The products at issue

As stated above, the take-away salads will be GST-free unless they are food of a kind specified in Schedule 1 (paragraph 38-3(1)(c) of the GST Act).

Relevant to paragraph 38-3(1)(c) of the GST Act and the take-away salads, is the category of 'Prepared food' in Schedule 1 and more specifically, item 4 which specifies:

*food marketed as a prepared meal, but not including soup

Relevant to prepared food and meals, are clauses 2 and 3 of Schedule 1 which state:

2 Prepared food, bakery products and biscuit goods

For the purpose of determining whether particular *food is covered by any of the items in the table relating to the category of prepared food, bakery products or biscuit goods, it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption.

3 Prepared meals

Item 4 in the table only applies to *food that requires refrigeration or freezing for its storage.

Your salads are foods that require refrigeration for their storage. Therefore, the salads meet the additional tests set out in clauses 2 and 3 of Schedule 1.

What is left to consider is whether the take-away salads are 'of a kind' of food marketed as a prepared meal.

Meaning of the words 'of a kind'

The phrase 'of a kind' is not defined in the GST Act, but was discussed in Lansell House Pty Ltd v Commissioner of Taxation [2010] FCA 329 (Lansell House 2010).

In Lansell House 2010, Sundberg J reviewed the relevant authorities, including Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 (Air International), and at [19] it agreed with the comments of Tamberlin J in that case, that the words 'of a kind' added something to the word 'specified':

...If the intention had been simply to exclude the items in the table in the schedule, Parliament would have used the words "food specified in the third column". What then does "of a kind" add? In Air International the Full Court was concerned with a classification of goods under tariff subheadings in Schedule 3 of the Customs Tariff Act 1995 (Cth) - goods "of a kind used as replacement components in passenger motor vehicles". Tamberlin J, with whom O'Loughlin J agreed, said at [53]:

"It is helpful to look at actual use, if any, when deciding whether goods are of a kind used as replacement components. Where they are so used, then that points to a conclusion that they are 'of a kind' so used. The words 'of a kind' add a further level of generality to the expression 'used' so that even if (to use the Tribunal's expression) the goods are not so used but are within a range of goods of a type which are used, then they satisfy the required description.

...

The description can apply where there is no actual use of a good as a replacement component if the goods are of that genus. That is to say they are of the same type of component which is used to replace components of passenger motor vehicles. The genus, in my view, is a relatively broad one and the word "kind" should be so construed." [Emphasis added.]

Sundberg J also noted, at [20], that the same approach was taken in Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305, a value added tax case. The question in that case was whether the particular goods fell to be classified as 'Goods of a kind suitable for use as parts of goods within item 1 or item 5'. At [316] Megaw LJ said:

Presumably the three words 'of a kind' have not been introduced merely for elegance of prosody or to provide meaningless padding. They do affect the meaning. It is not 'the goods' - the particular articles, here the couplings and the winch - which have to be suitable for use as parts. It is the kind of goods to which those particular articles belong, their genus, which has to be thus suitable. The addition of 'of a kind' would be meaningless if goods which are themselves suitable are necessarily also goods of a kind which is suitable.

Ultimately, Sundberg J found that the mini ciabatte was a 'cracker', and thus was not GST-free. His Honour did not need to rely on the product falling within the broader description of 'of a kind'.

In Lansell House 2011, the Full Federal Court was satisfied that the mini ciabatta was 'of a kind' of the cracker genus, after taking into account the characteristics of the product as set out by Sundberg J in Lansell House 2010 at [109], which included the following factors in relation to the goods:

(a)     Ingredients

(b)     percentage / ratio of ingredients

(c)     manufacturing process

(d)     in store display

(e)     marketing

(f)      appearance and physical attributes

(g)     use

The Full Federal Court in Lansell House 2011 held at [30] that:

...The word "kind" is appropriately used to denote a genus, class or description (Commonwealth of Australia v Spaul (1987) 74 ALR 513 at 516 per Davies, Lockhart and Neaves JJ). The use of the words "of a kind" in s 38-3(1)(c) of the GST Act adds further generality to the description of the items described in Schedule 1: Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 per Hill J. Thus, a new product that does not possess all of the same characteristics of known crackers may nevertheless be within the relevant item...The question is whether the resulting product comes within the genus, class or description of a cracker.

Prepared meal

The term 'prepared meal' is not defined in the GST Act and therefore takes on its ordinary meaning informed by the legislative context (discussed in more detail below).

In the context of food, 'prepare' is defined in Macmillan Publishers Australia, The Macquarie Dictionary Online, www.macquariedictionary.com.au, accessed 8 December 2021, as:

2. to get ready for eating, as a meal, by due assembling, dressing, or cooking.

and 'meal' as:

noun 1. one of the regular repasts of the day, as breakfast, lunch, or dinner.

2. the food eaten or served for a repast.

Essentially therefore, a prepared meal would be a 'repast ready for eating'.

The take-away salads would be within the meaning of this broad description as the salads are food that is prepared ready for eating. That is, the salads are supplied as a prepared meal as is ordinarily understood. This definition could be applied to a single food item or to a meal consisting of several food items.

Item 4: Food of a kind marketed as a prepared meal

Item 4 relevantly covers 'food marketed as prepared meal...', therefore item 4 contains a marketing test.

Marketing in a GST context

The Federal Court decision of Cascade Brewery Company Pty Ltd & Anor v Federal Commissioner of Taxation [2006] FCA 821 (Cascade), considered marketing in a GST context. Specifically, whether Ultra-C (the product at issue) was 'marketed principally as food for infants or invalids' so that it would fall within item 13 of Schedule 2 to the GST Act and be classified as GST-free.

In respect of 'marketing' Sundberg J had this to say at [11], [23] and [24]:

11. The words "marketed principally as food for infants" in item 13 require an examination of the content of the advertising and other marketing in fact carried out either by the taxpayer or by competitors in the market. The witnesses to whom I have referred spoke somewhat generally about their aims and hopes in respect of the marketing. The relevant findings at [9] are based on the content of the marketing, that is to say, on what a reader of the labels, the Bounty bag brochure and the print advertisements or a viewer of the television advertisements would derive from them. The findings do not entirely accord with the witnesses' evidence about Cascade's aims. That evidence seems to me to have been subconsciously influenced by the existence of item 13 and the purpose of the litigation.

23. I have referred at [11] to one aspect of the word "marketed", about which the parties did not make submissions. Otherwise there does not appear to be any significant difference between their positions on the meaning of the expression "marketed principally". Cascade adopted the approach published by the Commissioner in SST11 - Sales tax: a guide to the classification of goods under the sales tax law (SST11):

"Marketing principally means the most important or the most significant of all the ways in which the product is marketed. Marketing involves an examination of the activities of the sellers of the relevant goods."

The document goes on to say that consideration may be given to the name of the goods, their price, the labelling on any containers, literature or instructions accompanying the goods, how they are packaged, how they are promoted or advertised, and how they are distributed.

24. This approach is consistent with the dictionary meanings of "marketing". Thus The Macquarie Dictionary refers to "the total process whereby goods are put onto the market". The Australian Oxford Dictionary refers to "the action or business of promoting and selling products, including market research and advertising".

It is perhaps worth noting that in Cascade the court was required to consider whether the product in question was 'principally marketed as ...'. The use of the word 'principally' creates a stricter marketing test. Item 4 is not qualified by the use of the word 'principally' therefore a lesser standard in terms of the level of marketing activity is necessary. As such when considering whether a product is 'marketed as a prepared meal', the marketing test is broader than what was considered in Cascade. Not all marketing factors may be present or indicate that the product is marketed as a prepared meal, however this is not necessarily determinative. In situations where other factors sufficiently influence the overall impression, an alternative conclusion may be reached. Therefore, whether a food is marketed as a prepared meal depends on the overall impression gained after looking at the marketing activities as a whole.

The ATO's approach to marketing is outlined in the Industry Partnership Issues Register - Issue 5 - Prepared Food and is consistent with the approach taken by Sundberg J in Cascade.That is when determining whether a food product is marketed as a prepared meal the ATO considers the total process whereby the goods are put onto the market. In doing so, consideration is given to the following:

(a)    The name of the goods

(b)    The price of the goods

(c)    The labelling on any containers for the goods

(d)    Literature or instructions packed with the goods

(e)    How the goods are packaged

(f)     How the goods are promoted or advertised

(g)    How the goods are distributed.

From the above therefore, each of the listed elements by which the take-away salads are marketed will be considered in turn as follows.

(a)    The name of the goods

On your website each salad is described and named after its key ingredients.

The names of the salads indicate to the consumer that they are foods that contain multiple ingredients that have been prepared, cooked, assembled and are ready for consumption as fresh and healthy meal alternatives. The names of the salads convey to the consumer that they are comparable to foods sold by take-aways and restaurants as prepared meals and are ready for consumption.

Therefore, the names of the take-away salads indicates that they are food of a kind marketed as prepared meals.

(b)   The price of the goods

Pricing is set with a view to the trade environment and operating costs. The trade environment is essentially the market that your store competes in and this is the 'fast/take-away food market'.

It is evident that the take-away salads are in direct competition with other fast/take-away food sold by other fast/take-away food stores and restaurants. Whilst the types and pricing of foods may vary from store to store, your pricing is in the same range as the competing prepared meal options available on the market.

The pricing of the take-away salads is comparable to the pricing of other prepared meals sold in your store during lunch hours. This indicates that the take-away salads have the same standing as sandwiches and wraps which are prepared meals.

Your store operates and competes in the fast food or takeaway industry. Your store is situated in proximity of several fast/take-away food outlets. The take-away salads are competitively priced, and the price of the take-away salads is comparable to the price of fast/take-away food sold by other similar outlets.

Accordingly, we consider that the price range of the take-away salads is in the same range as the competing prepared meals sold by take-aways and restaurants. This supports the view that the take-away salads are food of a kind marketed as prepared meals.

(c)    The labelling on any containers of the goods

There is no labelling on the take-away salad containers.

The salads are supplied in unmarked disposable resealable containers. Cutlery and serviettes are provided to the customer which facilitates the immediate consumption of the products as take-away meals.

Considering the nature of your business being a fast/take-away food, we consider that the lack of labelling on the packaging does not exclude the take-away salads from being food marketed as a prepared meal.

(d)       Literature or instructions packed with the goods

You do not pack any literature or instructions with the take-away salads.

Prepared food including salads purchased from take-away outlets and restaurants are generally prepared, assembled and ready for immediate consumption and therefore do not come with any literature or instruction.

We consider that the lack of any literature or instructions does not exclude the take-away salads from being food marketed as a prepared meal. The take-away salads are assembled and ready for consumption.

(e)    How the goods are packaged

The take-away salads are sold in disposable resealable containers. Several salad dressings are available to the customer to choose from. Cutlery and serviettes are provided to the customer to facilitate the consumption as a takeaway meal.

We consider that the way the take-away salads are packaged at the time of sale indicates that the take-away salads are food marketed as prepared meals.

(f)     How the goods are promoted or advertised

You promote and advertise the salads on your website and social media pages. The information on your website and social media pages promotes the salads as fast, fresh and healthy meal alternatives.

Your online menu includes an appealing/appetising image of each salad presented as a prepared meal.

Your website also provides a list of each salad's ingredients and the nutrition information.

In your store the salads are placed in large trays and the trays are placed in display cases for customers to choose from. The customers have the option of purchasing various combinations of salads and choose a salad dressing.

The take-away salads are also offered with a drink as a 'meal deal'.

Cutlery and serviettes are available to your customers at your store.

The way you promote the salads on your social media pages, demonstrates that you promote the salads as convenient healthy prepared meals that are ready for consumption. Consistently, the feedbacks from your customers on your social media pages also indicate that your customers regard your salads as prepared meals.

The inference from all this is the overall impression that your overall marketing strategy is directed at promoting the salads as ready to eat fresh and healthy meal solutions, to be seen and eaten as prepared meals.

(g)   How the goods are distributed

As part of your take-away business you offer a variety of food products including salads and other convenient ready to eat meal solutions, such as sandwiches and wraps.

The take-away salads are prepared and assembled daily on your premises and displayed in display cases next to other prepared meals such as sandwiches and wraps.

Your store is situated in proximity of several take-away food stores.

As a take-away business, your store's busiest period is generally the lunch trade where shoppers and close by workers buy food for immediate consumption either in the seating areas near your store or away from the premises (for example, open space, workplace, or home).

Your salads including your salad meal deals, are available for online ordering during specified hours.

The graph of your hourly sales shows that the sale of the take-away salads is at its highest during the lunch hours which supports the view that the customers view your salads as prepared meals.

The take-away salads are in direct competition with other fast/take-away food sold by other take-away outlets or restaurants.

We consider that the way the take-away salads are distributed indicates that they are food of a kind marketed as prepared meals.

Conclusion

Your store operates and competes in the fast food or takeaway industry. The concept underlying your business model is to provide a healthy meal alternative fast/take-away food that is fresh and tasty.

The take-away salads compete with other fast/take-away and restaurant foods. Shoppers buy the take-away salads as meals that are prepared and ready for consumption.

Taking into consideration the individual elements of marketing, such as the name, price, packaging of the take-away salads and how they are promoted, advertised and distributed, the overall impression is that the take-away salads are marketed as prepared meals or are of a kind of foods that are marketed as prepared meals and therefore covered by item 4.

It follows that the sales of the take-away salads are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Therefore, the sales of the take-away salads are not GST-free supplies under section 38-2 of the GST Act. The sales of the take-away salads are taxable supplies under section 9-5 of the GST Act.

Question 2

Are the sales of the packaged salads by you GST-free under section 38-2 of the GST Act?

Summary

The packaged salads are food of kind that is marketed as a prepared meal and therefore covered by item 4.

It follows that the sales of the packaged salads are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Therefore, the sales of the packaged salads are not GST-free supplies under section 38-2 of the GST Act. The sales of the packaged salads are taxable supplies under section 9-5 of the GST Act.

Detailed reasoning

As discussed previously, in determining whether a food product is marketed as a prepared meal the ATO considers the total process whereby the goods are put onto the market. In doing so, consideration is given to the following:

(a)    The name of the goods

(b)  The price of the goods

(c)    The labelling on any containers for the goods

(d)    Literature or instructions packed with the goods

(e)    How the goods are packaged

(f)     How the goods are promoted or advertised

(g)    How the goods are distributed.

(a)    The name of the goods

The packaged salads are essentially the same salads sold earlier in the day that have been packed in resealable containers and marked down for quick sales.

Similar to take-away salads, the packaged salads are also salads that are taken away and consumed away from the premises from which they are supplied.

It is not a requirement of item 4 for the prepared meal to be consumed immediately, at the food court, away from home, for lunch or during lunch hours. Item 4 applies to food that is marketed as a prepared meal regardless of when it is supplied or when and where it is consumed.

This view is supported by clause 2 of Schedule 1 which provides that 'For the purpose of determining whether a particular *food is covered by any of the items in the table relating to the category of prepared food...it does not matter whether it is supplied hot or cold, or requires cooking, heating, thawing or chilling prior to consumption'. This indicates that a food that is not ready for immediate consumption or would be required to be taken away to other premises such as workplace or home for further preparation may nevertheless be food marketed as a prepared meal and covered under item 4.

Further, in Lansell House 2010, the Court looked beyond the labelling and held at [109] that 'A supplier cannot, by a label govern the classification of a product for the purposes of the Act'.

We consider that the words 'packaged salads' informs the consumers that the packs contain salads that are assembled and ready for immediate consumption wherever and whenever the customer chooses to do so.

Therefore, we consider the name of the packaged salads does not preclude them from being food of a kind marketed as prepared meals.

(b)   The price of the goods

The packaged salads contain leftover salads that after lunch hours are transferred into take-away containers.

The packaged salads are clearance sales that attract price conscious customers. The reduction in price is due to a number of factors, including ensuring perishable products are sold at the end of the day before the store's closing time, and customers' choices being limited to the salads available.

You adopt the same practice in selling any leftover bread items such as sandwiches and wraps at a reduced price at the end of the day.

Such end of day price reductions is commonly adopted by other take-away food stores that cannot carry their leftover food to the next day. The packaged salads therefore would also be competitively priced.

We consider that reducing the price of the salads when packed, to ensure they are sold at the end of the day, does not change the characteristics of the salads into food that is not marketed as a prepared meal.

(c)    The labelling on any containers for the goods

You provided specific information about marketing of the packaged salads.

As stated above both take-away salads and packaged salads are food that is taken away and consumed away from the premises from which they are supplied. Item 4 does not exclude take-away food that may be consumed at home from being food marketed as a prepared meal.

The packaged salads are still the same type of salads sold at lunch time and therefore this does not preclude the packaged salads from being food 'of a kind' marketed as a prepared meal. The marketing test in item 4 does not require the food to be marketed principally as prepared meal, it only requires it to be 'of a kind' of 'food marketed as a prepared meal'.

(d)   Literature or instructions packed with the goods

Like the take-away salads, there is no literature or instructions packed with the packaged salads.

The salads in the packs are salads that are assembled and ready for immediate consumption.

The lack of any literature or instruction does not preclude the packaged salads from being food of a kind marketed as a prepared meal.

(e)    How the goods are packaged

After the lunch period the leftover salads are transferred into take-away containers with lids. The containers are displayed in the display cases, available for customer's selection of the salad varieties already packed. Cutlery and serviettes are placed on the counter available to the customers. If customers specifically ask for dressing the store will dress the salads.

Just because the packaged salads are salads that have been packed does not mean that the products are not food of a kind marketed as a prepared meal. The packaged salads are packed similarly to the way take-aways package their leftover prepared meals. This supports the view that the packaged salads are food of a kind marketed as prepared meals.

(f)        How the goods are promoted or advertised

At the end of the day the leftover salads are packed and displayed in the display cases in your store next to other prepared meals clearance products such as sandwiches and wraps. Cutlery and serviettes are available to the customer at the counter. Salad dressing would be made available at the customer's request.

You provided specific information about marketing of the packaged salads. However, the products are nevertheless the same salad products sold at lunch times.

The social media posts indicate that the consumers also perceive the packaged salads as prepared meals.

Accordingly, packaged salads are not precluded from being food of a kind marketed as a prepared meal.

(g)       How the goods are distributed

The clearance range of products includes salads as well as foods such as sandwiches and wraps. The leftover salads are packed in disposable take-away containers and displayed in the display cases in your store next to other leftover prepared meals such as sandwiches and wraps that are also marked down for clearance.

While cutlery and serviettes may not be offered to the customer, they are available to the customers at the counter. This facilitates the immediate consumption of the salads as a take-away meal if a customer wishes to do so. We note that whilst the provision of cutlery and serviettes would facilitate the immediate consumption of a product, the lack of it does not exclude a product from being a prepared meal.

The packaged salads are sold from your fast/food outlets store. The pre-packed salads directly compete with other fast/take-away food. The fact that the products are sold outside lunch hours is not an indicator that the products are not a meal.

Conclusion

The packaged salads contain the same salads that are sold earlier in the days as take-away salads. The salads are assembled and ready for consumption. Cutlery, serviettes and salad dressings are available to the customers.

The price of the packaged salads is reduced for quick sale similar to your other leftover prepared meal products such as sandwiches and wraps.

Your customers view the packaged salads as prepared meals similar to the take-away salads.

Similar to take-away salads, the packaged salads are take-away food. They compete with prepared meals sold by take-away outlets and restaurants.

Therefore, the packaged salads are 'of a kind' of food marketed as prepared meals and covered by item 4. It follows that the sales of the packaged salads are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Therefore, the sales of the packaged salads are not GST-free supplies under section 38-2 of the GST Act.

The sales of the packaged salads are taxable supplies under section 9-5 of the GST Act.