ATO Interpretative Decision
ATO ID 2002/301
Goods and Services Tax
GST and the supply of an indirect calorimeterFOI status: may be released
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Issue
Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an indirect calorimeter?
Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an indirect calorimeter. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of medical aids and appliances. The entity is supplying an indirect calorimeter.
The indirect calorimeter is a device whose primary function is to measure a person's energy expenditure. In the course of this function, the device also measures how much oxygen is inhaled and exhaled by that person. The entity promotes the device for use in nutritional research. For instance, the device can be used to provide a comparative analysis of energy expenditure between healthy and sick subjects.
The entity is registered for goods and services tax (GST)
Reasons for Decision
Under subsection 38-45(1) of the GST Act, a supply of a medical aid or appliance is GST-free where the medical aid or appliance:
- •
- is covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 2019(GST Regulations);
- •
- is specifically designed for people with an illness or disability; and
- •
- is not widely used by people without an illness or disability.
The only item of relevance to the status of the indirect calorimeter is item 137 in the table in Schedule 3 (Item 137), which lists 'breathing monitors'. Indirect calorimeters are not specified in the GST Regulations.
The term 'breathing monitors' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222).
The health industry considers a breathing monitor to be a device with the primary purpose of measuring a patient's breathing in circumstances where such monitoring is essential (eg the patient is unconscious, under an anaesthetic etc).
Although the indirect calorimeter does measure the level of oxygen breathed in and out during a person's breathing cycle, the primary purpose of the device is to measure how much energy the person is expending. Furthermore, the device is not used to monitor a person's breathing in situations where the person is unconscious or under an anaesthetic, but rather is used in nutritional research.
As such, it is considered that the indirect calorimeter system is not a 'breathing monitor' and is not covered by Item 137. As the indirect calorimeter is not covered by Schedule 3, the supply of the machine is not GST-free under subsection 38-45(1) of the GST Act.
The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under any of the other provisions in Division 38 of the GST Act nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies the indirect calorimeter.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 9 April 2019 | Throughout | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019. |
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
subsection 38-45(1)
Schedule 3
Schedule 3 table item 137
Division 40
The Regulations
Keywords
Goods and services tax
GST free
GST health
Section 38-45 - medical aids & appliances
ISSN: 1445-2782