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GST and Food

Do you remember hearing people talking about going to the vat at a farm and getting a jug of milk, skimming off the cream and drinking the fresh milk?

Ever wonder why we don’t hear of this happening now?

Believe it or not, GST had something to do with this.

When GST was being introduced and discussions around fresh food being GST free, the farming industry raised concerns that their income would be GST free, however their expenses would include GST. This effectively meant their cashflow was going to be impacted.

To overcome this, milk at the farm gate was declared unfit for human consumption, and therefore the farmers would receive GST on their income.

I’m sure there are other reasons that milk can no longer legally be sold straight from the farm. But GST was the start of it.

Our GST rules around food are overly complicated and even brought down a prime minister.

Here are a few examples of the stranger ones:

Savory scrolls: If the topping on the scroll makes up more than 30% of the height, the scroll includes GST, if not it is GST free.

Mixed fruit / nuts: They are GST free, unless they include banana chips, then they include GST.

Bottled Water: If you buy it as takeaway, it is GST free, if you buy it and drink it at a restaurant with your meal it includes GST in the price.

Garlic Bread is GST free if cold, however if served hot it includes GST.

Fruit Juice over 90% is GST free, under 90% and the price includes GST.

The ATO GST guide is over 88 pages long. If you are interested in searching for  your favorite food to see if it includes GST use the search tool https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=GSTFBSearch&anchor=GSTFBSearch/questions#GSTFBSearch/questions

So how does a small food business selling a variety of GST inclusive, GST free product keep up with their reporting?

There are five Simplified Accounting Methods (SAMS) that can be used, which basically allow the business to use averages to calculate their GST sales and purchases. See which one suits you best here https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-for-food-retailers---simplified-accounting-methods/

So back to milk, do you think flavored milk includes GST?


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