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Ruling

Subject: Goods and services tax (GST) and medical aids and appliances

Question 1

Is the supply of the lifting appliance GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes. This is provided the supplier and recipient have not made an agreement that the supply not be treated as GST-free.

Question 2

Is the supply of the charger, spare batteries and other accessory for the lifting appliance also GST-free?

Answer

Yes, the charger, spare batteries and other accessory are GST-free when they are supplied with the lifting appliance and the replacement batteries will also be GST-free when they are sold separately as a spare part for the lifting appliance. This is provided the supplier and recipient have not made an agreement that the supply, not be treated as GST-free.

Relevant facts and circumstances

You are registered for GST.

You supply the lifting appliance.

The lifting appliance consists of various components. There are also additional accessories available that are specifically designed for the lifting appliance. These are a charger, spare batteries and other accessories.

There are other suppliers of the lifting appliance in Australia.

You purchase the lifting appliance from a company in Australia who import the lifting appliance, and then you on sell.

You have provided information about the lifting appliance. The relevant extracts are:

· The lifting appliance is designed to lift a fallen person from the floor.

· The lifting appliance can lift various people including large people.

A fallen aged person can be assisted by a carer. The lifting appliance is used to lift the aged person from the floor to a sitting position and then transfer them to a chair.

The lifting appliance is purchased by nursing homes, hospitals and individuals.

Elderly couples purchase the lifting appliance so that one partner can assist the other after a fall.

You have advised that the lifting appliance is used by ambulances to lift fallen persons in Australia and in Country X.

Ambulances use the lifting appliance when they are called out to a home to assist with a fallen person. The lifting appliance is used to lift the fallen person and transfer them to a wheel chair or stretcher to then be placed in the ambulance and taken to the hospital for a check-up.

You believe that the product is a portable hoist (transfer aid) and meets the criteria for a GST-free medical aid or appliance, specifically item 88.

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 and

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

Reasons for decision

The supply of a medical aid or appliance is GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if it is:

· listed in Schedule 3 to the GST Act or in Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

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

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

An item will only be GST-free if it meets all three requirements of subsection 38-45(1) of the GST Act.

First requirement

The first requirement is that the thing supplied must be covered by an item listed in the table in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations.

Currently, Schedule 3 of the GST Regulations does not list any item relevant to the lifting appliance.

Item 88 in Schedule 3 of the GST Act (Item 88) lists 'manual, electric, ceiling, track or pool hoists specifically designed for people with disabilities'.

The ordinary meaning of the word 'hoist' as defined in the Macquarie Dictionary Fifth Edition, Macquarie Dictionary Publishers Pty Ltd is:

verb

1. to raise or lift, especially by some mechanical appliance: to hoist sail.

noun

4. an apparatus for hoisting, as a lift.

The devices normally covered by Item 88 would be those devices that are used to lift an individual and transfer them, for example, from a bed to a wheelchair.

In this case, the lifting appliance is designed to lift a person. For example a fallen person may be lifted from the ground and then transferred to a chair.

Item 88 also restricts those devises to those which are specifically designed for people with disabilities.

The following guidance is provided by Issue 1.e. of the GST Pharmaceutical Health Forum - issues register (available on ato.gov.au):

It is considered that medical aids or appliances listed in Schedule 3 which are capable of being used by aged persons, satisfy the requirements that the medical aid or appliance be 'specifically designed for people with an illness or disability and not widely used by people without an illness or disability'.

On the information supplied, the lifting appliance has been designed to lift a fallen person from the floor for transfer to a chair, bed etc. You are marketing the lifting appliance to nursing homes, hospitals, ambulances and individuals for the use of lifting people who have limited mobility due to age and weight. It is considered that the lifting appliance has been specifically designed for people with disabilities and is only used for the purpose of lifting them.

As such, the lifting appliance is covered by Item 88 and the first requirement in subsection 38-45(1) of the GST Act is satisfied.

Second requirement

The second requirement is that the thing supplied must be specifically designed for people with an illness or disability.

As Item 88 also requires that the device be specifically designed for people with a disability and we have already established that the lifting appliance is covered by Item 88, the second requirement in subsection 38-45(1) of the GST Act is also satisfied.

Third requirement

The third requirement is that the thing supplied is not widely used by people without an illness or disability.

We have already established that medical aids or appliances listed in Schedule 3 which are capable of being used by aged persons, satisfy the requirements that the medical aid or appliance be 'specifically designed for people with an illness or disability and not widely used by people without an illness or disability'.

As such, the third requirement is also satisfied.

As all the requirements in subsection 38-45(1) of the GST Act are satisfied, the supply of the lifting appliance will be GST-free.

Accessories for medical aids and appliances

In your case, you also intend to supply additional accessories that are specifically designed for the lifting appliance. These are a charger, spare batteries and other accessory.

Where an accessory is listed in Schedule 3 to the GST Act or in Schedule 3 to the GST Regulations, the supply of the accessory will be GST-free provided it is specifically designed for people with an illness or disability and not widely used by people without an illness or disability.

In this case, there are no items listed in Schedule 3 to the GST Act or in Schedule 3 to the GST Regulations that would capture the charger, spare batteries and other accessory for the lifting appliance.

However, an item that is GST-free under subsection 38-45(1) of the GST Act can sometimes be accompanied by accessories that are not listed in Schedule 3 to the GST Act or in Schedule 3 to the GST Regulations.

Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8) provides guidance on mixed and composite supplies by describing characteristics of supplies that contain taxable and non taxable parts (mixed supplies) and the characteristics of supplies that appear to have more than one part but are essentially supplies of one thing (composite supplies).

Paragraphs 16 and 17 of GSTR 2001/8 provide the following explanation for the terms 'mixed supply' and 'composite supply':

· 'Mixed supply' is used to describe a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised.

· 'Composite supply' is used to describe a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. You treat a composite supply as a supply of a single thing.

It is a question of fact and degree whether a particular part of a supply is integral, ancillary or incidental in relation to the whole supply. It is considered that a part of a supply will be integral, ancillary or incidental where it is insignificant in value or function, or merely contributes to or compliments the use or dominant part of the supply.

As such, the ATO considers that where the charger, spare batteries and other accessory are supplied together with the lifting appliance, the supply is a composite supply, and the entire supply will be GST-free.

Spare parts for medical aids and appliances

Where an accessory is not listed in Schedule 3 to the GST Act or in Schedule 3 to the GST Regulations, the supply of the item will be GST-free under subsection 38-45(2) of the GST Act, if it can be considered to be a spare part for a medical aid or appliance that is listed in Schedule 3 to the GST Act or in Schedule 3 to the GST Regulations.

The following guidance on spare parts is provided by Issue 1.g. of the GST Pharmaceutical Health Forum - issues register:

· A spare part is a part which has been specifically designed to replace a faulty, worn, or broken part of a medical aid or appliance.

· Spare parts which are specifically designed as spare parts for a GST-free medical aid or appliance, are GST-free at all points in the supply chain. That is, it is not necessary to determine to whom or for what the part is being supplied. Provided the part has been specifically designed to replace a faulty, worn, or broken part of a GST-free medical aid or appliance, the supply of that part will be GST-free under subsection 38-45(2) at all stages of the supply chain.

· For example, rubber stoppers are generic devices designed for various uses, such as stoppers for the bottom of a steel chair. Therefore as rubber stoppers are not specifically designed for use as a spare part for walking sticks, they are not GST-free as a spare part for a medical aid or appliance.

In this case, we do not consider the charger and other accessory to be spare parts which have been specifically designed to replace a faulty, worn or broken part of the lifting appliance. You have advised that the batteries are not generic batteries but have been specifically designed for the lifting appliance. As such, we consider that the batteries will be a spare part specifically designed to replace a faulty, worn or broken battery in the lifting appliance.

Therefore, the ATO considers that the supply of the replacement batteries (that are specifically designed for the lifting appliance and are not a generic battery that can be used in another device) will be GST-free.

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