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Edited version of your written advice
Authorisation Number: 1051407996497
Date of advice: 31 July 2018
Ruling
Subject: GST and supply of an ergonomic chair
Question
Are you making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you supply an ergonomic chair?
Answer
Yes, you are making a GST-free supply under subsection 38-45(1) of the GST Act when you supply an ergonomic chair.
Relevant facts and circumstances
● You are carrying on an enterprise of supplying ergonomic chair and registered for goods and services tax (GST).
● The ergonomic chair offers the user multiple sitting positions.
● The key feature of the ergonomic chair is an interchangeable cushion which allows the user to use a variety of sitting positions and postures through the day.
● The ergonomic chair is designed to reduce the negative consequences of prolonged static sitting and promote increased motion through the day when compared to a traditional office chair.
● It has high adjustability (seat height, backrest height, backrest tile, seat surface and other) to individualise the device to the user.
● You will be supplying medical appliances including Orthopaedic Chairs which are specifically designed for people with an illness or disability.
● The ergonomic chair will be custom made to suit the particular person’s anatomical shape in order to provide correct postural support.
● It is not widely used by people without an illness or disability.
● The ergonomic chair has been listed in the Australian Register of Therapeutic Goods (ARTG) as Medical Device Class 1.
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)
Reasons for decision
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with the Indirect Tax Zone; and 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.
In this case, you make a supply for consideration in the course or furtherance of your enterprise. The supply is connected with the Indirect Tax Zone and you are registered for GST. Furthermore, the supply does not fall within any provision of the GST Act which would be input taxed. Therefore, what remains to be determined is whether the supply of ergonomic chair will be GST-free.
Relevantly, subsection 38-45(1) of the GST Act outlines the circumstances in which the supply of certain medical aids and appliances will be GST-free.
Under subsection 38-45(1) of the GST Act a supply of medical aids or appliances is GST-free if 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 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 16 in the table in Schedule 3 to the Regulations (Item 16) specifies 'postural support seating'. Postural support seating as listed in Item 16 needs to be a specific type of seating possessing characteristics that satisfies both the description of the item and the use requirement of paragraph 38-45(1)(b) of the GST Act.
The phrase 'postural support seating' 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).
In consultation with the Health Industry, it is considered that for the purposes of Item 16 and to be a thing that is specifically designed for people with an illness or disability, 'postural support seating' should be:
(i) Custom made to suit the particular persons anatomical shape in order to provide correct postural support; or
(ii) Adjustable to such an extent that the product can be customised to the individual's body shape or size in order to provide correct postural support; or
(iii) Incorporate several of the following design characteristics which will ensure the product provides the necessary postural support for people with an illness or disability:
● adjustable height so as to attain correct seating position for the requirements of the individual;
● adjustable back angle to enable proper support (other than simply reclining) and contain appropriately positioned/shaped back supports;
● adjustable seat height and depth;
● adjustable seat base angle;
● adjustable shoulder and trunk supports;
● side supports;
● calf support;
● footrests specifically designed for injured or disabled persons;
● swing away arms or removable armrests;
● wide arm rests;
● integral push handles;
● specifically designed to provide a correct sitting position that results in sitting firmly on the pelvic bones and that aligns and lifts the head, neck and back;
● fitted with wheels, glides or a mobile base suitable for movement of disabled people;
● locking brakes;
● suitable hand grips for disabled people;
● specific features to enable people with difficulties in rising to get in and out of the seating; and
● pressure reducing cushions.
The ergonomic chair covers several of the characteristics from point 3 above. As such this product will fall within postural support seating as set out in the GST Act and GST Regulations.
In addition, the product must not be widely used by people without an illness or disability and specifically designed for people with an illness or disability.
In determining whether a medical aid or 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 it’s 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.
The taxpayer has confirmed that the ergonomic chair is not widely used by people without an illness or disability. Therefore, the taxpayer is making a GST-free supply under subsection 38-45(1) of the GST Act when they supply an ergonomic chair.
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