ATO releases new GST guidance on prepared meals

The ATO has recently issued a suite of guidance documents in response to the Federal Court’s decision in Simplot Australia Pty Ltd v Commissioner of Taxation [2023] FCA 1115.

This includes:

• GSTD 2025/1 – A GST Determination on “prepared meals”
• A Decision Impact Statement on Simplot
• An Addendum to the Detailed Food List 

While these documents provide helpful guidance, they also expose significant inconsistencies – particularly in the GST treatment of salads.

The Simplot Case: common sense meets legislative nonsense

The Federal Court in Simplot considered whether certain frozen food products were “food of a kind marketed as a prepared meal.” The Court applied a test based on common sense and common experience, focusing on three key attributes:

• Quantity – Is the product substantial enough to be considered a meal?
• Composition – Does it contain a mix of ingredients?
• Presentation – Is it complete and ready to eat with minimal preparation?

Despite this seemingly practical approach, the Court acknowledged the legislative framework is arbitrary and incoherent, with exemptions that defy logic – such as soup being GST-free, while frozen Irish stew is taxable.

Salads: a case study in GST inconsistency 

The ATO’s Determination and updated Detailed Food List apply the Simplot principles to salads, but the outcomes are perplexing: 

The result? A salad with bacon and egg is taxable if it’s called Caesar, but GST-free if it’s called Potato. A Greek salad with tomato and onion is taxable, while a tabbouleh with similar ingredients is not. 

Compliance challenges for suppliers 

The ATO’s four-step method prioritises the Detailed Food List over the Determination’s nuanced analysis. This creates uncertainty:

• Can suppliers rely solely on the Detailed Food List?
• What if a product’s ingredients don’t match its listed name?
• How should seasonal variations be handled?

A transitional compliance approach applies until 31 December 2025, offering relief for certain products – provided suppliers don’t retrospectively claim input tax credits or exploit the guidance.

Conclusion: time for reform

The ATO has made a genuine effort to clarify a complex area of law. However, the GST treatment of salads reveals a system that is ripe for reform. Until then, suppliers must navigate a landscape where lettuce is taxable and potato isn’t, and where the name of a salad can cost you 10 per cent. 

Need help?

Please contact one of our GST specialists if you need assistance with navigating the recent ATO guidance in advance of the 31 December 2025 deadline. 

Article contributed by Natalie Lu - Indirect Tax

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