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)
- The Determination also updates the Detailed Food List GSTD FL1 by adding new formula product entries and removing outdated ones.(au.andersen.com)
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)
- The Determination and related addenda are effective retrospectively and prospectively from 4 March 2026.(au.andersen.com)
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
- Review product portfolios: Identify which formula products are beyond 12 months age threshold and adjust pricing and GST treatment accordingly.
- Update systems/invoicing: Ensure point-of-sale systems and inventory databases flag age-relevant products correctly.
- Check supplier labels and marketing claims: “Principal marketed use” is key in determining exemption—marketing material matters.
- 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.