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Edited version of your written advice
Authorisation Number: 1051404041071
Date of advice: 30 July 2018
Ruling
Subject: GST and medical aids and appliances
Question
Is the supply of the Headset by you to customers in Australia GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
All further references are to the GST Act unless specified otherwise.
Answer
Yes. The supply of the Headset by you to customers in Australia is GST-free under subsection 38-45(1).
Relevant facts and circumstances
● The Headset is a wireless headset designed to assist those with hearing loss.
● The Headset has several features which are specifically designed to address those with hearing loss.
● The Headset has a microphone, amplifier and receiver.
● This private ruling is provided on the basis that you and the recipient do not have an agreement agreeing that the supply of the Headset is not GST-free. Further, this private ruling only covers the supplies of the Headset made to recipients in Australia.
● The clarity settings within the Headset are a special feature as they allow an adjustment of the frequency response for the wearer.
● The ability to increase volume control up to a certain decibel level serves to work for those with a more severe to profound level of hearing loss. This amount of volume is not required for those without an illness or disability (without hearing loss), and therefore is not built into the majority of headphones on the market.
● A large part of your branding for the Headset is identifying as hearing specialists and discussing options and technology for those with hearing loss. This marketing initiative is demonstrated on your website.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 – subsection 38-45(1)
Reasons for decision
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
You make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you carry on; and
(c) the supply is *connected with the indirect tax zone; and
(d) you are *registered or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
(Terms marked with asterisks (*) are defined in section 195-1 of the GST Act).
The supply of the Headset is not input taxed under any provision of the GST Act. What remains to be determined is whether or not the supply of the Headset is GST-free.
A supply of a medical aid or appliance will be GST-free if it satisfies the requirements of subsection 38-45(1).
Pursuant to subsection 38-45(1) a supply of certain medical aids and appliances is GST-free if:
(a) it 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 (Regulations); and
(b) it is specifically designed for people with an illness or disability; and
(c) it is not widely used by people without an illness or disability.
Subsections 38-45(2) and (3) further provides:
(2) A supply is GST-free if the thing supplied is supplied as a spare part for, and is specifically designed as a spare part for, another thing the supply of which would be GST-free under subsection (1).
(3) However, a supply is not GST-free under subsection (1) or (2) if the supplier and the * recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as GST-free supplies.
Schedule 3 of the GST Act includes a list of items relating to communication aids for people with disabilities. Item 14 of Schedule 3 (item 14) in this list specifies speech amplification/clarification aids. A speech amplification/clarification aid is a device designed to make sound appear larger and/or clearer and more intelligible.
The Headset is designed to assist those with hearing loss to hear the TV clearly and at their own preferred volume. Given the nature of the Headset including its function to make sound appear larger and clearer, it is a ‘speech amplification/clarification aid’ under item 14.
Furthermore, the clarity settings, volume control and amplifier are features made for those with hearing loss. This together with specific marketing of the Headset for use by those with hearing loss which would negate the likelihood that the Headset will be used by those with normal hearing (those without a disability) demonstrates the Headset not being widely used by people without an illness or disability. As such, the Headset satisfies all the requirements under subsection 38-45(1).
Therefore the supply of the Headset by you to customers in Australia is GST-free under subsection 38-45(1).
Additional information
We note that subsection 38-45(3) of the GST Act is not applicable in this case as this private ruling is provided on the basis that you and the recipient do not have an agreement agreeing that the supply of the Headset is not GST-free.
Spare parts
Please note that the supply of a specifically designed spare part for a GST-free medical aid or appliance would be treated as GST-free under subsection 38-45(2). However, generic spare parts that are not specifically designed for a GST-free medical aid or appliance are not GST-free.
This private ruling concerns the GST treatment of the supply of the Headset as one product and not individual supply or supplies of the respective components or spare parts. Accordingly, although the supply of the Headset is made up of components and spare parts, it is not a spare part. Therefore subsection 38-45(2) of the GST Act does not have application to the supply of the Headset.
This private ruling does not cover separate and individual supplies of components such as ear-tips and lithium batteries.
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