Compliance
GST Treatment of Infant and Toddler Food: What Australian Businesses Need to Know
A recent ATO Determination clarifies when formula products are GST-free, distinguishing between infants vs toddlers—businesses must update pricing, invoicing, and compliance practices accordingly.
By NomadicTax Research Team • 5-8 min read • April 10, 2026
## What the New ATO Determination Covers
- The ATO issued **GSTD 2026/1** clarifying that **formula products marketed principally as food for infants (aged up to 12 months)** are **GST-free** under **section 38-2 of the GST Act**, whereas formula products for children **over 12 months** are **not GST-free**, nor eligible under equivalent table items.([au.andersen.com](https://au.andersen.com/march-2026-monthly-tax-update/?utm_source=openai))
- The Determination also updates the Detailed Food List **GSTD FL1** by adding new formula product entries and removing outdated ones.([au.andersen.com](https://au.andersen.com/march-2026-monthly-tax-update/?utm_source=openai))
## Compliance & Transition Period
- A **transitional compliance approach** is offered: businesses that **in good faith treated formula for over-12-month-olds as GST-free** may avoid reviews for periods ending on or before **30 June 2026**, **except in cases of fraud**, evasion, or voluntary changes.([au.andersen.com](https://au.andersen.com/march-2026-monthly-tax-update/?utm_source=openai))
- The Determination and related addenda are effective **retrospectively and prospectively** from **4 March 2026**.([au.andersen.com](https://au.andersen.com/march-2026-monthly-tax-update/?utm_source=openai))
## Who Is Affected?
- **Retailers**, manufacturers, importers of formula products for infants and toddlers.
- **Childcare providers**, baby product distributors, and health-food stores.
- **Tax and accounting professionals** advising such businesses.
## Practical Steps for Businesses
1. **Review product portfolios**: Identify which formula products are beyond 12 months age threshold and adjust pricing and GST treatment accordingly.
2. **Update systems/invoicing**: Ensure point-of-sale systems and inventory databases flag age-relevant products correctly.
3. **Check supplier labels and marketing claims**: “Principal marketed use” is key in determining exemption—marketing material matters.
4. **Assess past treatment**: If you have treated toddler formula as GST-free and it’s before 30 June 2026, assess whether your accounting can rely on transitional relief (provided there was no fraud or voluntary change). If not, prepare to make corrections.
## Example Scenario
*A company sells both infant (0-12 months) and toddler (12-36 months) formula. Under the new rules, the toddler formula now must include GST and cannot claim input tax credits for it. They’ll need to adjust prices or accept margin impact.*
## Key Takeaways
- The distinction at **12 months** is decisive for GST‐free status for formula products.
- Transitional relief helps prevent penalty or review exposure for past practices before **30 June 2026**.
- Important for businesses to adjust catalogues, invoices, and internal classification systems now to align with both retrospective and prospective requirements.
Staying proactive now avoids costly restatements, penalties, and supply-chain confusion later.