ATO Interpretative Decision
ATO ID 2002/533 (Withdrawn)
Goods and Services Tax
GST and the dairy adjustment levy on flavoured milk
FOI status: may be released
||This ATO ID is withdrawn because the dairy adjustment levy enacted under the Dairy Produce Act 1986 was terminated by Dairy Adjustment Levy Termination Act 2008 effective from 23 February 2009.
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 22 September 2017.
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is the entity, a retailer that makes a taxable supply of flavoured milk, required to pay GST under section 9-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on the total value of its supply, including an amount to cover the dairy adjustment levy (DAL)?
Yes, the entity is required to pay GST under section 9-70 of the GST Act on the total value of its supply, including an amount to cover the DAL.
The entity is a retailer. The entity makes taxable supplies of flavoured milk. The sale of flavoured milk is subject to the DAL.
The DAL is a scheme administered by the Commonwealth Department of Agriculture, Fisheries, Forestry - Australia (AFFA), and is levied on all retail sales of liquid dairy products. The levy rate is 11 cents per litre and is collected from a retailer by its distributor/wholesaler who, in turns remits this to the processor and thence to the Commonwealth.
When the retailer sells its flavoured milk, it may maintain its profit margin by increasing the price of the supply by the levy amount.
The levy is an Australian, tax, fee or charge specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2001 (Treasurer's Determination).
Reasons for Decision
Subdivision 9-C of the GST Act sets out how much GST is payable on a taxable supply. Under section 9-70 of the GST Act, the amount of GST on a taxable supply is 10% of the value of the taxable supply.
The value of a taxable supply is 10/11th of the price, where the price is the sum of:
- so far as the consideration is expressed as an amount of money, the amount (including any GST component); and
- where the consideration is not expressed as an amount of money, the GST inclusive market value of that consideration (section 9-75 of the GST Act).
The entity is not making a supply of the DAL, it is making a supply of flavoured milk. The fact that the DAL is specified in the Treasurer's Determination is not relevant to the entity's customers. At that point, the amount of DAL collected represents a business cost to the entity.
If the entity chooses to pass this cost on to its customers, it merely becomes one of the components that make up the total cost of the milk. Other components may include the wholesale cost of the milk, the profit margin and various administrative costs. The GST payable is calculated on the total cost of the supply not on the individual components.
Accordingly, the entity is required to pay GST under section 9-70 of the GST Act on the total value of its supply, including an amount to cover the DAL.
Date of decision: 18 December 2001
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2001
Goods & services tax
GST supplies & acquisitions
Siebel/TDMS reference number: CW254287
Business line: Indirect Tax
Date of publication: 31 May 2002