Private ruling: GST and salads
Published: April 2015

Ruling: Q1: Is the supply of your salads GST-free? | A1: No.

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. • You carry on a business of supplying food products. • You are not currently registered for goods and services tax (GST). • You sell a range of salads primarily to supermarkets and grocery stores, but also to a variety of smaller retail food outlets. • The salad which is the subject of this application is a layered salad in a container, consisting of a variety of salad items. A second smaller container of topping is also supplied and the dressing is supplied in a third and separate container. The X containers are supplied with disposable utensils and serviette. The food is not assembled or dressed. • The salad can be eaten from the container but must be shaken first before adding the contents of the next containers including the dressing and then must be reshaken. The salad also can be assembled on a plate with the contents of the other containers added and mixed if wished. • Instructions on the label are very limited and currently only indicate the product must be shaken. New labels are being designed with detailed instructions for assembly and dressing of the product along with suggestions of preparation and consumption of the product. • There are a variety of salads available. • The salad must be refrigerated. • The salad may be consumed at home, on the road, in the workplace or at a shopping centre. • The business website displays different ways to consume the product - ie assemble on a plate or mix and eat from the container. • The menu available on the business website advertises your range of salads. • The homepage of the business also shows a pictorial diagram of how easy it is to enjoy the Salad.

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 are salads marketed as a prepared meal and therefore are a taxable supply and subject to GST. | 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. The Deli Jar Salads will be sold in your food outlets as food for human consumption. However, subsection 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. The salads are not specifically named in Schedule 1. Nevertheless, we need to consider whether these products 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. | 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. Of relevance to your circumstances is whether the salads are within the scope of Item 4 of Schedule 1. | Detailed Reasoning - 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 clause 3 of Schedule 1 of the GST Act. 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 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. Additionally, to fall within the scope of Item 4 of Schedule 1, 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. In determining whether food is marketed as a 'prepared meal' the activities of the seller are relevant. Your website displays different ways to consume the product - ie assemble on a plate or mix and eat from the container. There is a menu available on the business. The website also shows a pictorial diagram of how easy it is to choose, mix &/ eat serve and enjoy the salad. This would indicate that the salads compete with traditional takeaway/fast food. In your case, we consider the salads directly compete against take-away and restaurants and require refrigeration or freezing for storage. Consideration now needs to be given as to whether they are marketed as a prepared meal. | Detailed Reasoning - The Marketing test: The issue to consider for the marketing test is whether the salads are marketed as a 'prepared meal'. The salads contain a variety of salad items, a second smaller container of toppings and dressing supplied in a third and separate container. Your website displays different ways to consume the product - ie assemble on a plate or mix and eat from the container. There is a menu available on the business website advertising the salads. The website also shows a pictorial diagram of how easy it is to choose, mix &/ eat serve and enjoy the salads. This would indicate that the salads compete with traditional takeaway/fast food. The information and the facts provided, including the website content clearly indicates that you are promoting your salads as prepared meals. You provide statements comparing your salads to fast food and provide picture evidence of your salads 'served' on a plate as a traditional meal. Together with the packaging of the salads in one container (not including the dressing and additional toppings) from which it is suitable for consumption all support the salads being marketed as prepared meals. It is considered that your salads satisfy clause 3 of Schedule 1 as the salads are ready for consumption when supplied and they require refrigeration for storage. The salads are assembled with only the need for 'mixing' the ingredients, and are marketed as a prepared meal. The salads, by your own statements can be consumed with or without the dressing and toppings. Therefore, we consider that the salads are 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 - Conclusion: Therefore the salads are supplied as a prepared meal under Item 4 and are a taxable supply under paragraph 38-3(1)(c) of the GST Act.