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Edited version of private advice

Authorisation Number: 1051572328192

Date of advice: 30 August 2019

Ruling

Subject: The supply of a medical aid or appliance

Question

Is your supply of the product GST-free under subsection 38-45(1) of the A New System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the supply of the product is not GST-free under subsection 38-45(1) of the GST Act. Where you are registered or required to be registered for goods and services tax (GST) the supply is a taxable supply.

Relevant facts and circumstances

You are not registered for GST.

You design and supply a medical aid or appliance.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(2)

Reasons for decision

Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance 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 (GST Regulations)

·        is specifically designed for people with an illness or disability, and

·        is not widely used by people without an illness or disability.

All the above elements must be satisfied for an item to be GST-free under subsection 38-45(1) of the GST Act. The supply of an item that satisfies subsection 38-45(1) of the GST Act will be GST-free all the way down the supply chain and not only when supplied to a person with an illness or disability.

However, pursuant to subsection 38-45(3) of the GST Act, a supplier and purchaser can agree to treat the supply as if it were a taxable supply.

There are no items in the table in Schedule 3 to the GST Act or the GST Regulations that would cover the product. Accessories for an item are not GST-free unless there is an item that specifically lists an accessory for an item, for example Item 106 in the table in Schedule 3 lists 'accessories associated with wheelchairs, motorised wheelchairs, scooters, tricycles, spinal carriages and other goods for the carriage of people with disabilities.' Therefore, as the first requirement in subsection 38-45(1) of the GST Act is not satisfied, the supply of the product is not be GST-free under subsection 38-45(1) of the GST Act.

Spare part

For completeness we will address the issue of whether the product is considered a spare part.

Subsection 38-45(2) of the GST Act provides that a supply of a spare part is GST-free if:

·        it is supplied as a spare part for a GST-free medical aid or appliance; and

·        it is specifically designed as a spare part for a GST-free medical aid or appliance.

Spare part is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) defines spare part to mean 'a part which replaces a faulty, worn, or broken part of a machine'.

Therefore, it is considered that a spare part for a medical aid or appliance is a part that is used to replace a faulty, worn or broken part of a medical aid or appliance. The product is not considered to be a spare part for a GST-free medical aid or appliance.

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