AUTHORS

Sam Mohammad
Sam Mohammad
Partner
Brisbane
Ksenia Skatchkova
Ksenia Skatchkova
Senior Manager
Sydney

The ATO is seeking feedback on draft Determination GSTD 2023/D1 Goods and services tax: supplies of combination food by 10 November 2023

The draft Determination outlines the Commissioner’s preliminary view on what is a combination food for the purposes of paragraph 38-3(1)(c) of the A New Tax System (Goods and Services Tax) Act 1999 (“GST Act”), by reference to the recent decision in Chobani Pty Ltd and Commissioner of Taxation [2023] AATA 1664 (“Chobani”).

Backgroundchobani food tax

Chobani considered whether Chobani Flip Strawberry Shortcake flavoured yoghurt was a combination food, with the Administrative Appeals Tribunal (“AAT”) concluding that the cookie pieces and chocolate chips (each of which was otherwise taxable) were not sufficiently integrated into the yoghurt (which was otherwise GST-free), and the end product was therefore a ‘combination’ food subject to GST. It is important to note that the dry ingredients sat in a separate compartment and were intended to be flipped into the flavoured yoghurt before consumption.

Chobani and the recent Simplot case (Simplot Australia Pty Limited v Commissioner of Taxation [2023] FCA 1115) show that the ATO has been actively revisiting long-accepted positions and seeking to redraw the boundaries between GST-free basic food products taxable new food products not contemplated by the original legislation.

Key principles

GSTD 2023/D1 provides that the Commissioner will apply the following principles in determining whether there is a supply of a combination food:

  1. There must be at least one separately identifiable taxable food.
  2. The separately identifiable taxable food must be sufficiently joined together with the overall product.
  3. The separately identifiable taxable food must not be so integrated into the overall product, or be so insignificant within that product, that it has no effect on the essential character of that product.

The draft Determination includes a brief explanation of each principle, and examples of how it would be applied in practice.  It also notes that GST Ruling Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts (“GSTR 2001/8”) has no application to supplies of combination foods, and that combination foods are treated as a single taxable supply.

Impact on existing ATO public advice and guidanceGST tax for food supply

GSTD 2023/D1 represents a departure from previous guidance, some of which focused on whether the individual foods were separated by their individual packaging and included express references to mixed supplies in the Commissioner’s reasoning and/or the decision itself.

The draft Determination indicates that the following publications will be withdrawn, removed, or amended, as applicable:

  • withdrawal of ATO Interpretative Decisions (“ATO IDs”):
    • ATO ID 2002/994 GST and cake frosting decorations packaged separately and supplied as one product  
    • ATO ID 2003/857 GST and the supply of mixed fruit with glacé cherries  
    • ATO ID 2004/539 GST and blended seed and nut product  
    • ATO ID 2010/145 GST and dip with biscuits
  • removal of the GST issues register - Food industry partnership Issue 8 Hampers (Issue 8)
  • addendum to the GST Industry Issue GSTII FL1 Detailed Food List (“DFL”).

The GST status of the following item in the DFL will also change from “mixed supply” to “taxable”:

  • dip (with biscuits, wrapped individually and packaged together)

Deadline for comments

Comments are due by 10 November 2023.

The full text of the draft Determination and contact officer details can be found here: GSTD 2023/D1 | Legal database (ato.gov.au)

For more information

If you would like to discuss how the changes will impact you or your business, please contact Ksenia Skatchkova or Sam Mohammad.

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