Private ruling: GST and Salads
Published: June 2015

Ruling: Q1: Is the supply of your Salads GST-free? | A1: No, with the with the exception of the Salad A which remains GST-free.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 38-2 | Subsection 38-3(1) | Paragraph 38-3(1)(c) | Paragraph 38-4(1)(a) | Schedule 1

Reasons for decision: Summary: The supplies of your Salads with the exception of the Salad A are salads marketed as a prepared meal and therefore are a taxable supply and subject to GST. Salad A is not a type of salad that we consider is a prepared meal and is more akin to a side serving accompanying a meal and is therefore GST-free. | Detailed Reasoning - Detailed reasoning: A supply of food is GST-free under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (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. The definition of food in section 38-4 of the GST Act includes food for human consumption, whether or not requiring processing or treatment. Your Salads are sold in your food outlets as food for human consumption and consequently can be treated as food for human consumption. However, subsection 38-3(1)(b) and 38-3(1)(c) of the GST Act provide, amongst other things, that a supply of food is not GST-free if it is a supply of: • food of a kind specified in the third column of the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods at least one of which is food of a kind. | Detailed Reasoning - GST Food Guide and the Detailed food List: Before discussing the types of food listed in Schedule 1, it is worth referring to both the GST food guide (Food Guide) and the Detailed food list (DFL) (available from the ATO website www.ato.gov.au), which contain the ATO view and are public rulings for the purposes of the Taxation Administration Act 1953. The following salad item and its GST classification is listed in the DFL as follows: Foods GST Status Notes salad (e.g. green, rice, pasta, coleslaw) not marketed as a prepared meal GST-free Food for human consumption that is not of a kind specified in Schedule 1 of the GST Act. The salad food (e.g. green, rice, pasta, coleslaw) that is not marketed as a prepared meal is relevant to your supplies of salad foods. For your Salads to be GST - free, we need to apply the marketing test to the salads. Where a salad is not marketed as a prepared meal, the salad will be GST-free. | Detailed Reasoning - Schedule 1: In considering Schedule 1 for your Salads it is only necessary to consider Item 4 of Schedule1 which covers prepared meals. With the exception of Salad A, your Salads are not specifically named in Schedule 1. Nevertheless, these product may be subject to GST by virtue of paragraph 38-3(1)(c) of the GST Act which refers to food of a kind to those foods listed in Schedule 1. Item 4 excludes prepared meals and food marketed as prepared meals, but not including soup from GST-free status. When considering food under Item 4 we need to consider conditions outlined in clauses 2 and 3 of Schedule 1 of the GST Act. Clause 2 of Schedule 1 provides when considering prepared food under items 1 to 7, it does not matter whether the food is sold hot, cold or frozen or require cooking, heating, thawing or chilling prior to consumption. Clause 3 of Schedule 1 provides that Item 4 only applies to food that requires refrigeration or freezing for its storage. | Detailed Reasoning - Prepared Meals: The term 'prepared meal 'referred to in Item 4 is not defined in the GST Act and therefore takes its ordinary meaning. 'Meal' is defined in The Macquarie Concise Dictionary, 2001 , revised 3rd edition Macquarie Library Pty Ltd NSW (Macquarie Dictionary) as: 1. one of the regular repasts of the day, as breakfast, lunch, or dinner. 2. the food eaten or served for a repast. This definition could be applied to a single food item or to a meal consisting of several food items. The Macquarie Dictionary defines 'prepare' in relation to food as "to get ready for eating, as a meal, by due assembling, dressing or cooking" . The Further Supplementary Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (the EM) provides that the term 'prepared meal' is intended to cover a range of food products that: • directly compete against take-aways and restaurants • require refrigeration or freezing for storage and • are marketed as a 'prepared meal'. Included in this category (according to the EM at paragraph 1.33) are things such as: • prepared meals such as curry and rise dishes, mornay and similar dishes sold cold by a take-away or supermarket 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 example single serves of a roast dinned including vegetables and low fat dietary meals). Paragraph 1.34 of the EM provides examples of food items that are not considered to be prepared meals: • frozen vegetables • uncooked pasta products • fish fingers • baby food, baked beans, spaghetti and Irish stew that do not require refrigeration or freezing. The Australian Taxation Office (ATO) view on prepared food is outlined in Goods and Services Tax Industry Issue - Food partnership Prepared Food (Prepared Food) (available from the ATO website www.ato.gov.au), a public ruling for the purposes of the Taxation Administration Act 1953. Paragraph 12 of the Prepared Food ruling provides that consideration must be given to the suppliers' activities when deciding on whether a food is marketed as a prepared meal. The considerations are: which states in part: 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… Therefore, for food to be regarded as a 'prepared meal' in accordance with Item 4, the food needs to be supplied assembled and dressed (if applicable). In addition, if the food is cooked or partly cooked and is to be served hot, it should only need heating, which may include completion of the cooking process, to be ready for consumption. Heating will be interpreted to mean warmed in the microwave oven, convection oven, frying pan, wok or saucepan. In determining whether food is marketed as a 'prepared meal' the activities of the seller are relevant. Consideration is given to the following: • the name of the goods • the price of the goods • the labelling on any containers for the goods • literature or instructions packed with the goods • how the goods are packaged • how the goods are promoted or advertised and • how the goods are distributed. Consideration is also given to the actual product specifications, labelling, pricing, labelling and marketing as well as any cooking instructions. These are summarised as the "marketing test" . | Detailed Reasoning - The Marketing test: The issue to consider for the marketing test is whether your Salads are marketed as a 'prepared meal'. Your Salads contain cold salads consisting of a variety of salad items including, but not limited to beef, chicken, carrot, celery, capsicum, onion, sesame-seeds, vegetables pasta, olives, parmesan cheese, noodles etc. Your website allows your customers to order your products on-line. The products, including your Salad products are described on your Facebook page (at the links to your website) as meals. Your range of salads are indicative of that found in similar 'ready to eat' Salad concept stores and takeaway stores. You market your Salads as meals which would also indicate your Salads being supplied as a prepared meal and not as a side dish. Further, your Facebook page shows pictures of your Salads in take-away containers, duly assembled and 'ready to eat': This also indicates that your Salads compete with traditional takeaway/fast food. The salads require refrigeration for storage and are supplied cold. The information and the facts provided, including the website content, the Facebook content and the packaging of your Salads all support your Salads, being marketed as prepared meals in their own right and not as a side dish. It is considered that your Salads satisfy both clauses 2 and 3 of Schedule 1 as the salads are ready for consumption when supplied and they require refrigeration for storage. Your Salads are assembled and are marketed as a prepared meal. Therefore, we consider that your Salads are marketed as prepared meals listed in item 4 and are therefore excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. | Detailed Reasoning - Salad A: Traditionally Salad A is served as an accompaniment or side dish to a meal. It is not considered to be a prepared meal on its own and would not normally be eaten as such. We consider that the Salad A is not covered by Item 4. Furthermore, Salad A is not covered by any other item in Schedule 1, nor does it come within any of other exclusions listed in section 38-3 of the GST Act. Accordingly the supply of Salad A is GST-free.

Relevant facts: • You are the trustee of a trust and are registered for the goods and services tax (GST). | • You carry on a business of supplying food products to your customers. You deliver the food products to their premises. | • You operate a website where customers can order their food products for delivery. You offer a range of healthy food products delivered to their premises. | • You also operate your Facebook page which provides information on your business and updates on your menu items as well as links to the on-line ordering page of your website. | • A link on your Facebook page to your website makes references to "….meals delivered….quality fresh meals delivered to your office / home…": | • The salads are kept refrigerated at below 4 degrees C and are supplied cold. | • The salads are made fresh to order and are packed in clear containers. | • The price for each salad is $8.50. | • We have obtained 'Sample' pictures of your salads from your Facebook page: