Wild way GST is applied - or in some cases not applied - to different foods

A Sydney tax expert has lifted the lid on the wild ways in which GST is applied to certain foods.

In Australia, a 10 per cent goods and services tax (GST) is applied to food depending on how it is packaged, marketed and where it is sold.

All basic food such as milk, bread, fruit, vegetables and meat are exempt from GST, but the ATO's full list of taxable and non-taxable products is contradicting and at times puzzling.

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Tax lawyer Harry Dell told 9news.com.au that consumers are led to believe food is generally GST-free, "but that's not really the case, it's quite complex".

Dell has been using TikTok to highlight Australia's convoluted food classifications, breaking down GST tax laws around common groceries and popular snacks.

In one TikTok, Dell uses the example of a recent test case where the Administrative Appeals Tribunal ruled that Chobani "Flip" strawberry yoghurt was subject to GST.

While the main component of the product was mostly yoghurt, it contained a smaller compartment designed to tip in "dry inclusions".

"Normally the supply of yoghurt is GST-free, but the supply of things that are mixed can attract GST," he told 9news.com.au.

"Effectively they found that the parts were separated, it's the yoghurt, nuts and biscuits, it's actually taxable."

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To add to the confusion, there are also discrepancies in how chicken products are taxed.

"A live chicken attracts GST, raw chicken is GST-free, then when you have a roast chook from Coles or Woolies you add the GST on, then when that chicken's cold it's GST-free again, but then if you buy that from a takeaway shop whether it's hot or cold it's taxable. It's bizarre," Dell said.

Classifications for desserts are not straightforward either, explained Dell.

"A creme caramel is not subject to GST because it does not fit into the definition of cake or biscuit, it kind of falls outside, what's the sense in that? " he said.

"Another dessert, like a bar of chocolate, has GST on it because it's confectionary. The battle line has just been weirdly drawn and that's always been the case."

Dell said complex food classifications for GST purposes were more likely to hurt food producers, who may need to increase prices due to the tax incurred.

"Now we're demanding more ready-to-eat products than we were before, less ingredient-focused, we're paying a lot more GST," he said.

"It's supposed to just be 10 per cent, but really it's not 10 per cent, it's based on these archaic rules, which aren't even that old, and it needs to be simplified because consumers need to know if they're buying higher priced items."