Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012749624780

Ruling

Subject: GST and specialised bras

Question

Is the supply by you of the post specialised bras to an Australian customer GST-free pursuant to subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply by you of the post specialised bras to an Australian customer is GST-free pursuant to subsection 38-45(1) of the GST Act.

Relevant facts and circumstances

You are an Australian business which specialises in specialised bras (products) for women who had breast surgery. You are registered for GST.

All the bras are exactly the same in design with a pocket inside the cups to securely and comfortably fit breast prosthesis. .

The products will be sold through your online store. The products will be marketed using traditional media and new methods such as social media.  The products will be described as specialised bras. 

The retail price of the products will be priced slightly higher than the normal/general purpose bras because of the extra workmanship required to include the pockets and also the extra research and testing of the products to ensure they meet the outcomes they are designed to do, that is, you test to ensure the cups securely and comfortably fit the breast prosthesis for a woman who had a surgery.

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 38-45

A New Tax System (Goods and Services Tax) Act 1999, Section 195-1

Reasons for decision

Summary

The post-surgery bras (products) are considered to be 'supplements and aids associated with mammary prostheses' as listed in item 15 of the Schedule 3 to A New Tax System (Goods and Services Tax) Regulations 1999 (GST regulations), satisfying the requirement in paragraph 38-45(1)(a) of the GST Act is satisfied. In addition, the products are 'specifically designed for people with an illness or disability', and are 'not widely used by people without an illness or disability', satisfying paragraph 38-45(1)(b) of the GST Act. Therefore the supply of the products is GST-free.

Detailed reasoning

Section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) deals with medical aids and appliances. It provides that for a supply to be GST-free it must:

Specified in the GST regulations

Schedule 3 to the GST regulations consists of a table of medical aids and appliances. Item 15 of schedule 3 lists 'supplements and aids associated with mammary prostheses'.

ATO Interpretative Decision (ATO ID) 2001/472 states as follows:

You state that your range of specialised bras is exactly the same in design with a pocket inside the cups to securely and comfortably fit breast prosthesis. We therefore consider that the products are 'supplements and aids associated with mammary prostheses' as listed in item 15 of Schedule 3 to the GST regulations and the requirement in paragraph 38-45(1)(a) of the GST Act is satisfied.

Specifically designed for people with an illness or disability:

Issue 1.c of GST Pharmaceutical Health Forum Issues Register deals with the requirement in paragraph 38-45(1)(b) of the GST Act that the thing supplied 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.

You have provided details of the packaging and the marketing methods of the products. The products will be described as specialised bras. 

We consider that the packaging of the products indicates that the products are 'specifically designed for people with an illness or disability'. The marketing methods reinforce that the products are suitable for use by women who have undergone a medical procedure.

Not be widely used by people without an illness or disability

Issue 1.d in the ATO's GST Pharmaceutical Health Forum Issues Register provides guidance for 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.

Your submissions in relation to the requirement that the product is 'not widely used by people without an illness or disability' focus on the nature, price point, and where you plan to target the marketing of the product.

ATO ID 2001/472 provides that a specialised bra differs from regular bras and is not widely used by women who have not undergone medical treatment such as a breast surgery.

You state that the recommended retail price $X of the products are slightly higher than the normal/ general purpose bras because of the extra workmanship and extra research and testing of the products to ensure they meet the needs of women who had surgery in that the users will have the comfort of a secure fit of the breast prosthesis.

In relation to the type of retail outlets at which the product can be purchased, you state that you sell the products through your online store and plan to target certain entities for the supply of the products.

Taking into account all the above information, we accept that the common purpose for which the wider community purchases these products is for use by women who have undergone a medical procedure.

Accordingly, the supply of the products by you satisfies all of the requirements of section 38-45 of the GST Act, and is GST-free. Please note that the supply of the products is GST-free at every point in the supply chain - from manufacture to consumer.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).