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Ruling

Subject: GST and medical aids and appliances

Questions

1. Are the supplies of your products and associated refill filter cartridges GST-free supplies under subsection 38-45(1) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

2. Is the supply of the hand held product a GST-free supply under subsection 38-45(1) of GST Act?

Answers

1. No, your supplies of the products and associated cartridges are not GST-free supplies under subsection 38-45(1) of the GST Act.

2. No, your supply of the hand held product is not a GST-free supply under subsection 38-45(1) of GST Act.

Relevant facts and circumstances

You are registered for GST.

You are selling specific products and associated cartridges and the hand held product.

You have provided a copy of the products brochure. Details of the products can also be found on your website.

The advertising and promotional information with respect to the products addresses many of the conditions that they assist with and how the products work to provide relief for the sufferer from the conditions.

Some of your products are the power operated mechanical delivery devices that work by dispersing tiny particles of a particular aerosol into the air, while entrapping dust and other airborne pollutants through a filter. The devices effectively contain a fan and a filter cartridge.

When inhaled, these particles travel through the upper and lower respiratory tract (airway), breaking up mucous and increasing air flow, as well as reducing airway inflammation associated with respiratory conditions. The products are designed to provide relief from a variety of respiratory conditions.

The only difference in the power operated products is their size and the room size that they are intended to effectively service.

The cartridges contain a particular matter which is released into the air in a room by the power operated devices. These require replacing every particular period for effective use of the power operated devices.

The hand held product is effectively the mobile or pocket version of the power operated products. It is a hand held breath activated device used for inhalation. The hand held product is filled with the same matter used in the power operated products.

Whilst use of the products does not require a medical referral it is marketed to those people suffering from respiratory conditions and also distributed through medical and health professionals where their target market would be those patients suffering from respiratory conditions.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 38-45,

A New Tax System (Goods and Services Tax) Act 1999 Schedule 3,

A New Tax System (Goods and Services Tax) Act 1999 Schedule 3, table items 129 to 138,

A New Tax System (Goods and Services Tax) Regulations 1999 Schedule 3,

A New Tax System (Goods and Services Tax) Act 1999 Section 38-47 and

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.

Reasons for decision

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.

Schedule 3 to the GST Act contains three columns made up of the item number, the category and the medical aid or appliance. If the meaning of the medical aid or appliance listed in the third column is unclear, you can use the category column to clarify it.

You advised that your products perform a similar function to devices which are covered by items 129 to 138 in the table in Schedule 3 to the GST Act, in particular item 132 in the table in Schedule 3 to the GST Act (item 132) which covers vaporisers. We will now examine if your products are covered by item 132 you mentioned.

Item 132

Item 132 lists 'vaporisers'.

The term 'vaporisers' is not defined in the GST Act.

Where a term is not defined in the relevant Act, it takes on its ordinary meaning, unless the term has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates (Herbert Adams Pty Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222; (1932) 2 ATD 31).

In this case, given the context in which the term 'vaporiser' appears (i.e., in a list of medical aids and appliances), the term is considered to have a special or technical meaning. Therefore, it is not appropriate to refer to the ordinary meaning of that term.

Stedman's Medical Dictionary 28th edition defines 'vaporizer' as:

· An apparatus for reducing medicated liquids to a state of vapor suitable for inhalation or application to accessible mucous membranes.

· A device for volatizing liquid anesthetics.

This definition indicates that the primary purpose of a vaporiser is to facilitate the delivery of liquid medications.

You have advised that your power operated products are used to disperse a particular matter into the air as well as purifying the air by entrapping dust and other airborne pollutants through a filter. Your hand held product is a hand held breath activated device which forces inhaled air through a layer of a particular matter. As your products are not used for reducing liquid medication to vapour, it does not come within the technical meaning of a 'vaporiser' for the purposes of the GST Act. Consequently, your products are not covered by item 132.

As you have mentioned items 129 to 138, we will also consider whether your products are covered by these other items.

Item 129

Item 129 in the table in Schedule 3 to the GST Act (Item 129) lists 'peak flow meters'.

The term 'peak flow meters' is not defined in the GST Act.

Stedman's Medical Dictionary 28th edition defines 'peak flow meter' as:

· A hand-held device that measures peak expiratory flow; useful for self-monitoring of airway obstruction in asthma.

A peak flow meter is a small, hand-held device used to monitor a person's ability to breathe out air. Your products are not hand-held devices that measure a person's ability to breathe out air and consequently are not covered by item 129.

Item 130

Item 130 in the table in Schedule 3 to the GST Act (Item 130) lists 'nebulisers'.

The term 'nebulisers' is not defined in the GST Act.

Stedman's Medical Dictionary 28th edition defines 'nebulisers' as:

· A device used to reduce a liquid medication to extremely fine cloudlike particles; useful in delivering medication to deeper parts of the respiratory tract.

A nebuliser is a device used to administer medication in the form of a mist inhaled into the lungs. Your products are not nebulisers and consequently are not covered by item 130.

Item 131

Item 131 in the table in Schedule 3 to the GST Act (Item 131) lists 'spacers'.

The term 'spacers' is not defined in the GST Act.

Stedman's Medical Dictionary 28th edition defines 'spacer' as:

· A device attached to a metered-dose inhaler that aids delivery of inhaled medications.

Spacers are used to ensure proper delivery of inhaled medication. Your products are not used for this purpose. Consequently, your products are not spacers and are not covered by item 131.

Item 133

Item 133 in the table in Schedule 3 to the GST Act (Item 133) lists 'respirators'.

The term 'respirators' is not defined in the GST Act.

Stedman's Medical Dictionary 28th edition defines 'respirator' to mean:

· An apparatus for administering artificial respiration in cases of respiratory failure.

· An appliance fitting over the mouth and nose, used for the purpose of excluding dust, smoke, or other irritants, or of otherwise altering the air before it enters the respiratory passages.

Your products do not fulfil this function and are not used to provide artificial respiration. Accordingly, your products are not covered by Item 133.

Item 134

Item 134 in the table in Schedule 3 to the GST Act (Item 134) lists 'air pumps'.

The term 'air pumps' is not defined in the GST Act.

'Air pump' is not defined in the Stedman's Medical Dictionary 28th edition. However, the Stedman's Medical Dictionary 28th edition defines 'pump' as:

· An apparatus for forcing a gas or liquid from or to any part.

· Any mechanism for using metabolic energy to accomplish active transport of a substance.

The second column of Schedule 3 is not operative, but may be considered if the meaning of the medical aid or appliance listed in the third column is unclear. The category heading for the purposes of item 134 confirms that 'air pumps' are those that are 'respiratory appliances-other products for those with breathing difficulties.'

Therefore, it will be considered that an 'air pump' is a respiratory appliance for forcing air from or to any part of the body for people with breathing difficulties.

Your products are not 'air pumps' as they are not respiratory appliances for forcing air from or to any part of the body for people with breathing difficulties. Accordingly, your products are not covered by Item 134.

Item 135

Item 135 in the table in Schedule 3 to the GST Act (Item 135) lists 'bottled oxygen and associated hardware'.

Your products are not 'bottled oxygen'. The 'associated hardware' is considered to be mechanical equipment that usually accompanies or is associated with another piece of equipment, in order to conduct a certain activity in particular the delivery of medical oxygen to a patient. Accordingly, your products are not covered by Item 135.

Item 136

Item 136 in the table in Schedule 3 to the GST Act (Item 136) lists 'oxygen concentrators'.

An oxygen concentrator's primary function is to deliver oxygen to a patient at substantially higher concentrations than available in ambient air. Your products are not oxygen concentrators as they do not deliver oxygen to a patient. Accordingly, your products are not covered by Item 136.

Item 137

Item 137 in the table in Schedule 3 to the GST Act (Item 137) lists 'breathing monitors'.

The term 'breathing monitor' is not defined in the GST Act. It is also not defined in the Stedman's Medical Dictionary 28th edition. In the absence of a definition, an item generally takes the technical meaning given to it in by the industry in which the item is used. It is generally accepted in the medical industry that a 'breathing monitor' is a device that monitors a person's breathing while he/she is under anaesthesia/unconsciousness.

Your products do not perform this function and are not covered by Item 137.

Item 138

Item 138 in the table in Schedule 3 to the GST Act (Item 138) lists 'ventilators'. The category heading for the purposes of item 138 confirms that 'ventilators' are those that are 'respiratory appliances-other products for those with breathing difficulties.'

However, your products are not ventilators as they are not designed to mechanically move breathable air into and out of the lungs, to provide the mechanism of breathing for people with breathing difficulties. Therefore, your products are not covered by item 138.

Summary

The supply of your products are not covered under any of the items you have mentioned and are not covered by any other items listed in the table in Schedule 3 to the GST Act or specified in the table in Schedule 3 to the GST Regulations. Therefore, you are not making a GST-free supply under subsection 38-45(1) of the GST Act when you sell your products.

Section 38-47 of the GST Act provides that a supply is GST-free if it is a supply of goods of a kind that the Health Minister, by determination in writing, declares to be goods the supply of which is GST-free. The Health Minister has made such a determination. However, the supplies of your products are not within the scope of this determination. Accordingly, you are not making a GST-free supply under section 38-47 of the GST Act.

There are no other provisions in the GST Act that would make your supplies of your products and associated refill filter cartridges as well as the hand held product GST-free. Therefore, your supply of these products will not be GST-free.

Section 9-5 of the GST Act provides that you make a taxable supply if:

(a) you make the supply for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that you carry on; and

(c) the supply is connected with Australia, and

(d) you are registered, or required to be registered for GST.

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

In your case, you will satisfy the requirements of paragraphs 9-5(a) to (d) of the GST Act when you sell your products. That is, you will make a supply when you sell your products for consideration. The supply will be made in the course or furtherance of an enterprise that you carry on. The supply is connected with Australia, and you are registered for GST. Additionally, there are no provisions in the GST Act that make your supply input taxed, and as explained above, you are not making a GST-free supply.

Therefore, as all the requirements of section 9-5 of the GST Act are met, you are making a taxable supply when you sell your products and associated refill filter cartridges as well as the hand held product.

For your guidance and reference the fact sheet GST and medical aid and appliances (NAT 4651) is available and is accessible from Australian Taxation Office (ATO) website at www.ato.gov.au.

For your guidance you may also wish to refer to the Health Industry Partnership - issues register at issue 4 and 5 and the GST Pharmaceutical Health Forum - Issues Register at issues 1 and 2 which is also accessible from the ATO website.

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