ATO Interpretative Decision
ATO ID 2002/713
Goods and Services Tax
GST and spare parts for a TENS machineFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 parts, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies electrodes and pads for a transcutaneous nerve stimulator machine (TENS machine)?
Decision
Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies electrodes and pads for a TENS machine.
Facts
The entity is a supplier of parts. The entity is supplying electrodes and pads for a TENS machine. The electrodes and pads are designed to be used with the TENS machine and cannot be used for any other purpose. The electrodes and pads on the TENS machine require replacing when they become worn, faulty or broken.
The supply of a TENS machine is GST-free under subsection 38-45(1) of the GST Act.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Subsection 38-45(2) of the GST Act provides that a supply is GST-free if the thing supplied is:
- •
- supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act; and
- •
- specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.
The first requirement is that the thing supplied must be supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act. The term 'spare part' is not defined in the GST Act. Therefore, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...'.
The entity is supplying electrodes and pads that replace the worn, faulty or broken electrodes and pads on a TENS machine. As such, the electrodes and pads are spare parts for the purposes of the GST Act.
The supply of the TENS machine is GST-free under subsection 38-45(1) of the GST Act. The electrodes and pads are supplied as spare parts for a TENS machine. Therefore, the electrodes and pads are supplied as spare parts for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.
The second requirement in subsection 38-45(2) of the GST Act is that the spare part must be specifically designed as a spare part for the GST-free medical aid or appliance. The electrodes and pads are designed for use with the TENS machine and cannot be used for any other purpose. Therefore, the electrodes and pads are specifically designed as a spare part for the TENS machine.
As all of the requirement in subsection 38-45(2) of the GST Act are met, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies electrodes and pads for a TENS machine.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 13-10
subsection 38-45(1)
subsection 38-45(2)
Other References:
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales
Keywords
Goods & services tax
GST free
GST health
Section 38-45 - medical aids & appliances
ISSN: 1445-2782