Quick answer
In Australia, many basic foods are GST-free, including plain bread, unflavoured milk, cheese, eggs and fresh fruit and vegetables. But food eaten on your premises, hot food, prepared meals, cakes and pastries, confectionery, platters and many snacks are taxable at 10%. For cafés, delis and bakeries that sell both, correct point-of-sale coding is essential to avoid paying too much GST or owing GST you didn't collect.
Key points
- Food and drink consumed on your premises is taxable, even if it would otherwise be GST-free.
- Hot food and prepared meals are taxable; many plain basics are GST-free.
- Sweet bakery items are taxable; bread without a sweet filling or coating generally isn't.
- Use the ATO's food and beverage search tool and code your POS carefully.
A customer buys a loaf of sourdough, a croissant, a flat white and a tub of olives. Depending on what they take and where they eat it, some of those items carry GST and some don’t. Get it right and nobody notices. Get it wrong across thousands of transactions a year and you can end up with a BAS surprise, or quietly handing the ATO margin you never needed to give. This guide explains the GST rules for food in plain English for cafés, delis and bakeries.
Why is GST on food so complicated?
Because the rules aim to keep basic food GST-free while taxing food that’s prepared, served or sold as a treat. That sounds simple until you run a business that sells both. A deli might sell GST-free cheese next to taxable crackers. A bakery sells GST-free bread next to taxable pastries. A café sells almost everything as taxable, because it’s consumed on the premises or served hot.
The ATO also notes that the way food is marketed affects its GST classification, including how it’s promoted, labelled, packaged and placed in the store. So the same product can be treated differently depending on how you sell it.
What food is GST-free?
According to the ATO, GST-free food includes:
- Bread and bread rolls without a sweet filling or sweet coating.
- Unflavoured milk, cream, cheese and eggs.
- Fresh, frozen, dried, canned or packaged fruit, vegetables, fish and soup.
- Raw, fresh or frozen meats for human consumption (except prepared meals).
- Fruit or vegetable juice that is non-alcoholic and non-carbonated and contains at least 90% juice by volume.
- Formula products marketed principally for infants.
There’s an important catch for cafés: the ATO notes bread rolls are GST-free unless they are consumed in a restaurant. Where the food is eaten changes the answer.
What food is taxable?
The ATO lists these categories of food as taxable:
| Category | Examples relevant to cafés, delis and bakeries |
|---|---|
| Food consumed on the premises | Anything eaten or drunk at your tables or counter |
| Hot food | Food heated above the surrounding air temperature, such as toasties or hot pies |
| Takeaway hot food and drinks | Takeaway coffee, hot chips, hot meals |
| Prepared meals | Food marketed as a prepared meal (soup is an exception) |
| Bakery products | Cakes, pastries, pies, sausage rolls, bread and rolls with a sweet filling |
| Confectionery | Chocolates, lollies, and food marketed as confectionery |
| Certain beverages | Flavoured milk, carbonated or flavoured water, sports drinks, juices below the threshold |
| Snacks | Potato chips, crisps, sticks and straws; muesli, health and sports bars |
| Platters | Platters and similar arrangements of food |
| Specialty items | Ice cream, caviar, seasoned or flavoured nuts |
How the rules play out in a café
In a café, most sales are taxable because the food and drink is consumed on the premises or served hot. A takeaway coffee is taxable because it’s a hot beverage. A toasted sandwich is taxable because it’s hot. A slice of cake is taxable as a bakery product, whether eaten in or taken away.
Where cafés can go wrong is with retail lines on the side: bags of coffee beans, bottled milk, loaves of bread, packaged snacks. Some are GST-free, some aren’t. Our guide to menu costing explains why getting the GST treatment right also matters for your margins, because GST collected isn’t yours to keep.
How the rules play out in a deli
Delis carry the most complicated mix. Plain cheese, eggs, fresh produce and unflavoured milk are generally GST-free. Crackers and chips, confectionery, platters and prepared meals are generally taxable. Add a coffee machine and a few stools and anything consumed on the premises becomes taxable too. For specific products, the ATO’s GST food and beverage search tool lets you check a product’s classification against its detailed food list.
Our page on deli and grocer loans covers the funding side of running a specialty food store.
How the rules play out in a bakery
Bakeries sit right on the line. Plain bread and rolls are generally GST-free when taken away. Cakes, pastries, pies, sausage rolls and sweet-filled bread are taxable. If you add seating, anything eaten there becomes taxable. A bakery with a busy coffee counter and tables has a very different GST profile from one that sells mostly loaves to take home. See bakery business loans for more on funding bakery equipment and growth.
If your GST profile has left you with a tax debt, or you need to fund equipment while you sort it out, you can ask us what’s possible with no credit check at the first step.
Why point-of-sale coding matters
Your point-of-sale system is where GST decisions happen thousands of times a year. If items are coded incorrectly:
- Taxable items coded as GST-free mean you haven’t collected GST you owe. The ATO will still expect it, and it comes out of your margin.
- GST-free items coded as taxable mean you’re charging customers GST and paying it to the ATO when you didn’t need to, or absorbing it in your price.
- Dine-in versus takeaway needs a clear process, especially for items that change status depending on where they’re eaten.
Once a year, or whenever you change your menu or product range, review your POS coding against the ATO’s lists. Many accountants will do this review with you.
GST, BAS and your cash flow
For registered businesses, GST you collect is held on the ATO’s behalf until your BAS is due. For quarterly lodgers, the ATO’s due dates are 28 October, 28 February, 28 April and 28 July. Because strong trading quarters produce larger BAS bills, a café or bakery that does well at Christmas will face a bigger BAS on 28 February, often in a quieter month.
A few habits help:
- Set GST aside as you collect it, ideally in a separate account.
- Know your GST credits. GST paid on business purchases, including equipment and stock, can generally be claimed back through your BAS.
- Plan for the big quarters. Our Christmas trading cash flow page covers the post-Christmas BAS pinch.
- Lodge on time, even if you can’t pay in full. An unlodged BAS is a bigger problem than an unpaid one, and the ATO offers payment plans.
Businesses with a high share of GST-free sales, such as some delis, may find their GST credits on purchases are large relative to the GST they collect. That changes the shape of their BAS, sometimes into a refund. Your accountant can help you understand your own pattern.
When should you register for GST?
The ATO requires registration within 21 days once your GST turnover reaches $75,000 or more, or is expected to. Most cafés, delis and bakeries pass that threshold quickly, and many new businesses register from the start so they can claim credits on their fit-out and equipment. Our guide to opening a café covers when to set this up.
An illustrative example
Illustrative only. A bakery café sells loaves to take home, pastries, pies, coffee and a small range of pantry goods, with twelve seats inside. Its POS was set up years ago with all bakery items coded the same way. During a review, the owner and accountant find that plain loaves sold for takeaway were being charged GST, while some sweet-filled rolls had been coded as GST-free. They recode each item, add a simple dine-in button at the register and set up a separate GST account. The next BAS is more accurate, and margins on loaves improve.
Getting help
The ATO’s taxable food and GST-free food pages, and its GST food and beverage search tool, are the best starting points. For anything unusual, such as combination products or items where marketing affects the classification, talk to your accountant or the ATO directly.
Keep your cash flow clear of GST surprises
GST shouldn’t be a shock, but a strong quarter, a POS coding error or a slow month after Christmas can leave a food business short at BAS time. If you’d like to talk through a buffer, an equipment purchase or a tax debt, tell us about your business in a short enquiry. It takes around 60 seconds and involves no credit check when you first enquire. Your details stay with one team rather than being sprayed across a queue of lenders, and a real person who understands food businesses will call you. Please fill in the form accurately, including any ATO debt, so we can match you properly the first time.
Frequently asked questions
Is there GST on coffee in a café?
Yes. The ATO lists all food and beverages for consumption on the premises, and all takeaway hot food and beverages, as taxable. A coffee served in a café, whether dine-in or takeaway, is taxable.
Is bread GST-free?
Bread and bread rolls without a sweet filling or sweet coating are generally GST-free, according to the ATO. But the ATO notes bread rolls are not GST-free if they are consumed in a restaurant, and sweet-filled or sweet-coated bread is taxable.
Are cakes and pastries taxable?
Yes. The ATO lists bakery products including cakes, pastries, pies, sausage rolls, and bread and bread rolls with a sweet filling as taxable.
Is a cold salad from a deli taxable?
It can depend on how it's prepared and marketed. The ATO lists food marketed as a prepared meal as taxable, and platters and similar arrangements of food as taxable. Use the ATO's GST food and beverage search tool or check with your accountant for specific products.
What happens if my POS codes items wrongly?
If you treat taxable items as GST-free, you'll owe the ATO GST you didn't collect from customers. If you treat GST-free items as taxable, you'll pay GST you didn't need to. Either way, it affects your margins and your BAS.
Do I need to be registered for GST?
The ATO requires registration once your GST turnover reaches $75,000 or more, or is expected to. Most cafés, delis and bakeries reach that threshold.