Like the onset of the digital age of technology and the changing landscape of taxation, the food industry has changed significantly since the introduction of GST. The increased focus on healthier foods such as plant-based substitutes (i.e. pea-based proteins, tofu and wheat/gluten) or more traditional food types have caused increasing GST complexity for the food industry.
Supporters for the widening the base of GST have highlighted the complexity that the Australian GST regime imposes on food classification as an argument for imposing GST on all food items. The analysis is that the Government should consider imposing GST on a broader range of food, to take into account eating and packaging trends.
The current application of GST on food items is becoming increasingly complex and confusing where products with similar characteristics are being taxed differently depending on how they are packaged, marketed and consumed.
Recently, Grant Thornton assisted an Australian business who has recently launched a new range of food products in navigating through a complex ruling process with the ATO. Following extensive discussions with the ATO, we were able to help ensure a consistent GST-free treatment to the new food products. We have also seen more ATO activity that is seeking to assert that the food products that have different combinations of food components are subject to GST.
It is evident that the GST position of foods (particularly plant-based and innovative products that were not common when GST was introduced) is not clear. We strongly recommend clients clarify that their existing or proposed new food products have robust advice that is confirmed with the advice and an ATO private ruling to ensure tax certainty in this environment.