Draft Taxation Ruling

SST D12

Sales tax: classification of drugs, medicines and sunscreen preparations

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FOI status:

draft only - for comment

Preamble

Chapter 1: What this Ruling is about

Overview

1.1 The sales tax law provides exemption from sales tax for certain categories of drugs and medicines and some sunscreen preparations. This Ruling explains the provisions of the law that determine whether products are exempt, provides some practical guidelines to make the law easier to apply and explains how manufacturers and importers can get further advice from the Australian Taxation Office (ATO).

1.2 The exemptions, and their exclusions, available for drugs and medicines are discussed in Chapter 2. Chapter 3 sets out some practical guidelines that operate without manufacturers and importers needing to ask the ATO for a private ruling. Chapter 4 deals with sunscreen preparations and Chapter 5 sets out how previous advice from the ATO is affected by this Ruling.

1.3 The principles of interpretation governing the ordinary meaning of words and the essential character of goods are explained in draft Taxation Ruling SST D9. The marketing of goods is also explained in SST D9. However, because marketing plays a significant role in determining exemption under Items 78 and 91, it is also discussed in this Ruling.

Safe Harbours

1.4 In addition to providing an explanation of the law, this Ruling sets out some practical guidelines to determine if products are exempt drugs or medicines. These guidelines were developed in consultation with industry groups and their representatives. They are termed Safe Harbours and they look like this:

Safe Harbour

A practical test for exemption under Item 78 that the ATO accepts as conclusive.

1.5 While the Safe Harbours cover several major categories of exempt goods, they don't deal with every product on the market, so manufacturers and importers may still wish to ask for private rulings from the ATO on some products. This may be especially appropriate where a person cannot classify a product under the guidelines set out elsewhere in the Ruling. Penalties may apply if sales tax is not charged correctly.

1.6 This Ruling is expressed in non-technical language wherever possible. The footnotes refer to court decisions on the point, give details of the particular legislation that applies, or dictionary^[F1] and publication references as appropriate.

Chapter 2: Exemption for drugs and medicines and goods specifically excluded from exemption

Elements of the exemption

2.1 Item 78 in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (ST(E&C) Act) exempts from sales tax:

'(1)

Goods marketed principally as drugs or medicines for use:

(a)

in preventing, curing or treating sickness or disease in humans; or

(b)

in compounding or preparing such drugs or medicines.

(2)

This Item does not cover:

(a)

toilet preparations and goods in the nature of toilet preparations (including soaps, cleansing creams, hair lotions, anti-dandruff foams or shampoos, skin repair creams or lotions, toothpastes, cosmetics, powders, pomades and perfumes);

(b)

medicated confectionery;

(c)

goods of the following kinds marketed principally as antiseptics:

(i)

household disinfectants;

(ii)

sterilising solutions;

(iii)

combined sterilising solutions and disinfectants;

(iv)

combined disinfectants and antiseptics;

(v)

combined sterilising solutions, disinfectants and antiseptics.'

2.2 Therefore, for goods to be exempt under paragraph (a) of subitem 78(1) they need to be:

*

marketed principally as drugs or medicines; and

*

for use in preventing, curing or treating sickness or disease in humans;

but not meet the descriptions of:

*

toilet preparations or goods in the nature of toilet preparations (including listed types of goods);

*

medicated confectionery; or

*

disinfectants.

2.3 The two qualifying elements of the Item and the three categories of exclusion are discussed below.

Marketed principally as drugs or medicines

2.4 Where sales tax exemption depends on how goods are marketed, it is possible for products with common ingredients to be classified differently if they are marketed differently.^[F2] For exemption to apply under Item 78, goods must be marketed principally as drugs and medicines. In the sales tax law, principally includes exclusively.^[F3] The ordinary meaning of principally is 'in the chief place; above all; pre-eminently'.^[F4]

2.5 The term marketed is not defined in the sales tax legislation.^[F5] The ordinary meaning of the term is the total process whereby goods are put on to the market. To determine whether goods are marketed in a particular way for sales tax purposes requires consideration of the facts including:

*

the name of the goods;

*

the price of the goods;

*

the labelling on any containers for the goods;

*

literature or instructions packed with the goods;

*

how the goods are packaged;

*

how the goods are promoted or advertised^[F6]; and

*

how the goods are distributed.^[F7]

2.6 Goods that are marketed principally as something other than drugs or medicines, for example, as cosmetics, cannot qualify for exemption under Item 78. In many situations, deciding how goods are marketed principally may prove difficult. The Safe Harbours described in the next Chapter may be useful in these circumstances.

2.7 A drug is a chemical substance given or taken with the intention of preventing or curing disease or otherwise enhancing the physical or mental welfare of humans. A medicine is any substance or mixture of substances used in treating or preventing diseases or disorders.^[F8]

For use in preventing, curing or treating sickness or disease in humans

2.8 The term for use in does not require the drug or medicine to have proven efficacy, but that it be directed to, or marketed for, the prevention, cure or treatment of sickness or disease.^[F9] Item 78 requires that a product be marketed principally for therapeutic use. The product may also be marketed for other less significant uses without detracting from exemption.^[F10] However, the principal use has to be an appreciable or significant one, not merely a possible or remote use.^[F11]

2.9 In the context of the Item, preventing means to ward off disease.^[F12] Curing is a method or course of remedial treatment for disease. Treating means dealing with, in order to cure. When read as a compound expression, the words preventing, curing or treating can be taken to mean any action taken to stop a person from contracting or spreading a sickness or disease; a course of action taken to make a person, afflicted by a sickness or disease, well; or to relieve the symptoms of sickness or disease.

2.10 Sickness is a particular disease or malady (that is, any bodily disorder). Disease is a morbid or degenerative condition of the body, or of some organ or part. The sickness or disease must be a recognisable condition and not merely a state of general weariness. A product that is intended for use by persons when they are in their normal healthy state to help maintain them in, or restore them to, the very best health and energy, is not a medicine.^[F13]

Exclusion from exemption: toilet preparations

2.11 Even where goods satisfy the two qualifying elements dealt with above, if they fall within the description of toilet preparations and goods in the nature of toilet preparations they are excluded from exemption by paragraph (a) of subitem 78(2). The term toilet preparation is not defined in the law so the ordinary or normal meaning applies:

toilet

the act or process of dressing, including bathing, arranging the hair, etc.; the action or process of dressing, or, more recently, of washing or grooming.^[F14]

toiletry

an article or substance used in dressing or hygiene.

hygiene

the science that deals with the preservation of health.

preparation

a preparation is something prepared, manufactured or compounded.

Accordingly, a toilet preparation can be described as something prepared, manufactured or compounded, for use in the course of dressing, bathing or grooming, or for hygiene.

2.12 In addition to excluding toilet preparations, paragraph (a) of subitem 78(2) also excludes goods in the nature of toilet preparations and specifies several types of goods that are included in the combined expression toilet preparations and goods in the nature of toilet preparations^[F15]:

*

soaps;

*

cleansing creams;

*

hair lotions;

*

anti-dandruff foams or shampoos;

*

skin repair creams or lotions;

*

toothpastes;

*

cosmetics;

*

powders;

*

pomades; and

*

perfumes.

In the nature of means having the qualities of.

2.13 The classes of excluded goods given in paragraph 2.12 are marketed for dressing, bathing, grooming and hygiene purposes with a view to protecting or maintaining the body in good condition; cleansing or perfuming the body; or altering the odours of the body. Preparations that provide these attributes include:

*

make-up, and hygiene powders;

*

perfumes, toilet waters or eau de colognes;

*

depilatories;

*

antiperspirants and deodorants;

*

hair tonics, hair tints or bleaches; and

*

shaving creams, foams, lotions and soaps.

2.14 It is clear that paragraph (a) of subitem 78(2) excludes from exemption, toilet preparations or goods in the nature of toilet preparations even though the marketing of such goods may include a medicinal or therapeutic use. The question of whether a product falls within the exclusion depends on its dominant or essential character. Products that predominantly perform a cleansing, washing or moisturising action (even though they may contain an anti-bacterial agent or other active therapeutic ingredient) fall within the exclusion.

Examples of goods that may be excluded as toilet preparations:

* Essential oils and herbal preparations

2.15 Preparations that include volatile essential oils or herbal extracts may be formulated as creams, lotions, oils, gels ointments or emulsions for use on external parts of the body. They are marketed for a wide range of health and beauty uses. Essential oil and herbal products are excluded from exemption by paragraph (a) of subitem 78(2) where they are for use on the skin and other parts of the body such as the hair and eyes, or in the processes of washing and bathing, for purposes such as: revitalising and rejuvenating the body; deodorising and cleansing; soothing and calming muscles or skin; relieving daily tension or tiredness; promoting good health and well being; freshening the breath; and in maintaining healthy hair and scalp.

2.16 However, some essential oil and herbal products are marketed for use in the treatment of conditions including: nappy rash; muscle sprains and strains; cold sores and rashes; and cracked nipples. Where the character of a product is directed to the treatment of conditions such as these and in such a manner that any toilet or cosmetic attributes of that product are completely subsumed or dominated by the therapeutic nature of the product, the product is not excluded from exemption.

* Vitamin E creams

2.17 Vitamin E creams are marketed for a wide range of applications. These include uses to soften, to soothe or protect the skin, to treat minor irritations and to help in healing cuts and abrasions. In some cases, conditions such as mild sunburn and minor burns are also listed on the product label. Vitamin E products that can be characterised chiefly as skin repair creams, for enriching, soothing or softening dry or chafed skin, are not exempt. However, some Vitamin E creams and lotions are specifically marketed for other uses, for example, in the treatment of more serious conditions, such as burns, abrasions, nappy rash, cuts and wounds. It is possible that the character and intended use of such products show that they are something other than toilet preparations.

* Medicated face and skin washes and anti-dandruff treatments

2.18 Medicated face and skin washes comprise a range of products in liquid, lotion, foam or bar form. They are generally used to clean the skin, in some cases as a preparatory step to the application of an anti-acne product. They are frequently described as being able to cleanse deep into the pores of the skin to remove dirt and excessive oil. Often face washes use the term 'medicated' where they contain an antiseptic additive. Anti-dandruff treatments are used to clean the hair and scalp.

2.19 Soaps and cleansing creams are specifically excluded from exemption, even if they are marketed principally as drugs and medicines. Products that predominantly perform a cleansing, washing or moisturising action (even though they may contain an anti-bacterial agent or other active therapeutic ingredient) are generally taxable. However, where the purpose of an anti-bacterial face, skin or scalp treatment product is to treat a specific medical condition and any cleansing action is subsumed or totally dominated by the therapeutic purpose, the exclusion does not apply.

* Mouthwashes

2.20 There are two main types of mouthwash on the market:

*

breath fresheners; and

*

mouthwashes that are marketed as having antiseptic or anti-bacterial properties.

2.21 Breath fresheners assist the user to achieve fresh breath by removing loose debris in the mouth and masking breath odours. These products are excluded from exemption as toilet preparations (even if they could be considered to be used in treating sickness or disease) and are therefore not exempt from sales tax under subitem 78(1).

2.22 Whether mouthwashes other than breath fresheners are exempt under Item 78 depends on their essential character. Mouthwashes designed to treat or remove plaque as an aid in the treatment of gingivitis, as antiseptics for mouth disorders or in conjunction with dental treatment may have the essential character of a drug or medicine. These mouthwashes are not toilet preparations where their cleansing or masking action is completely dominated by their therapeutic purpose.^[F16]

Exclusion from exemption: medicated confectionery

2.23 Medicated confectionery is excluded from exemption by paragraph (b) of subitem 78(2). The term medicated confectionery is not defined in the sales tax law so the ordinary or normal meaning applies:

medicate

impregnate with a medical substance.

confection

a sweet or bonbon.

confectionery

things made or sold by a confectioner.^[F17]

Considering the above dictionary meanings in context, the ordinary or normal meaning of medicated confectionery can be described as sweet preparations formulated to include one or more medical substances. These preparations are often marketed in the form of lozenges or drops.

Throat and cough lozenges

2.24 Many types of throat or cough lozenges or drops have the essential character of medicated confectionery and are therefore excluded from exemption. The ingredients of such goods mostly comprise those found in ordinary confectionery (for example, sugar, glucose, gum). Other ingredients normally found in medicated confectionery, such as eucalyptus or menthol, are often present. Marketing terminology uses terms synonymous with 'soothing action'.

2.25 However, a range of throat or cough lozenges exhibits characteristics that preclude them from being known as medicated confectionery. These lozenges qualify for exemption under subitem 78(1). The characteristics are that the products are marketed:

*

with active ingredients not normally found in medicated confectionery (for example, anti-bacterial substances);

*

to treat a sickness or disease (for example, coughs or sore throats)

*

with dosage requirements on their labelling; and

*

with minimal sugar and other sweetener content.

Exclusion from exemption: household disinfectants

2.26 The third category of exclusion from exemption as a drug or medicine covers goods marketed principally as antiseptics of the following kinds:

*

household disinfectants;

*

sterilising solutions; and

*

combinations of disinfectants, sterilising solutions and antiseptics.

2.27 Antiseptic derives from the noun antisepsis. Antisepsis is defined to mean the destruction of micro-organisms that produce sepsis or septic disease. An antiseptic can be described as a substance that is intended for application to the skin or mucous membranes, to kill or prevent the growth of bacteria on the human body.

2.28 Disinfectants are used to control the spread of infection by killing the bacteria responsible. They are normally used to wash floors, walls and toilets in houses and public buildings or are added to water to wash clothing or babies' nappies. Sterilising solutions are used to kill microbes and to stop the reproduction of microbes on inanimate objects and surfaces. The relevant definitions are as follows:

disinfect

to cleanse (rooms, clothing, etc.) from infection; destroy disease germs;

disinfectant

any chemical agent that destroys bacteria;

sterilise

to destroy micro-organisms.

2.29 Paragraph (c) of subitem 78(2) excludes from exemption goods that are for use in a range of cleansing actions (including cleaning to prevent contamination) on surfaces and objects other than the human body. The goods excluded are commonly known as disinfectants or sterilisers. The exclusion extends to combinations of these goods, including antiseptic combinations. Antiseptics for application directly to the skin are not affected by this provision.

Application of other Items

2.30 Goods that are clearly excluded from exemption as drugs or medicines under Item 78, are not generally exempted by Items 80 and 93, which deal respectively with medical and surgical goods and goods for disabled persons.

2.31 Item 80 exempts from sales tax:

'Medical or surgical goods of a kind ordinarily used by persons suffering from a medical condition where that use is for the purpose of alleviating or treating the condition or its effects.

[Parts]

In this Item, "medical condition" means sickness, disease, injury or physical impairment.'

2.32 Item 93 exempts from sales tax:

'Goods that:

(a)

are designed and manufactured expressly for use by persons who suffer from sickness, disease or disablement; and

(b)

are of a kind not ordinarily used by persons who do not suffer from sickness disease or disablement.

In this Item, "disablement" includes blindness or deafness.

[Parts]'

2.33 Goods that fall for classification under Item 78 are distinct from those covered by Item 80 or 93. Item 78 provides exemption for goods that are strictly consumables whereas Items 80 and 93 are concerned with exempting goods that are generally appliances or equipment. This conclusion is supported by the fact that sales tax exemption under Items 80 and 93 extends to Parts for the goods covered. Exemption for Parts is not available under Item 78 because it is not relevant to that Item.

2.34 Eye droppers, medicine glasses and hearing aids are examples of goods that are exempt under Item 80. Artificial limbs and orthotic devices are examples of goods exempt under Item 93. Specific use consumable goods that enable the use of other exempt goods, like comfort drops for wearers of contact lenses, are also exempt under Item 93.

Chapter 3: Safe Harbours

Why provide Safe Harbours?

3.1 Several tests are required to determine whether a product is exempt from sales tax under Item 78. Each test may involve a degree of complexity, needing the exercise of some judgment. However, there are many goods that are so obviously drugs or medicines and not cosmetics, toilet preparations or other types of excluded goods, that a formal consideration of each step involved in determining exemption seems hardly necessary.

3.2 In an area such as this, where there are potentially many thousands of products to be classified and the legislative tests are difficult, we use Safe Harbours as a way to provide certainty and market neutrality for taxpayers. The Safe Harbours remove the formal consideration otherwise necessary to determine exemption for many, but not all, of the goods that could be considered exempt under subitem 78(1).

3.3 A person who acts reasonably, in reliance of a Safe Harbour has the protection of section 77 of the Sales Tax Assessment Act 1992.^[F18]

Rules for using Safe Harbours

3.4 If a product is exempted by any of the Safe Harbours in the Ruling, the manufacturer, importer or wholesaler of the product may treat the goods as exempt from sales tax under Item 78 without obtaining confirmation from the ATO. If that Safe Harbour is subsequently changed, the change only affects that taxpayer prospectively. Safe Harbours apply prospectively from the date of effect of this Ruling and nothing in them can be taken to give rise to a credit entitlement in respect of the past. However, a person who believes they have overpaid tax before the date of effect of this Ruling may apply for a refund and the application will be dealt with on the basis of the general principles contained in this Ruling.

3.5 A manufacturer or importer may seek guidance from the ATO about whether a Safe Harbour applies to particular goods in the form of a request for a private ruling. Alternatively, if they think that exemption applies, but the goods are not covered by a Safe Harbour, they may ask for a private ruling. The Appendix to this Ruling contains a flow-chart that may be used as a guide to whether a Safe Harbour applies.

Safe Harbours linked to the Therapeutic Goods Act

3.6 As explained in Chapter 2, one of the requirements to be met for exemption under Item 78 is that the goods must satisfy a marketed principally test. Determining how goods are marketed principally can be difficult and manufacturers and importers have sought a simpler way to determine this, based on concepts more familiar to them.

3.7 The marketing of drugs and medicines in Australia is subject to the requirements of therapeutic goods legislation administered by the Therapeutic Goods Administration (TGA), an arm of the Commonwealth Department of Health and Family Services. The regulation of therapeutic goods in Australia is substantially governed by the Therapeutic Goods Act 1989 and the Therapeutic Goods Regulations.^[F19] Under therapeutic goods legislation, products making therapeutic claims or containing prescribed substances must be included in the Australian Register of Therapeutic Goods (ARTG), unless exempt from inclusion or otherwise specifically approved.^[F20] The ARTG is divided into two categories: registrable and listable goods. Schedules to the Regulations generally govern the relevant applicable category.

3.8 The therapeutic goods legislation and the Therapeutic Goods Advertising Code^[F21] impose a marketing test on products that make therapeutic claims. Unlike sales tax exemption Item 78, there is no requirement that a product's therapeutic uses must be the principal purpose for which it is marketed. Another important difference is that the sales tax law does not exempt products that are toilet preparations, cosmetics, etc., regardless of whether or not therapeutic claims are made for these products.

3.9 Despite the differences in the marketing tests in the therapeutic goods legislation and Item 78, the ATO recognises that classification can be difficult without some practical industry benchmark or guide. We have therefore decided to use the ARTG for this purpose in formulating each Safe Harbour.

Safe Harbour 1: Prescription only medicines, controlled drugs and medicines on the Schedule of Pharmaceutical Benefits

3.10 Some drugs and medicines contain substances that are included in Schedule 4 (S4) or Schedule 8 (S8) of the Standard of the Uniform Scheduling of Drugs and Poisons (SUSDP).^[F22] An S4 or S8 medicine may be respectively referred to as a PRESCRIPTION ONLY MEDICINE or CONTROLLED DRUG. This is because these 'signal' words must appear on the labelling of S4 and S8 medicines before they may be sold or supplied for human use.^[F23] A prescription must also be given by a medical or dental practitioner before a PRESCRIPTION ONLY MEDICINE or CONTROLLED DRUG may be sold for human use. Safe Harbour 1 exempts these goods.

3.11 Safe Harbour 1 also exempts drugs and medicines included in the Schedule of Pharmaceutical Benefits (PBS). PRESCRIPTION ONLY MEDICINE, CONTROLLED DRUG and PBS drugs and medicines are required to be included in the ARTG.

Safe Harbour 1 - Item 78, Schedule 1

Goods are drugs or medicines for human use and exempt under Item 78 if they are:

(1)

a PRESCRIPTION ONLY MEDICINE (S4) or CONTROLLED DRUG (S8); or

(2)

listed in the PBS (as published from time to time).

Safe Harbour 2: Pharmacy medicine and pharmacy only medicine

3.12 Some drugs and medicines contain substances included in Schedule 2 (S2) or Schedule 3 (S3) of the SUSDP. An S2 or S3 medicine may be referred to as a PHARMACY MEDICINE or a PHARMACIST ONLY MEDICINE respectively . This is because these 'signal' words are required to be shown on the labelling of S2 and S3 medicines before they may be sold or supplied.^[F24] The assistance of a pharmacist should be available if a person needs advice when buying a PHARMACY MEDICINE. A pharmacist should be involved in the supply of a PHARMACIST ONLY MEDICINE. S2 and S3 medicines must be included in the ARTG. Safe Harbour 2 exempts these goods.

Safe Harbour 2 - Item 78, Schedule 1

Goods are drugs or medicines for human use and exempt under Item 78, if they are a PHARMACY MEDICINE (S2) or a PHARMACIST ONLY MEDICINE (S3).

Safe Harbour 3: Unscheduled non-prescription, non-dermal medicines

3.13 Safe Harbour 3 exempts two groups of drugs and medicines that are neither included in the SUSDP (under Schedules 2, 3, 4, or 8) nor require a prescription from a medical or dental practitioner before they may be sold. The first group covers those medicines that are swallowed or ingested but does not include medicated confectionery, mouthwashes and mouthrinses, or formulations excluded from exemption by paragraph (c) of subitem 68(2) in Schedule 1. The second group covers those medicines that are to be applied to the eye's surface or for insertion into body cavities (for example, aural, nasal and vaginal) but does not include products marketed for use in connection with sexual intercourse or personal hygiene. To be covered by Safe Harbour 3 these goods must be included in the ARTG.

Safe Harbour 3 - Item 78, Schedule 1

Goods are drugs or medicines for human use and exempt under Item 78 if they are included in the ARTG and are:

(1)

to be swallowed or ingested but do not include: medicated confectionery, mouthwashes and rinses; or goods excluded from exemption by paragraph (c) of subitem 68(2); or

(2)

applied to the surface of the eye or inserted into body cavities (including aural, nasal and vaginal) but do not include goods used in connection with sexual intercourse or personal hygiene.

3.14 In practice, this Safe Harbour exempts, amongst other things, vitamin and mineral tablets, herbal therapeutic products and essential oils, provided they are registered or listed on the ARTG. Since paragraph (c) of subitem 68(2) excludes ingredients for beverages from the exemption for food, those formulations that require the addition of a liquid, such as water, milk or fruit juice, are not covered by Safe Harbour 3.

Goods that are not included in the ARTG

3.15 Products that are not included in the ARTG do not have access to a Safe Harbour. They need to be classified in accordance with the guidelines set out in Chapter 2 of this Ruling.

Chapter 4: Sunscreen preparations

Elements of the exemption for sunscreens

4.1 Item 91 in Schedule 1 to the ST(E&C) Act exempts from sales tax:

'Goods marketed principally for use as sunscreen preparations for humans and included in the Australian Register of Therapeutic Goods.'

4.2 To meet the marketed principally test, goods must be marketed chiefly, pre-eminently or most significantly as a sunscreen. The manner in which sunscreen products are marketed needs to be determined in accordance with the principles set out in paragraphs 2.4 to 2.6.

Definition of a sunscreen preparation

4.3 A sunscreen is a cream or lotion applied to the skin to screen it from ultraviolet rays and prevent sunburn.^[F25] A preparation is something prepared, manufactured or compounded. A sunscreen preparation is a preparation applied to the skin to reduce the incidence of skin damage caused by exposure to the sun.

4.4 Some features common to sunscreen preparations are:

*

a name that makes sun protection prominent, by including words like 'Sunscreen Cream', 'Sunscreen Lotion', or 'Blockout';

*

a sun protection factor (SPF) clearly shown on the label; and

*

the inclusion of directions for use, for example: 'Reapply every 2 hours'; 'Apply 20 minutes before going out into sun'; 'Reapply if wiped with towel'.

Australian Register of Therapeutic Goods

4.5 Where a product states on its label that it has a sun protection factor (SPF) of 4 or greater it must be included on the Australian Register of Therapeutic Goods (ARTG). A sunscreen that is included on the ARTG must show, on its labelling, its listing or registration number. Listed numbers are prefaced with AUST L, registered numbers are prefaced with AUST R.^[F26]

4.6 The Therapeutic Goods Administration issues a certificate verifying that a sunscreen preparation has been included on the ARTG. This certificate is evidence that the ARTG test in Item 91 has been met. Any questions concerning the requirements of the Therapeutic Goods Administration should be directed to the Administration's Information Officer.^[F27] Because a major object of the therapeutic goods legislation is to control the sale of therapeutic goods, many goods appear in the ARTG, but fail to meet the marketed principally test of Item 91.

Goods marketed principally for cosmetic purposes

4.7 Many make-up, facial and other cosmetic products now contain SPF ratings in line with shifting consumer expectations. A cosmetic is a preparation for beautifying the complexion or skin. While it may be correct that these products do afford a level of sunscreen protection and, in some cases, appear on the ARTG, they do not qualify for sales tax exemption under Item 91 if they are marketed principally as cosmetics rather than as sunscreen preparations.

Sunscreen lip products

4.8 There is a range of sunscreen products marketed for specific application to the lips. These products must satisfy the two tests contained in Item 91 for exemption to apply. In determining whether a lip product is marketed principally as a sunscreen preparation, a reference to cold or wind protection, moisturising qualities, or the addition of colourings or flavours does not necessarily prevent the product from qualifying for exemption.

Chapter 5: Date of effect

5.1 This Ruling will be effective immediately upon its release in final form. If a person will pay less tax because of this Ruling, it may be acted upon immediately on its release in final form. Nothing in this Ruling may be taken as automatically authorising a refund before the date of effect of the final Ruling. Credit claims are considered on their individual merits.

5.2 The effect of this Ruling on existing public and private rulings is discussed in the following paragraphs.

Application to previous rulings

Public rulings

5.3 The following Rulings will be withdrawn^[F28] on finalisation of this draft Ruling:

ST 2041; ST 2048; ST 2078; ST 2250; ST 2251 and ST 2423.

Private rulings

5.4 Previous private rulings that are inconsistent with the principles in this Ruling will be altered from three months after the release of this Ruling in final form.

5.5 A sunset clause applies to all private rulings given in relation to Items covered by this Ruling. For details of how the sunset clause is applied, see paragraphs 5.4 to 5.7 of draft Taxation Ruling SST D9 'Sales tax: a guide to the classification of goods under the sales tax law'.

Chapter 6: Your comments

6.1 If you wish to comment on this draft Ruling, please send your comments by 31 March 1998 to:

Commissioner of Taxation
21 January 1998

Appendix

This Draft Ruling has been finalised by SST 12

References

ATO references:
NO 98/24-8

Related Rulings/Determinations:

SST D1 Previously released to the public in (unnumbered) draft form on 16 March 1995.

Subject References:
classification of goods, drugs and medicines, sunscreen products, sales tax

Legislative References:
Sales Tax Assessment Act 1992 77
Sales Tax (Exemptions and Classifications) Act 1992 Sch 1
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-68(2)(c)
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-78
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-78(1)
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-78(1)(a)
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-78(2)(a)
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-78(2)(b)
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-78(2)(c)
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-80
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-91
Sales Tax (Exemptions and Classifications) Act 1992 Sch1-93
Therapeutic Goods Act 1989 4(1)
Therapeutic Goods Regulations

Case References:
Bristol-Myers Company Pty Limited v. FCT
90 ATC 4553
(1990) 21 ATR 417

Customs and Excise Commissioners v. Beecham Foods Ltd
[1972] 1 WLR 241
DFC of T v. Stewart
(1984) 154 CLR 385
84 ATC 4146
(1984) 15 ATR 387
Nicholas Kiwi Pty Ltd v. FCT
90 ATC 4662
(1990) 21 ATR 686
Parke Davis Pty Ltd v. FCT and Anor
96 ATC 4865
(1996) 33 ATR 463
Zeroz Pty Ltd v. DCT
97 ATC 4277
(1997) 35 ATR 349
Case 10/97
97 ATC 167
AAT Case 11,643
(1997) 35 ATR 1001