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Edited version of your private ruling

Authorisation Number: 1012522861589

Ruling

Subject: Is the supply of garments GST-free

Question

Is your supply of the listed garments GST-free?

Female

Male

Answer

No, your supply of the listed garments is not GST-free. It is a taxable supply.

This ruling applies for the following periods:

1 July 2013 onwards

Relevant facts and circumstances

You confirm that you trade as your disclosed trading name and are registered for GST.

You supply clothing specifically designed for people who suffer from continence issues.

Your products are not designed to be worn by any able-bodied person. They are not fashion garments nor are they classic styling for retirees.

The unique design of the clothing you supply is requested by high care nursing homes and used for people in high-care. People who live in hostels for instance do not use your products.

Your clothing assists in keeping continence pads in place and is open back clothing which easily slides on and off the wearer thereby minimising pain and injury when being dressed by a nurse or carer.

You have stated that the garments greatly assist in the management of continence issues by exposing the continence aid, minimising the need to manually handle the person in care when dressed in your unique designs thus reducing possible injuries and maintaining the dignity of the individual.

You have also stated that your home shoes are recommended by health professionals for certain conditions.

Unlike regular shoes, the opening at the back and the top of your shoes is designed to ensure the shoe can expand, not only for comfort for bunions and sore toes but to accommodate bandages, dressings and pressure hosiery

The female products you contend are GST-free among your range are listed below

The male products you contend are GST-free among your range are listed below

You contend that your garments fall within 'Daily living for people with disabilities' and 'Disposable/reusable continence aids required for continence use' as listed in the table under Schedule 3 of the GST Act.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-40,

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1) and

A New Tax System (Goods and Services Tax) Regulations 1999 Regulation 38-45.01.

Reasons for decision

Under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you must pay the GST payable on any taxable supplies that you make.

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

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

Division 40 of the GST Act deals with input-taxed supplies and does not include anything similar to your listed garments. Division 38 deals with GST-free supplies and specifically, Subdivision 38-B is relevant for consideration.

Subsection 38-45(1) of the GST Act provides that a supply is GST-free if:

Schedule 3 of the GST Act and Schedule 3 of subregulation 38-45.01(1) of the GST Regulations lists a number of medical aids and appliances which are used by people with various illnesses and disabilities.

Items 15 to 27 of Schedule 3 to the GST Act provide for items under the category 'Continence'. Particularly, item 18 lists as a medical aid or appliance, 'disposable/reusable continence pads, pants and nappies required for continence use (excluding nappies for babies, sanitary pads or tampons)'. All three of these products are placed on the lower half of the body, are absorbent and their main purpose is to ensure the wearer remains reasonably dry which prevents discomfort.

Nighties, Singlets, Vests, Under Shirts, Dresses, Blouses and Polos

These types of clothing are neither listed nor similar to the medical aids and appliances listed under item 18 of Schedule 3 to the GST Act. They are worn from the upper half of the body, are not absorbent and do not directly assist the wearer in keeping dry and comfortable. Accordingly, we consider the above clothing is not covered by item 18 of Schedule 3 to the GST Act. As these clothing products are not covered under any other items in Schedule 3 of the GST Act or Schedule 3 of the GST Regulations, these garments do not fall within the description of a medical aid or appliance for GST purposes.

Sundowner Suits, Pants and Trousers

While these garments fall within the classification of pants under item 18 in Schedule 3 to the GST Act, they must also be 'required for continence use'. While these garment designs greatly assist in keeping unattached continence pads secure and in place and in dressing and undressing the wearer, thereby limiting pain, injury and discomfort, the garments themselves are not designed to be absorbent or have any pads attached. Unlike the products listed in item 18, the overall purpose and design of these garments are to make managing continence easier to administer. Accordingly, we consider these garments are not covered by item 18 of Schedule 3 to the GST Act. As there are no other items in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations that cover these clothing products, these garments do not fall within the description of a medical aid or appliance for GST purposes.

Shoes

Item 41 of Schedule 3 to the GST Act includes in the category, 'Footwear for people with disabilities' and specifically names 'surgical shoes, boots, braces and irons'.

The term 'surgical shoes, boots, braces and irons' is not defined in the GST Act, and therefore takes on its ordinary meaning or normal meaning. The Macquarie Dictionary (1997), 3rd edition, The Macquarie Library Pty Ltd, New South Wales, defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'.

The Australian Taxation Office (ATO) issued a number of reference materials, including:

The above references provide the following guidance:

Applying the same principle in the above guidance, we consider that surgical shoes and boots will be limited to those specially constructed shoes or boots designed to support or correct a deformed foot or leg or designed to be worn to support or protect a foot following surgery. The use of the terms together indicates that the meaning is to be limited to a very narrow range of footwear products.

We also consider 'surgical shoe' does not include shoes that are merely for abnormally large, wide or high feet nor does it include shoes for recovery of an injured foot, for example a sprained foot or to correct stance or posture. Where a foot is badly bruised or injured such that it requires a wider and/or higher shoe to alleviate or to prevent pressure being exerted on the injured foot while it heals, the shoe is not a surgical shoe.

A relevant example may be where a foot is badly bruised or injured and it requires a wider and or higher shoe to alleviate or to prevent pressure being exerted on the injured foot while it heals. This type of shoe cannot be a surgical shoe, even where the shoes are custom made or modified.

In your case, unlike regular shoes, your shoes design opening at the back and the top of your shoes are designed to ensure the shoe can expand, not only for comfort for bunions and sore toes but to accommodate bandages, dressings and pressure hosiery to treat conditions. Your shoes are specifically made to maintain comfort and provide for space to accommodate bandages rather than support or correct a post-operative foot. For these reasons, these shoe designs do not fall within item 41 of Schedule 3 of the GST Act. As there are no other clothing products similar to the listed shoes, these shoes do not fall within the description of the medical aids or appliances listed.

Items 28 to 33 of Schedule 3 of the GST Act provide for items under the category 'Daily living for people with disabilities'. There are no products listed within these items that are in any way similar to the clothing you supply. For this reason, your garments do not fall within the description of medical aids or appliances listed under these items.

Items 8 to 10 of Schedule 3 of the GST Regulations cover further items under the categories 'Continence' and 'Daily living for people with disabilities'. There are no products listed within these items that are in any way similar to the clothing you supply. For this reason, your garments do not fall within the description of medical aids or appliances listed under these items.

As there are no items in Schedule 3 of the GST Act or GST Regulations that include items of clothing similar to your garments, the requirements under subsection 38-45(1) of the GST Act will not be met.

Therefore, the supply of your listed garments is not GST-free. Where it satisfies all the requirements under section 9-5 of the GST Act, it will be a taxable supply.

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