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Edited version of your written advice
Authorisation Number: 1051326069328
Date of advice: 11 January 2018
Ruling
Subject: GST and medical appliances
Question
Is the supply of a medical appliance a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
Relevant facts and circumstances
The Entity is selling a medical appliance in Australia and is registered for goods and services tax.
The Entity has provided a brochure for the medical appliance which provides relevant information on how the appliance works and its working mechanism.
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 Subsection 38-45(1).
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3.
Reasons for decision
Item 141 in Schedule 3 to the GST Act which lists ‘transcutaneous nerve stimulator machines’ (TENS machine) is the most relevant item to be considered in the current case. If the appliance in the current case falls within the definition of a TENS machine, a supply of such appliances will be GST-free if it is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability.
ATO Interpretative Decision ATO ID 2001/281 Goods and Services Tax: GST and Non-invasive acupuncture point electric stimulators (ATO ID 2001/281) provides guidance on the factors considered when determining whether a particular product is a TENS machine.
ATO ID 2001/281 provides that the phrase ‘transcutaneous nerve stimulator machine’ is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222).
ATO ID 2001/281 states:
The Concise Medical Dictionary (1998) defines 'transcutaneous electric nerve stimulation' as:
'the introduction of pulses of low-voltage electricity into tissue for the relief of pain. It is effected by means of a small portable battery-operated unit with leads connected to electrodes attached to the skin; the strength and frequency of the pulses, which prevent the passage of pain impulses to the brain, can be adjusted by the patient. TENS is used mainly for the relief of rheumatic pain; as a method of producing pain relief in labour, it is less frequently used than epidural anaesthesia (see spinal anaesthesia), which has a much wider application for pain relief in obstetrics.'
Black's Medical Dictionary (1995) defines 'transcutaneous nerve stimulation' as:
'a method of electrical stimulation that is being used for the relief of pain, including that of migraine, neuralgia and phantom limbs. Known as TENS, its mode of action appears to have some resemblance to that of acupuncture. Several controlled trials suggest that it provides at least a modicum of relief of pain after operations, thereby reducing the amount of analgesics that may be called for.'
Based on the above definitions, it is considered that a TENS machine is a small portable battery-operated unit with leads connected to electrodes that are then attached to the skin. The purpose of the machine is to aid pain relief by preventing the passage of pain impulses to the brain. As such, a TENS machine only includes those devices which are developed primarily for the purpose of pain relief.
The appliance in the current case is not a TENS machine based on the information provided. As the appliance is not covered by any items in Schedule 3 to the GST Act (Schedule 3), or specified in the GST Regulations, a supply of such appliance is not GST-free under subsection 38-45(1) of the GST Act.
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