Q&A: GST and olive products

The AOA OliveCare® Administrator received a query from a signatory about GST and olive products. We looked into it and found the situation is not that simple - and, it appears, is not fully understood across the industry. So to provide some clarity, we delved even further into the legislation: here’s the outcome of our investigations.

Professor John Fielke, Ag-IQ/Olives 1 More

Q#1: Do you know if there is a concise ruling on GST on table olives that are sold in a pack? To me it appears that if it’s a snack food it has GST. If it is an ingredient it does not.

AOA OliveCare® Administrator

A: Good question. It’s the first time I have been asked this and, on checking online, I note that many olive producers are selling their table olives inclusive of GST.

And it would seem that there is a lot of confusion generally on the issue. I know that Woolies have staff dedicated to constantly checking for GST compliance and seeking specific rulings on individual items.

Supermarket tax invoices should show which food items are subject to GST - usually by having an asterisk next to the item – so our team checked their invoices to see what’s being done.

One bought a major brand of EVOO at Woolworths and the invoice has no GST marked against it.

Another bought both olive oil and table olives (the latter pitted, to be precise). The receipt showed that the oil was sold GST-free, while the table olives were marked as having GST added.

However, my reading of the ATO GST Act (refer below) is that, while table olives may be consumed as a savoury snack, they have been specifically classified as a GST-free food.

Goods and Services Tax (GST) Industry Issues - Detailed Food List

This list details the GST status of major food and beverage product lines. It includes a number of olive products, as follows:

Olive oil marketed for culinary purposes

GST-free Fat/oil marketed for culinary purposes. Paragraph 38-4(1)(f)* of the GST Act applies.

Olive oil spread

GST-free Fat/oil marketed for culinary purposes. Paragraph 38-4(1)(f) of the GST Act applies.

Olives (black, green, kalamata, marinated, pitted, stuffed)

GST-free Food for human consumption that is not of a kind specified in Schedule 1** of the GST Act.

Tapenade

GST-free Food for human consumption that is not of a kind specified in Schedule 1 of the GST Act.

Oil cooking spray

GST-free Fat/oil marketed for culinary purposes. Paragraph 38-4(1)(f) of the GST Act applies.

Oil marketed for non-culinary purposes

Taxable Paragraph 38-4(1)(f) of the GST Act does not apply to an oil differentiated for a non-food use. Examples include massage oil and aromatherapy oil. *Food is defined in subsection 38-4(1) of the GST Act to include ingredients for food for human consumption. **Schedule 1 of the GST Act is a listing of food that is not GST-free (i.e. taxable)

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AUSTRALIAN EVOO

Australian Table Olives AUSTRALIAN EVOO Australian Table Olives

GST × Dukkah GST× AUSTRALIAN EVOO Australian Table Olives GST✓ Roasted Spiced Almonds

Dukkah

While edible olive products are not subject to GST, when you’re providing gift baskets or hampers including other products the issue becomes much more complicated.

Q#2: To expand the question, if the olives are placed in a gift basket of olive products are they still GST exempt?

A: Here’s where things get a bit more complicated. In short, if all items in the basket are edible olive products included in the listings above, then the answer would be yes. If the gift basket also includes olive oil massage oil, or input taxable items such as water crackers, roasted nuts or chocolate, then some GST is payable and there’s a calculation process involved.

Relevant Goods and Services Tax Rulings

With hampers/gift baskets, where a mix of GST-free and taxable individually packaged goods is packed and sold together, the items are taxed individually as a mixed supply and the following Goods and Services Tax Rulings apply:

GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts; and GSTR 2006/9 Goods and services tax: supplies (paragraphs 63 to 66).

Proposition 3: a supply may be mixed, composite or neither. 63. A supply may consist of separately identifiable taxable and non-taxable parts. In GSTR 2001/8 the Commissioner refers to this as a 'mixed supply'. *Refer below for how you work out the value of the part of a mixed supply that is a taxable supply. 64. If all of the parts in a supply have the same GST treatment, then there is no requirement to separately identify each part. That is, if all of the parts are taxable, then apportionment of the consideration is not necessary as GST is payable on the total value of the supply. Similarly, if all of the parts are non-taxable, then no GST is payable on the supply and apportionment is not necessary. Apportionment may still be necessary in relation to the acquisition of the supply, such as where not all the parts of the supply are acquired for a creditable purpose. 65. A supply that contains a dominant part, but also includes something that is integral, ancillary or incidental to that part is a 'composite supply', being the supply of a single thing. 66. On the other hand, a supply may simply involve something that is different to, and has a separate identity from, its parts, for example, the supply of a cake. The cake is made from ingredients such as flour, butter, sugar and eggs, but it is readily apparent that it is a cake that is supplied. There are no separately identifiable parts.

Calculating GST on a mixed supply

The New Tax System (Goods And Services Tax) Act 1999 - Sect 9.80 provides the calculation method for the value of taxable supplies that are partly GST-free or input taxed. (1) If a supply (the actual supply) is: (a) partly a *taxable supply; and (b) partly a supply that is *GST-free or *input taxed; the value of the part of the actual supply that is a taxable supply is the proportion of the value of the actual supply that the taxable supply represents. (2) The value of the actual supply, for the purposes of subsection (1), is as follows: *Price of the actual supply x 10 10 ÷ Taxable proportion where: "taxable proportion" is the proportion of the value of the actual supply that represents the value of the * taxable supply (expressed as a number between 0 and 1).

Simple example

So if the retail price of the mixed supply basket is $10, and the value of the items subject to GST is $5, then the value of the actual supply for taxable purposes is calculated as: ($5 - no GST payable) + ($5 – taxable @ 10% GST = $5.50) = $10.50, including $0.50 GST.

Do your homework

What’s clear is that, if you’re selling only edible olive products as listed above then GST isn’t applicable. If you’re selling any other products as well, you need to check the GST status for each of those individual products and calculate/apply accordingly. You can do this via the ATO's Detailed Food List.

And if you have a farm gate shop or café where you also provide food to consume on the premises, you’ll definitely be dealing with GST inputs – e.g. while antipasto items are GST-free an antipasto platter is taxable, even if it contains the same items.

So again, check the list and if you’re still unsure, contact the ATO and ask for clarification.

More information: www.ato.gov.au/law; www.classic.austlii.edu.au.

New OliveCare® Administrator, Michael Southan For all OliveCare® enquiries, please now contact: Michael Southan AOA CEO and OliveCare® Code of Best Practice Administrator Mobile: 0476 760 160 Email: olivecare@australianolives.com.au or ceo@australianolives.com.au