Anything eaten at your tables carries GST, and so does anything hot to take away. Cold food and drinks to take away are GST-free only if the item itself is, so a cold sandwich carries GST and a bottle of still water doesn’t.
We think the place to get this right is your POS. Every button carries a tax code, and those codes end up on your BAS. Get them right once, then check each new item as it goes on.
Eaten here or hot means GST
The ATO treats all food and drink for consumption on the premises, and all hot takeaway food and drink, as taxable, and your premises go past the front door. They include the grounds around a cafe and a food court where tables are supplied, and GSTD 2000/5 gives footpath tables as an example.
Hot means heated above the surrounding air temperature. To take away, food that’s still warm only because it was freshly cooked, like fresh bread, is GST-free unless another taxable category applies. A warm pie misses out, because pies are taxable bakery products anyway. Sausage and onion on a slice of bread is taxable too: hot and cold parts sold as one item to take away are taxable.
Every hot coffee, tea and hot chocolate carries GST, in or out. Coffee you sell off the shelf is different: the detailed food list has coffee beans, capsules and tea bags as GST-free.
If you run a takeaway, everything you heat to serve is taxable, so the question only comes up for your cold lines.
Cold bakery, sandwiches and meals still carry GST
Cold food is taxable when it falls in a Schedule 1 category: certain prepared food, confectionery, savoury snacks, bakery products, ice cream foods and biscuits. A food that combines several foods is taxable if any one of them is in Schedule 1.
Taxable even when cold:
- Cakes, cake-type muffins, croissants, scones, slices, doughnuts, Danish pastries and biscuits
- Sandwiches on any type of bread or roll, and filled bagels
- Caesar salad, Greek salad, sushi, and filled wraps that need refrigeration or freezing
- Confectionery, potato chips, salted or roasted nuts, muesli bars, ice cream and flavoured ice blocks
GST-free cold, to take away:
- Plain bread and rolls, and bread-type English muffins
- A plain glazed hot cross bun, because the ATO doesn’t count a glaze as a sweet coating
- Fresh fruit, and yoghurt on its own
- Potato salad, pasta salad, coleslaw and tabbouleh, as each food list entry describes them
Bread or rolls with a sweet filling or coating are taxable. So is food of a kind marketed as a prepared meal, except soup, judged by common sense and common experience: quantity, composition and presentation. Each salad entry lists the ingredients it covers, so match your recipe to the wording before you code it.
Cold drinks are GST-free only if they’re on the list
Drinks work the other way round from food. A drink that isn’t of a kind listed in Schedule 2 of the GST Act isn’t GST-free. In a cafe fridge, that means:
GST-free to take away:
- Unflavoured milk, including unflavoured soy, rice and oat milk
- Natural still water with no additives
- Non-carbonated juice with at least 90% fruit or vegetable juice
Taxable:
- Soft drinks, sports drinks, flavoured milk and flavoured water
- Carbonated water, other than naturally carbonated mineral water
- Juice drinks under 90% juice, and ready-to-drink coffee and tea
The GST-free ones become taxable when you serve them for drinking on your premises.
The food list has no entry for a house-made iced latte, smoothie or cold brew. Look each one up in the ATO’s search tool, and get advice before you set its POS code.
One item sold two ways needs two buttons
If you sell the same item to eat in and to take away, GSTD 2000/5 expects you to tell them apart, through separate ordering or serving, different packaging, or different menus. If you don’t separate them, a GST-free item stays GST-free when you serve it in its original or takeaway form and not at a table. Asking “eat in or take away” on each order is one way to keep the record.
We’d give still water, plain rolls and 90% juice a dine-in and a takeaway button each, and bags of beans their own item.
Meal deals are harder. Buying items together doesn’t make them a combination food, but a package at one price can be a mixed or composite supply depending on all of the circumstances. If it’s mixed, you split the price on a reasonable basis you can support, such as each item’s separate price, and the GST is one eleventh of the taxable part. An $8.80 hot pie and $3.30 water sold together for $11.00 puts $8.00 on the pie, so the GST is $0.73. A snack pack sold as one product, like cheese and biscuits, is taxable in full.
A delivery order is food eaten away from your premises, so the takeaway rules apply.
A wrong button comes out of your margin
Your POS codes set the GST on each sale, and the totals go to 1A on your BAS, GST on sales. Total sales at G1 takes GST-free and taxable sales together, so a wrong code shows up in the GST at 1A.
Take a cafe selling 100 croissants a week at $5.50, with the button set to GST-free.
- GST in each croissant: $5.50 ÷ 11 = $0.50
- GST missing each week: $50
- GST missing over a 13-week quarter: $650
- Customers paid $5.50 either way, so the $650 comes out of your takings when it’s fixed
Code a GST-free item as taxable and you pay GST that was never owed, out of the same menu price.
If you find a wrong code, the ATO lets you correct a GST error on a later BAS lodged within the period of review, if it fits the ATO’s definition of one. Revising an earlier BAS can attract penalties or general interest charge, so ask your BAS agent or tax agent which route fits before you lodge.
What we would do
- Print your POS item list with the tax code next to each item
- Check every GST-free item against the ATO’s detailed food list
- Give anything sold both ways a dine-in and a takeaway button
- Check each new item’s code before it goes on the till
- Watch GST-free sales as a share of the week; a jump with no menu change means a code moved
In our Essentials package we do your BAS every quarter and lodge it as a registered tax agent.