ATO Interpretative Decision
ATO ID 2004/218
Goods and Services Tax
GST and supply of an airway suction deviceFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a supplier of medical aids and appliances, 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 it supplies a portable, stand-alone airway suction device?
Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a portable, stand-alone airway suction device. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of medical aids and appliances. The entity supplies an electrically powered airway suction device that is portable and designed for field and transport use.
The airway suction device is a stand alone device. It can be used:
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- in hospital wards
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- at home by people suffering from respiratory illnesses such as cystic fibrosis, or
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- by ambulance paramedics and emergency room medical personnel in the course of patient resuscitation, often as a necessary pre-cursor to, or in conjunction with, devices such as respirators or ventilators.
The airway suction device is specifically designed for use by people with an illness or disability and is not widely used by people without an illness or disability.
There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance:
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- 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)
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- is specifically designed for people with an illness or disability, and
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- is not widely used by people without an illness or disability.
There are no items in Schedule 3 or the GST Regulations that specifically list airway suction devices. However, item 127 in the table in Schedule 3 (Item 127) lists 'respiratory appliance accessories'.
The word 'accessories' is not defined in the GST Act. Accordingly, it is necessary to consider the ordinary meaning of that word. The Australian Concise Oxford Dictionary (1997) defines the word 'accessory' to include 'an additional or extra thing' or 'a small attachment or fitting'. The Macquarie Dictionary (1997) defines 'accessory' as 'a subordinate part or object; something added or attached for convenience, attractiveness, etc., such as a spotlight, heater, driving mirror, etc., for a vehicle.'
The meaning of the word 'accessory' has also been considered in a number of cases relating to sales tax and customs tariff classification. In FC of T v. Polaroid Australia Pty Ltd 71 ATC 4249; (1971) 2 ATR 653, Gibbs J., stated: 'The ordinary dictionary meaning of accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependent upon it.' In FC of T v Kentucky Fried Chicken Pty Ltd 88 ATC 4363; (1988) 19 ATR 1141, Hope J held that an item does not have to be joined to the primary object for it to be considered an accessory.
Furthermore, in Zendel Australia Ltd & Others v. FC of T 92 ATC 4515; (1992) 24 ATR 101 (Zendel's Case), Hill J. held that an accessory must contribute to the working of some principal item or its general effect and also an accessory must be an adjunct to an item rather than an adjunct to a process. This interpretation was confirmed on review by the Full Federal Court (see Zendel Australia Pty Ltd (t/as Glad Products Australia) v. Federal Commissioner of Taxation (1993) 46 FCR 14; 94 ATC 4022; (1993) 27 ATR 352). In determining whether aluminium foil was an accessory for an oven, Hill J stated:
As the dictionary definitions demonstrate for an item to be an 'accessory' in the relevant sense that item must contribute to the working of some principal item or its general effect. Thus both a camera lens and light meter are, as Gibbs J observed, accessories to a camera; mag wheels may be an accessory to a car, a crisper may be an accessory to a refrigerator, or perhaps even a baking dish might be an accessory to a stove, at least if custom made for it. In each of these examples the accessory actually contributes to the functioning of the principle item.
However, to take the example of aluminium foil, that does not in any way contribute to the stove, or its functioning. The stove functions and performs in the same way irrespective of the use of aluminium foil. It is true that the foil may improve the effect of cooking on the food, or the freezer bags may modify the effect of freezing on food, but this is but to say that the product in question assists in the process of cooking or freezing. They are, as counsel for the Commissioner submitted, an adjunct to the process, rather than an adjunct to the appliance.
The entity supplies an electrically powered airway suction device that is portable and designed for field and transport use. The airway suction device is a stand alone device. It can be used in hospital wards and at home by people suffering from respiratory illnesses such as cystic fibrosis. It can also be used by ambulance paramedics and emergency room medical personnel in the course of patient resuscitation often as a necessary pre-cursor to, or in conjunction with, devices such as respirators or ventilators.
The airway suction device, being a stand alone device, is an entirely separate piece of equipment to the respirator and performs a completely distinct function from that of respiration. The airway suction device does not form an additional or extra part of the equipment of a respirator nor is it dependant upon, or subordinate or auxiliary to, the respirator. Although at times the airway suction device performs the first step in the resuscitation process, that is to suction a patient's airway, the airway suction device is also utilised on its own to just perform the task of suction, as in the case of an at home patient suffering from a respiratory illness.
Whilst the process of suction may accompany the process of respiration, the airway suction device itself does not contribute to the working of the respirator device. Although the two processes may be interdependent and both devices may be required to complete the resuscitation of a patient, each device performs a separate and distinct process, which may or may not need to be combined to necessitate a successful resuscitation.
Based on the reasoning of Hill J. in Zendel's Case, for a device to be an accessory, it needs to be an adjunct to an item rather than an adjunct to the process. A respirator would function and perform in the same way irrespective of the use of the airway suction device. In the same way that the aluminium foil is an adjunct to the process of cooking, the airway suction device is an adjunct to the process of respiration rather than an adjunct to the respirator itself. The airway suction device is a device in its own right that performs a task that is separate and distinct from that of a respirator.
Therefore, the airway suction device is not an 'accessory' within the ordinary meaning of that term. In addition, there is nothing in the surrounding context of item 127 which would suggest that a wider than ordinary meaning be given to the term 'respiratory appliance accessories'. Accordingly, the airway suction device is not covered by item 127. Therefore, the supply of the airway suction device is not GST-free under subsection 38-45(1) of the GST Act.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a portable, stand-alone airway suction device.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 9 April 2019 | Throughout | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019. |
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
subsection 38-45(1)
Division 40
Schedule 3
Schedule 3 table item 127
The Regulations
Case References:
Federal Commissioner of Taxation v. Kentucky Fried Chicken Pty Ltd
88 ATC 4363
(1988) 19 ATR 1141
71 ATC 4249
(1971) 2 ATR 653 Zendel Australia Pty Limited & Others v. FC of T
92 ATC 4515
(1992) 42 ATR 101 Zendel Australia Pty Ltd (t/as Glad Products Australia) v. Federal Commissioner of Taxation
(1993) 46 FCR 14
94 ATC 4022
(1993) 27 ATR 352 Related ATO Interpretative Decisions
ATO ID 2001/138
ATO ID 2001/639
Other References:
The Australian Concise Oxford Dictionary (1997), 3rd edn, Oxford University Press, Victoria
The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales
Keywords
Goods and services tax
GST free
GST health
Section 38-45 - medical aids & appliances
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782