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Edited version of your private ruling
Authorisation Number: 1012564464797
Ruling
Subject: GST and medical aids and appliances
Question
Will you be making a GST-free supply under section 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply your product (Product)?
Answer
Yes.
Relevant facts and circumstances
· You are registered for goods and services tax (GST).
· You are to supply to retail outlets the Product.
· The Product is fully water proof and is specifically designed for people with an illness or a disability including incontinence.
· You do not have any agreements with your customers stating that your supply of the Product will not be treated as GST-free supplies.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999:
Subsection 38-45
Section 182-10
Section 182-15
Schedule 3.
Reasons for decision
For your supply of the Product to be a GST-free under section 38-45 of the GST Act as a medical aid and appliance, it must:
· be 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)
· be specifically designed for people with an illness or disability, and
· not be widely used by people without an illness or disability.
Item 16 in the table in Schedule 3 to the GST Act (Item 16) lists waterproof covers or mattress protectors. Furthermore, item 22 in the table in Schedule 3 to the GST Act (Item 22) lists waterproof protection for beds and chairs.
The terms waterproof covers or mattress protectors and waterproof protection for beds and chairs are very wide in meaning and do not provide enough indication as to the characteristics or class of goods that are covered.
Items 16 and 22 are listed under the category Continence which appears in the second column of the table in Schedule 3 to the GST Act.
Section 182-15 of the GST Act provides that the second column of the table in Schedule 3 is not operative and in interpreting an item in this table, or any other operative provision, the column may only be considered for a purpose for which an explanatory section may be considered under subsection 182-10(2) of the GST Act.
Paragraph 182-10(2)(c) of the GST Act provides that in interpreting an operative provision, an explanatory section may only be considered in determining the provision's meaning if the provision is ambiguous or obscure.
Therefore, we consider that for an item to be covered under Items 16 and 22, the item must be designed for the purpose of assisting with the treatment or management of incontinence.
Your Product is specifically designed for people with incontinence. Therefore, the Product is specifically designed for people with an illness or disability and as such is covered by Items 16 and 22. What is left to be determined is whether your Product is not widely used by people without an illness or disability.
Factors taken into account in determining whether a medical aid or appliance is not widely used by people without an illness or disability are discussed in the GST Pharmaceutical Health Forum Issues Register (available from our website ato.gov.au).
Issue number 1.d. in the GST Pharmaceutical Health Forum Issues Register states:
In determining whether a medical aid and appliance is used by people without an illness or disability reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased.
Subsection 38-45(1) does not require the GST treatment of a medical aid and appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products.
Accordingly, it is considered that irregular and uncommon use of a medical aid and appliance in a way contrary to it's manufactured purpose will not prevent the good from being GST-free.
Based on the information provided, we consider that the common purpose for which the Product will be purchased is for the management of incontinence and as such, the Product will not be widely used by people without an illness or disability.
Accordingly, your supply of the Product meets all of the requirements listed in subsection 38-45(1) of the GST Act. Furthermore you do not have any agreements with your clients stating that supplies of the Product would not be treated as GST-free supplies.
Consequently, your supply of the Product will be a GST-free supply under section 38-45 of the GST Act as a medical aid and appliance.
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