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Edited version of your written advice
Authorisation Number: 1012829007296
Date of advice: 30 June 2015
Ruling
Subject: GST, medical aids and appliances
Question
Is the installation of a medical alert device listed in subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) by you, GST-free?
Answer
Yes. Your supply and installation of the medical alert device(s) will be GST-free under subsection 38-45(1) of the GST Act, as there is a single supply of an installed medical alert device(s).
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 38-45, and
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3
Relevant facts and circumstances
You sell various medical alert devices.
When a medical alert device is prepared for a customer, it requires activation and programming specific to the customer. Before the customer is given their medical device, specialised tools and programming codes are used to customise the medical alert device for the customer. Your medical alert device will not work unless it is activated and programmed.
Previously, the setting up of the medical alert device was optional.
You are considering a new arrangement where you will sell the device fully set up due to customers' problems with the device. That is, you will charge one price for the medical alert device that is fully set up (activated and programmed). The customer just needs to pay separately for the extras like the pouch and the phone card.
You previously received a private ruling where we advised that the importation and sales of the certain products and power adaptors used to charge their batteries are GST-free as medical alert devices.
You also received a private ruling where we advised, among others, that:
• The supply of certain products is a GST-free supply of a medical alert device.
• The pre-paid phone card that you supply with the medical alert device is not a GST-free spare part of a GST-free medical aid or appliance.
Reasons for decision
Summary
Your supply and installation of the medical alert device(s) will be GST-free under subsection 38-45(1) of the GST Act, as there is a single supply of an installed medical alert device(s).
Detailed reasoning
A supply of a medical aid or appliance will be GST-free if it satisfies subsection 38-45(1) of the GST Act. Subsection 38-45(1) of the GST Act states:
A supply is GST-free if:
(a) it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations; and
(b) the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.
Item 33 of Schedule 3 to the GST Act lists 'medical alert devices'. It is considered that a 'medical alert device' is a device which is designed for the purpose of alerting medical/caring personnel or an ambulance service that a person is in need of emergency medical assistance.
Medical alert devices will be considered GST-free at all stages of the supply chain. The supply will be GST-free no matter who makes the supply or who the supply is made to.
We have previously advised you that the supplies of certain products and the power adaptors used to charge their batteries are GST-free medical alert devices. Further, the supply of certain products is a GST-free supply of a medical alert device.
Therefore, the supply of these medical alert devices will be GST-free under subsection 38-45(1) of the GST Act.
In relation to the installation (activation and programming) service, there are no provisions within the GST Act to specifically allow for the separate installation service of the medical alert device to be GST-free.
What is left to be determined is whether the installation service (activation and programming) of the medical alert devices forms part of your GST-free supply of the medical alert device(s).
Issue 4.a.13 of the Health Industry Partnership - issues register (HIP issues register) considers whether the installation of a GST-free medical aid forms part of a composite GST-free supply of the medical aid under section 38-45 of the GST Act.
The supply and installation of the medical aid or appliance will be GST-free in situations where it is provided under a single contract for an 'installed medical alert device'. The supply of the medical aid or appliance will be GST free and would include a charge for installation. It is considered that the dominant part of this composite supply is the supply of the medical aid or appliance. The installation service is integral, ancillary or incidental to the supply of the medical aid or appliance, as the installation service merely contributes to or complements the use or enjoyment of this dominant part of the composite (single) supply.
However, if a client purchased a 'medical alert device' and then contracted with you (or another entity) to install the 'medical alert device', the supply is of an installation service, which will be subject to GST. In addition, if the installation of the 'medical alert device' is merely an optional extra to the supply of the 'medical alert device', there will be two supplies, a GST-free supply of the 'medical alert device' and a taxable supply of the installation service.
The facts indicate that you will be contracted (under a single contract) to supply and install a complete device, being a medical alert device listed under Item 33 of Schedule 3 to the GST Act. The installation of the medical alert device involves activation and programing of the emergency contact numbers specific to the customer. Before the customer is given their medical alert device, the expertise of the installer is required as specialised tools and programming codes are used to customise each medical alert device for the customer. Your medical alert device(s) will not work unless it is activated and programmed.
You will sell the medical alert device(s) fully set up (activated and programmed) and will charge one price for the medical alert device(s). The installation (that is activation and programming) of the devices will no longer be optional, and the customer will be charged the same single price for the medical alert device(s).
Therefore, the supply and installation of the medical alert devices will be GST-free under subsection 38-45(1) of the GST Act, as there is only a single supply being made, that of an 'installed medical alert device'. In this circumstance, there is no need to apportion the consideration for the supply of the medical alert device from the installation.
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