Edited version of private ruling

Authorisation Number: 1011592782078

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Ruling

Subject: GST and medical aids and appliances

Are you making a taxable supply when you supply tactile products?

Advice/Answer

Yes, you are making a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply the products,

Relevant facts

You are registered for GST.

You supply the tactile products for patients with dementia, acquired brain injuries, and digital nerve damage to improve memory, promote conversation, and improve motor and cognitive skills by stimulating olfactory, auditory and tactile senses.

Your products have been developed in consultation with health professionals.

Your products have been successfully trialled by people with an illness or disability.

Your products are specifically designed for people with an illness or disability.

Your products are not widely used by people without an illness or disability.

Reasons for decision

Summary

Yes, you are making a taxable supply when you supply the products.

Detailed reasoning

Section 9-5 of the GST Act states that:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that you *carry on; and

· the supply is *connected with Australia; and

· you are *registered or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

Under subsection 38-45(1) of the GST Act, the 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 1999 (GST Regulations); and

· is specifically designed for people with an illness or disability; and

· is not widely used by people without an illness or disability.

Your products are specifically designed for people with an illness or a disability. They are not widely used by people without an illness or disability.

It remains to be determined whether your products are covered by Schedule 3, or specified in the GST Regulations. Items in Schedule 3 that your products could potentially fall under are: items 47, 141, 143 and 151.

Item 47 and 151 - visual/tactile alerting devices and auditory/tactile alerting devices.

The phrases 'auditory/tactile alerting devices' (item 151) and 'visual/tactile alerting devices' (Item 47) are not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of these phrases.

The Macquarie Dictionary (1997), defines 'auditory' to mean 'relating to hearing, or the sense of hearing ...', 'tactile' to mean '1. of or relating to the organs of sense or touch. 2. perceptible to the touch...'; and 'alert' to mean '...4. an alarm or warning..'

Accordingly, an auditory/tactile alerting device and a visual/tactile alerting device are devices which are designed to alert vision and hearing impaired people to a presence, occurrence or danger through the person's sense of touch, hearing or sight.

This is contrasted with the operation of your products which are tactile and some are auditory and/or visual, but they are not designed to alert a vision or hearing impaired person to a presence, occurrence or danger. Therefore, the products do not fall under items 47 or 151.

Item 141 - transcutaneous nerve stimulator machines.

The phrase 'transcutaneous nerve stimulator machine' (TENS machine) is not defined in the GST Act. When a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. When a word or phrase has a technical meaning it is necessary to determine the meaning by reference to the industry in which that word or phrase relates.

After consultation with the health industry it is considered that a TENS machine is a device that is used for the purpose of pain relief by preventing the passage of pain impulses to the brain. The TENS machine introduces pulses of low-voltage electricity into tissues for the relief of pain. A TENS machine will only include those devices which were developed primarily for the purposes of pain relief.

This is contrasted with the operation of your products which have no input of electricity into the body. Your products are designed for and marketed as products for rehabilitation and not for pain relief. Therefore, the products do not fall under item 141.

Item 143 - tactile or Braille books, magazines or newspapers.

The Macquarie Dictionary (1997), defines 'Braille' as 'a system of writing or printing for the blind, in which combinations of tangible points are used to represent letters, etc.' Accordingly, Braille books, magazines or newspapers are reading materials specifically made to assist visually impaired people to read. Under item 143, the term tactile books, magazines or newspapers also fits within this definition. The fact sheet: GST and medical aids and appliances discusses medical aids or appliances listed in an unexpected category. It states that if the meaning of the medical aid or appliance listed in the third column (ie the 'item' column) is unclear, you can use the category column to clarify it. In this instance, the category column for item 143 is 'vision', making it clear that the items listed under this category are to assist with vision.

This is contrasted with the operation of your products which are tactile, but they are not designed to assist the vision impaired person to read books or other reading material. Therefore, your products do not fit under item 143.

The products do not fall under any of the other items in Schedule 3, and are not specified in the GST Regulations. Therefore, the supply is not GST-free under subsection 38-45(1) of the GST Act. (Note that the Australian Tax Office cannot add new medical aids and appliances to Schedule 3 of the GST Act or to the GST Regulations - only Parliament can do this).

You are registered for GST and the 'supply' satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, you are making a taxable supply under section 9-5 of the GST Act when you supply your products.

The fact sheet: GST and medical aids and appliances is enclosed for your information.

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