Edited version of private advice

Authorisation Number: 1051815420097

Date of advice: 11 March 2021

Ruling

Subject: GST and medical use devices

Question

Are supplies by the entity of the medical use devices GST-free under section 38-45 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act)?

Answer

Yes.

This ruling applies for the following period:

1 October 2020 until 31 March 2025

Relevant facts and circumstances

The entity is registered for GST and supplies medical use devices. Information about the devices was provided.

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 section 38-45

Reasons for decision

Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances will be 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 2019 (GST Regulations); and

•   is specifically designed for people with an illness or disability; and

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

Item 132 of Schedule 3 to the GST Act lists 'vaporisers'. The term 'vaporisers' is not defined in the GST Act. Where a term is not defined in the relevant Act, it takes on its ordinary meaning unless the term has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates (Herbert Adams Pty Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222; (1932) 2 ATD 31).

The Macquarie Dictionary online does not define vaporiser but rather, defines the word vaporise as follows:

vaporise

- verb 1. To cause to pass into the gaseous state.

- verb 2. To become converted into vapour

The Australian Oxford Dictionary (2 ed.) defines vaporiser as:

•   noun: a device that vaporises substances, especially for medicinal inhalation.

The Oxford Concise Medical Dictionary (10 ed.) defines vaporizer as:

•   noun: a piece of equipment for producing an extremely fine mist of liquid droplets by forcing a jet of liquid through a narrow nozzle with a jet of air. Vaporizers are used to produce aerosols of various medications for use in inhalation therapy.

Having regard to these dictionary definitions, for the purposes of item 132, a 'vaporiser' is interpreted to mean a device for reducing medications to a fine mist of liquid droplets (i.e. a vapour; aerosols) for use in inhalation therapy.

It is considered that the devices in this case are vaporisers and fall within item 132 of Schedule 3 to the GST Act.

For the supply of the devices to be GST-free, the devices also have to be:

•   specifically designed for people with an illness or disability; and

•   not widely used by people without an illness or disability.

In determining whether a medical aid and 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 its features. Indicators of the designer's/manufacturer's intention of how the good is to be used include how the good is marketed and the type of retail outlets at which the good can be purchased.[1] It is how it is designed that is the test.

Whether a medical aid or appliance is used by people without an illness or disability reference should be made to how the wider community uses the goods. That is, the common purpose for which the goods are purchased. The GST treatment is not determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products.

It is considered that the devices are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.

Accordingly, the supply of the devices meets all the requirements of subsection 38-45(1) of the GST Act and is GST-free.

Qualification

Please note, that if the usage of the devices by the wider community changes over time so that they become widely used by people without an illness or disability, the supply of these devices will no longer satisfy all the requirements of subsection 38-45(1) and will no longer be GST-free.

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