Edited version of private ruling

Authorisation Number: 1011609519874

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Ruling

Subject: GST and importation of medical aids and appliances

Questions

Do you have to pay Goods and Services Tax (GST) when you import the following items especially designed for people with a disability:

(a) a handcycle and its associated accessories; and

(b) a sit ski and its associated accessories?

Answers

(a) No, you do not have to pay GST when you import a handcycle and its associated accessories, as the importation is a non-taxable importation because the supply would be GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if it was supplied in Australia.

(b) No, you do not have to pay GST when you import a sit ski and its associated accessories, as the importation is a non-taxable importation because the supply would be GST-free under subsection 38-45(1) of the GST Act if it was supplied in Australia.

Relevant facts and circumstances

You are not registered for GST.

You are a paraplegic.

You require the use of a wheelchair for mobility.

You are importing the following products with the following features:

Handcycle

You will import a handcycle from an overseas supplier. Details of the handcycle can be found on the supplier's website. You have also provided a copy of the brochure which details the product.

The handcycles are custom made and are specially designed for a persons particular disability.

You advised that the handcycle is fitted with its seat just in front of dual rear wheels, (to overcome problems with your core balance),and power to the front drive wheel is via a hand crank mounted in front of the rider which will be able to be operated using your arms & shoulders. Steering, brakes & gears are all mounted close to the hand crank. Your legs are held parallel to the ground, in "stirrups" on either side of the front wheel.

People with a high level of disability can use the handcycle to keep their body in good shape.

You advised that the handcycle will enable you to engage in recreation, and serious training, designed to lift your overall fitness and, with a controlled diet reduce your body mass from its current unhealthy level.

The handcycle product can be purchased with upgrades and options

You have provided a copy of the invoice. The handcycle and the following options have been itemised on the invoice:

Trigger shifter right handle-brake left handle

Front safety light

Rear flashing light

Cordless computer

Tool and tyre repair

Thorn resistant tyre protectors

You advised that apart from the trigger shifter right handle-brake left handle all the others itemised on the invoice are accessories. The trigger shifter right handle-brake left handle is an essential item to operate the handcycle that has been selected by you on the purchase order form and as such you do not consider it to be an accessory.

The front safety light and the rear flashing light are safety features that are to be fitted and used with the handcycle.

You advised that the cordless computer is a small electronic device specifically designed to be used with the handcycle and is capable of measuring speed, distance travelled and calculate energy used (calories) while using the handcycle. It also will record historical information in order to monitor improvements in physical fitness.

You also advised that the tool and tyre repair is a kit which is necessary in order to change and repair the tyres on the handcycle in the event of a puncture and is specific to the type of tyres provided with this handcycle. The tool and repair kit would not have a general use as it is specifically designed for the handcycle. The tool bag includes 22 tools in 1, a unique 3 piece design plus tyre patch kit, CO₂ tyre inflators; tyre changing tools and zippered tool bag. There is step by step instruction as to fork removal and installation procedure requiring use of specific tools designed for the handcycyle.

The thorn resistant tyre protector is an accessory designed for people with disabilities and is associated with the handcycle.

Sit ski

You will import the sit ski from an overseas supplier. You have also provided a copy of the brochure which details the product. Details of the sit ski can also be found on the supplier's website. The sit ski is custom made and is designed to allow physically disabled persons to ski.

You advised that the sit ski will enable you to engage in recreation and training which is designed to lift your overall level of fitness. It is a fibreglass moulded seat mounted on a frame which is in turn mounted on a single snow ski. Balance is achieved by the use of hand held "outriggers" (similar to elbow crutches with ski tips attached to the base). The design of the frame allows the sit ski to use the chair lift or attach to a T-bar lift. The skier is therefore able to ski independently. Without a sit ski this would not be possible.

You have provided a copy of the invoice. The sit ski and the following options have been itemised on the invoice:

Seat lift-up tube with screws

Chest strap

You advised that the seat lift-up tube with screws is a necessary piece of equipment for the operation of the sit ski in order to load it onto a chairlift and as such you do not consider it to be an accessory.

The chest strap has been selected by you on the purchase order form specifically to meet your disability and to give you extra support while using the sit ski. You advised that not every purchaser would need this item and as such this could be treated as an accessory.

You advised that the handcycle and the sit ski that you are importing are for your personal and private use and are not for resale.

You also advised that the handcycle and the sit ski are designed for the disabled and are not intended for use by non-disabled people nor are they in general use by non-disabled people.

You advised that you have engaged a customs broker who will complete the customs formalities to release the goods from customs as your agents and you are named as the owner on the import entry documents.

Reasons for decision

GST is payable on importations of goods into Australia where the importation is a taxable importation.

Any entity, including a natural person, can make a taxable importation. There is no requirement that the entity be registered for GST purposes, or that the importation is made in the course of carrying on an enterprise. This is because GST is a tax on private consumption and private consumers can import goods directly.

The entity that makes the taxable importation must pay the GST payable on the taxable importation.

Taxable Importations

Section 13-5 of the GST Act states that you make a taxable importation when:

· goods are imported, and

· you enter the goods for home consumption (within the meaning of the Customs Act 1901).

However, the importation is not a taxable importation to the extent that it is a non-taxable importation.

Goods and Services Tax Ruling GSTR 2003/15 'importation of goods into Australia' explains that if you, as 'owner', lodge an import entry in your name, you enter imported goods for home consumption within the meaning of the Customs Act and you are liable to pay GST on that importation if the importation is a taxable importation.

You have advised that you are in the process of importing the products for your own use and have engaged a customs broker to import the goods on your behalf. The customs broker acting as your agent will enter the goods for home consumption when completing the customs formalities and you are named as the owner on the import entry documents. Therefore you will be making a taxable importation unless the importation is a non-taxable importation.

Non-taxable importations

Under section 13-10 of the GST Act, an importation is a non-taxable importation if:

· it is a non-taxable importation under Part 3-2 of the GST Act (which contains only one Division, that is, Division 42 of the GST Act), or

· it would have been a supply that was GST-free or input taxed if it had been a supply.

Part 3-2 of the GST Act, particularly section 42-5 of the GST Act, deals with the importation of goods that are non-taxable importations in accordance with the Customs Tariff Act 1995. As the Australian Customs and Border Protection Service (Customs) administers this Act, the Australian Taxation Office cannot provide you with any advice on this matter. You will need to contact Customs on 1300 363 263 for more information.

An importation is also a non-taxable importation to the extent that, had it been a supply, the supply would have been a GST-free or input taxed supply. We have to determine whether the importation of the handcycle and its associated accessories and the importation of sit ski and its associated accessories is a non-taxable importation that would have been GST-free if it had been a supply.

There are no provisions in the GST Act that would make the handcycle and its associated accessories and the sit ski and its associated accessories an input taxed supply.

Subsection 38-45(1) of the GST Act provides that a supply of a medical aid or appliance is GST-free where:

· it is covered by an item listed in the table in Schedule 3 to the GST Act or specified in the table in Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), and

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

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

A medical aid or appliance must meet all three elements of subsection 38-45(1) of the GST Act to be GST-free. Once an item meets all of the above elements, then its supply will be GST-free all the way down the supply chain and not only when supplied to a person who has an illness or disability. One exception to this applies, and that is when the supplier and the recipient agree to treat the supply as if it were taxable pursuant to subsection 38-45(3) of the GST Act.

Further, subsection 38-45(2) of the GST Act provides that a spare part that is specifically designed as a spare part for a GST-free medical aid or appliance will be GST-free.

Supply of the handcycle and its associated accessories

Item 105

Item 105 in the table in Schedule 3 to the GST Act (Item105) lists 'wheelchairs, motorised wheelchairs, scooters, tricycles, spinal carriages and other goods for the carriage of people with disabilities'.

Based on the information provided, the handcycle is covered by item 105 as it is a tricycle used for the carriage of people with disabilities. It has three-wheels and has features which indicate it has been specifically designed for persons with an illness or disability. It is custom made and specially designed for a person's particular disability. The handcycle is not widely used by people without an illness or disability.

Accordingly, all of the requirements of subsection 38-45(1) of the GST Act are satisfied and therefore, we consider that a supply of the handcycle to you will be GST-free.

Item 106

You are also importing other accessories associated with the handcycle.

Item 106 in the table in Schedule 3 to the GST Act (Item 106) lists 'accessories associated with wheelchairs, motorised wheelchairs, scooters, tricycles, spinal carriages and other goods for the carriage of people with disabilities'.

You have provided a copy of the invoice which shows that the following options have been itemised on the invoice:

Trigger shifter right handle-brake left handle

Front safety light

Rear flashing light

Cordless computer

Tool and tyre repair

Thorn resistant tyre protectors

The word 'accessories' is not defined in the GST Act. Accordingly, it is necessary to consider the ordinary meaning of that word.

The Australian Concise Oxford Dictionary (1997), 3rd edn, Oxford University Press, South Melbourne defines the word 'accessory' to include 'an additional or extra thing' or 'a small attachment or fitting'.

The Macquarie Dictionary (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'accessory' as 'a subordinate part or object; something added or attached for convenience, attractiveness, etc., such as a spotlight, heater, driving mirror, etc., for a vehicle'.

The Australian Taxation Office considers that an accessory is something that adds to the functionality of the appliance or its general effect, but is not essential or necessary for the appliance to carry out its function. Although the trigger shifter right handle-brake left handle is separately itemised on the invoice, you advised that the trigger shifter right handle-brake left handle is an essential item to operate the handcycle. As such, it is considered to be an integral part of the handcycle rather than being an accessory. As it is not been supplied separately it is part of the handcycle which is covered by item 105 as discussed earlier.

For a medical aid or appliance to be covered by Item 106, it does not need to be an accessory 'for' items listed, rather it only needs to be 'associated with' the items listed.

The front safety light and the rear flashing light are safety features that are to be fitted and used specifically with the handcycle. These are accessories to the handcycle.

You advised that the cordless computer is a small electronic device specifically designed to be used with the handcycle and is capable of measuring speed, distance travelled and calculate energy used (calories) while using the handcycle. It also will record historical information in order to monitor improvements in physical fitness. This is an accessory associated with the handcycle.

You also advised that the tool and tyre repair is a kit which is necessary in order to change and repair the tyres on the handcycle in the event of a puncture and is specific to the type of tyres provided with this handcycle. The tool and repair kit would not have a general use as it is specifically designed for the handcycle. The tool bag includes 22 tools in 1, a unique 3 piece design plus tyre patch kit, CO₂ tyre inflators; tyre changing tools and zippered tool bag. There is step by step instruction as to fork removal and installation procedure requiring use of specific tools designed for the handcycyle. This item is considered an accessory associated with the handcycle.

The thorn resistant tyre protector is an accessory designed for people with disabilities and is associated with the handcycle.

Based on the information provided, the above accessories are covered by item 106 as accessories associated with the handcycle and as such will be GST-free supplies under subsection 38-45(1) of the GST Act. This is provided that the accessories are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.

Single composite supply

In addition it is to be noted that the supply of the handcycle and associated accessories (although separately itemised on the invoice) have been supplied to you in one single overall package rather than separately. Where a supply comprises multiple items or parts having a supply of one dominant part that has other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply, then for GST purposes this can be treated as a single composite supply, which would take on the GST status of the dominant part. This view is expressed in Goods and Services Tax Ruling GSTR 2001/8. In your case the dominant part of the supply is the handcycle which has been determined as GST free as the requirements of subsection 38-45(1) of the GST Act have been satisfied. Therefore the other parts which are considered to be integral, ancillary or incidental to the dominant part of the supply need not be separately recognised and can take on the GST free status of the dominant supply of the handcycle. As such the supply of the handcycle and its associated accessories to you in one single package is a single composite supply which is GST free as the dominant part of the supply is GST free.

Summary

In conclusion, the supply of the handcycle is covered by item 105 and is GST free as all the requirements of subsection 38-45(1) of the GST Act have been satisfied. The supply of the handcycle accessories to you are covered by item 106 as accessories associated with the handcycle and as such will be GST-free supplies under subsection 38-45(1) of the GST Act. This is provided that the accessories are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.

Alternatively, the accessories associated with the handcycle are integral, ancillary or incidental to the dominant part of the supply which need not be separately recognised and can take on the GST free status of the dominant supply of the handcycle. As such the supply of the handcycle and its associated accessories to you in one single package is a single composite supply which is GST free as the dominant part of the supply is GST free.

Therefore, the importation of the handcycle and its associated accessories satisfies the requirements of a non-taxable importation because had it been a supply, the supply would have been a GST-free supply under subsection 38-45(1) of the GST Act. Therefore, the importation of the handcycle and its associated accessories is not subject to GST.

Supply of the sit ski and its associated accessories

Item 105

Item 105 lists '…and other goods for the carriage of people with disabilities'.

Based on the information provided, the sit ski is covered by item 105 as it is considered to be 'other goods for the carriage of people with disabilities'. You advised that the sit ski will enable you to engage in recreation and training which is designed to lift your overall level of fitness. It is a fibreglass moulded seat mounted on a frame which is in turn mounted on a single snow ski. Balance is achieved by the use of hand held "outriggers" (similar to elbow crutches with ski tips attached to the base). The design of the frame allows the sit ski to use the chair lift or attach to a T-bar lift. The skier is therefore able to ski independently. Without a sit ski this would not be possible. In addition the sit ski user's manual details that the sit ski is designed to allow physically disabled persons to ski.

The sit ski is custom made and has features which indicate it has been specifically designed for persons with an illness or disability. The sit ski is not widely used by people without an illness or disability.

Accordingly, all of the requirements of subsection 38-45(1) of the GST Act are satisfied and therefore, we consider that a supply of the sit ski to you will be GST-free.

Item 106

You are also importing other accessories associated with the sit ski.

Item 106 lists 'accessories associated with …and other goods for the carriage of people with disabilities'.

You have provided a copy of the invoice which shows that the following options have been itemised on the invoice:

Seat lift-up tube with screws

Chest strap

Although the seat lift-up tube with screws is separately itemised on the invoice, you advised that the seat lift-up tube with screws is a necessary piece of equipment for the operation of the sit ski in order to load it onto a chairlift. As such, it is considered to be an integral part of the sit ski rather than being an accessory. As it is not been supplied separately it is part of the sit ski which is covered by item 105 as discussed earlier.

The chest strap has been selected by you on the purchase order form specifically to meet your disability and to give you extra support while using the sit ski. You advised that not every purchaser would need this item. This is covered by item 106 as an accessory associated with the sit ski which is "other goods for the carriage of people with disabilities" and as such will be a GST-free supply under subsection 38-45(1) of the GST Act as the accessory is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability.

Single composite supply

In addition it is to be noted that the supply of the sit ski and associated accessories (although separately itemised on the invoice) have been supplied to you in one single overall package rather than separately. Where a supply comprises multiple items or parts having a supply of one dominant part that has other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply, then for GST purposes this can be treated as a single composite supply, which would take on the GST status of the dominant part. In your case the dominant part of the supply is the sit ski which has been determined as GST-free as the requirements of subsection 38-45(1) of the GST Act have been satisfied. Therefore the other parts which are considered to be integral, ancillary or incidental to the dominant part of the supply need not be separately recognised and can take on the GST-free status of the dominant supply of the sit ski. As such the supply of the sit ski and its associated accessories to you in one single package is a single composite supply which is GST-free as the dominant part of the supply is GST- free.

Summary

In conclusion, the supply of the sit ski is covered by item 105 and is GST-free as all the requirements of subsection 38-45(1) of the GST Act have been satisfied. The supply of the sit ski accessory to you are covered by item 106 as accessories associated with the sit ski and as such will be GST-free under subsection 38-45(1) of the GST Act as it is an accessory specifically designed for people with an illness or disability and is not widely used by people without an illness or disability.

Alternatively, the accessories associated with the sit ski are integral, ancillary or incidental to the dominant part of the supply which need not be separately recognised and can take on the GST free status of the dominant supply of the sit ski. As such the supply of the sit ski and its associated accessories to you in one single package is a single composite supply which is GST-free as the dominant part of the supply is GST-free.

Therefore, the importation of the sit ski and its associated accessories satisfies the requirements of a non-taxable importation because had it been a supply, the supply would have been a GST-free supply under subsection 38-45(1) of the GST Act. Therefore, the importation of the sit ski and its associated accessories is not subject to GST.

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