Edited version of your written advice

Authorisation Number: 1012697391596

Ruling

Subject: Medical aids and appliances

Question

Are the products listed in List I GST-free under section 38-45 of the GST Act?

Answer

No, the products listed in List I are not GST-free under the GST Act except Leg Spacer and Positioning Body Wedges.

Relevant facts and circumstances

• You are a company acting as the trustee for a trust.

• You are registered for the goods and services tax (GST).

• You manufacture and distribute a range of products which you claim are designed for the rehabilitation and care of patients with degenerative spinal conditions or accident induced spinal conditions.

• These products, you further claim, are designed and manufactured expressly for use by persons who suffer from sickness, disease or disablement and are of a kind not ordinarily used by persons who do not suffer from such conditions.

• You state that the products are recommended by health therapists for use by people who have an illness or a disability.

• In your submission you state that the products are stocked on the premises of health clinics/practices of physiotherapists, chiropractors and osteopaths to be supplied for patients under their care for night time use.

• You also declare that the products are stocked at selected chemists and surgical supply companies where the patients can purchase them on the recommendation of their health care professional.

• You advise that the products are not available through conventional bedding stores or department stores.

• It is your position that the products listed in this ruling request fall into one of three categories. These are: (1) Night-time positioning equipment (2) Backrests, leg rests, and footboards for bed use and (3) Cushions specifically designed for people with disabilities. You provided a list (List 1) with the trade names of the products.

• You state that these three categories are covered by items 82, 67, and 87 in Schedule 3 to the A New Tax System (Goods and Services Tax) 1999 Act (GST Act) respectively.

• You provided the name of the website where the details of these products are given.

Relevant legislative provisions

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

Reasons for decision

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

• is 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)

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

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

All the above requirements must be satisfied for a medical aid or appliance to be GST-free.

The first requirement is that the medical aid or appliance must be listed in the table in Schedule 3 or the GST Regulations.

You contend that the products for which you have sought this ruling are covered by items 82, 67 or 87 in Schedule 3 to the GST Act. We examine each of these items to determine whether your products are covered by them.

For the purpose of this ruling, we examined the products advertised in your website and which are listed in our ruling as List - 2.

Item 87 - cushions specifically designed for people with disabilities

Item 87 in Schedule 3 to the GST Act lists 'cushions specifically designed for people with disabilities'. It is considered that for an item to fall within this category, the cushion must do more than act as a preventative measure or merely provide comfort. The cushion must actually treat and alleviate an existing disablement rather than preventing it or providing comfort. Therefore, where such items fall within this category and provided they are not widely used by people without an illness or disability, they will be GST-free under subsection 38-45(1) of the GST Act.

It is the Australian Tax Office's understanding that certain cushions, such as Lumbar Rolls, treat and alleviate back pain. Back pain is considered to be a disablement as it is associated with an 'incapacity of action or use of some part of the body' - per BJ McMahon, AAT W38, 89 ATC 387. It is not common for people with a healthy back to use Lumbar Rolls either as a preventative measure or to provide comfort. As such, it is considered that Lumbar Rolls fall within item 87 in the table in Schedule 3 to the GST Act.

Accordingly, products specifically designed for people with disabilities will only be GST-free where they do more than act as a preventative measure or merely provide comfort and support. They must actually treat and alleviate an existing disablement rather than preventing it or providing comfort and support. Therefore, where such items fall within this category and provided they are not widely used by people without an illness or disability, they will be GST-free under subsection 38-45(1) of the GST Act.

Each of the products in question has been considered to determine whether they fall within item 87 in Schedule 3 to the GST Act.

Based on the information provided and obtained from your website, it is considered that each of the products are general use products which merely provide comfort and support without treating and alleviating an existing disablement.

In summary, none of the products in question fall within item 87 in the table in Schedule 3 to the GST Act, being 'cushions specifically designed for people with disabilities'.

Item 82 - night-time positioning equipment modifications

It is considered that item 82 in the table in Schedule 3 to the GST Act which lists 'night-time positioning equipment modifications' refers to modifications necessarily made to night-time positioning equipment in order to enable correct positioning of a person to suit their particular condition or disability during sleep. The item number is clear in that it is the modifications to such night-time positioning equipment, rather than the night-time positioning equipment itself, that is covered by this item number.

It is considered that a product is not a modification to night-time positioning equipment. A product is a separate item in itself which, when placed on a bed, does not effect a modification to the bed. It is merely a bedding accessory. Further, if the pillow itself was considered to be a piece of night-time positioning equipment (which is arguable), the product would still not fall within this item as it is only modifications to the product that would be covered.

Accordingly, these items are not covered by item 82 in the table in Schedule 3 to the GST Act.

According to your advertising material in your website, the contoured items you supply are designed to promote healthy posture while sleeping and prevent or reduce the risk of postural problems and neck stiffness from occurring rather than being designed specifically for people with an illness or disability.

Item 67 - backrests, leg rests and footboards for bed use

Item 67 in Schedule 3 to the GST Act lists backrests and leg rests for bed use. The two items in List 2 that can be considered under item 67 are Leg Spacer and Positioning Body Wedge Aligner.

Your website claims that the leg spacer is for relieving low back strain by properly aligning knees and hips and is "ideal for those recovering from hip surgery" and it is "therapeutically designed to help relieve pressure and strain on the lower back, hips and knees while you sleep by helping your legs align with your spine"

The other product that falls within this classification from the product List - 2 is Positioning Body Aligner. Your website mentions a number of uses for this product, including,

• Stabilises the trunk with support for front and back

• Reduces sacral pressure to prevent pressure sores

• Aids in the management and healing of existing sores

• Under thighs - help maintain pelvic tilt in pelvic traction

• Promotes proper hip alignment

• Secure, comfortable, and more stable than pillows.

It is our view that the descriptions of these two products meet the requirements of subsection 38-45(1) of the GST Act. Therefore the supply of these items is GST-free.

Snugfit Australia Pty Ltd v Commissioner of Taxation

In your submission you contend that the Administrative Appeals Tribunal (AAT) finding in the Snugfit case applies to your products. The AAT found that the product in Snugfit case is covered by Item 82 in Schedule 3 to the GST Act and not covered under Item 64, Item 67 or Item 87.

The product in Snugfit case comprised of a number of components including:

• Detachable and adjustable headrest;

• Shoulder and arm recess channel;

• Incline and weight support;

• Extension cushion (slide minimiser)

• Arm support extensions

The product was also marketed by the supplier as a product designed to be placed on and used in conjunction with a mattress.

We are of the view that none of your products in List - 2 are covered by Item 82 in Schedule 3 to the GST Act.

Paragraph 38-45(1) (b) of the GST Act

The second and third requirements in subsection 38-45 (1) of the GST Act are that for the supply of a medical aid or appliance to be GST-free it must be designed for people with an illness or disability and is not widely used by people without an illness or disability.

We examined all the products in List - 2 given in your website.

Except Nos 4 and 5 in List - 2 above, the advertising material in the website does not sufficiently demonstrate that the items were specifically designed for people with an illness or disability. The advertising material in the web appears to imply that although these are suitable to alleviate certain sleeping situations, they are also suitable for anyone needing some extra comfort with sleeping. They are also available for purchase through your website merely on the basis of the descriptions given therein.

GST Pharmaceutical Health Forum Issues Register deals with a number of issues relating to medical aids and appliances. The issues addressed therein are public rulings for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953. The following issues are relevant with regard to this case:

Issue 1.c.

What factors should be taken into account in determining whether a medical aid or appliance is specifically designed for people with an illness or disability?

In determining whether a medical aid and appliance is specifically designed for people with an illness or disability reference should be made to the designer's/manufacturer's intention of how the good is to be used and its features. Indicators of the designer's/manufacturer's intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased.

Issue 1.d.

What factors should be taken into account in determining whether a medical aid or appliance is widely used by people without an illness or disability?

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 its manufactured purpose will not prevent the good from being GST-free.

It will be seen from the above that the way your products, except Nos 4 and 5 in List - 2, are marketed in the website does not show that they are specifically designed for people with an illness or disability. Rather, they are promoted to be used by a wide range of people who may not necessarily be considered as "people with an illness or disability" under the common understanding of these terms. It is also evident from the material in the website that the thrust of its advertising is to reach people who wish to purchase pillows and support material for a comfortable sleep whether or not they have an illness or disability.

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