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Ruling

Subject: Medical aids and appliances

Is the supply of your electronically adjustable beds GST-free under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Yes.

Relevant facts:

You are registered for goods and services tax (GST).

You import and wholesale electronically adjustable beds.

The beds are electronically adjustable and are designed specifically for people who have an illness or disability.

The beds enable people who have an illness or disability to have a comfortable and more beneficial sleep and also assist them in mobility by raising the head or foot areas of the bed electronically.

You have advised the beds are designed to adjust to the recommended therapeutic positions required to give relief to a number of medical conditions such as to assist and aid people with poor breathing conditions caused by respiratory illness.

The principle design of these adjustable beds is similar to hospital beds and each bed has an electric motor with an option for both head and leg area vibration massage units, to relieve poor circulation problems.

The beds also have a back up battery system to assist in situations of power failure. When the bed is in the raised position the ends are supported by steel legs which are activated as the bed ends elevate to the desired position so as to give total stability when in use.

You anticipate the majority of the beds will be sold to people who have disabilities and are seeking relief from various medical conditions.

Your marketing strategy is to promote the therapeutic value of these beds.

You have advised that other competitors' brands of adjustable beds are sold as GST-free.

You have advised that you do not have any agreement with your customers to treat the supplies of the beds as not GST-free.

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(3).

A New Tax System (Goods and Services Tax) Act 1999 Schedule 3.

Reasons for decision

Summary

A supply of medical aids and appliances is GST-free under subsection 38-45(1) of the GST Act if it is:

(a) covered by Schedule 3 to the GST Act, or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

(b) specifically designed for people with an illness or disability, and

(c) not widely used by people without an illness or disability.

However, under subsection 38-45(3) of the GST Act the supply is not GST-free under subsection 38-45(1) if the supplier and the purchaser have agreed that the supply is treated as not a GST-free supply.

'Electronically operated adjustable beds' are listed at item 60 of Schedule 3 to the GST Act under the category heading of 'Mobility of people with disabilities-physical: bedding for people with disabilities'.

The beds listed at item 60 of Schedule 3 to the GST Act have design characteristics such that they will assist people with an illness or disability to get in and out of bed unaided.

They are generally purchased by aged, ill or disabled people who have difficulty or are unable to get in and out of bed unassisted or who suffer from medical conditions such hiatus hernia, poor circulation, back problems, acid reflux, and breathing problems.

Detailed reasoning

Section 38-45 of the GST Act outlines the circumstances in which the supplies of medical aids and appliances will be GST-free. The section states:

(1) A supply is GST-free if:

(a) it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations; and

(b) 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.

(2) A supply is GST-free if the thing supplied is supplied as a spare part for, and is specifically designed as a spare part for, another thing the supply of which would be GST-free under subsection (1).

(3) However, a supply is not GST-free under subsection (1) or (2) if the supplier and the *recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as GST-free supplies.

* is a defined term in the GST Act

Therefore, under subsection 38-45(1) of the GST Act a supply will be GST-free where:

· it is covered by an item in Schedule 3 of the GST Act, or specified in the GST Regulations

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

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

Where a supply satisfies all of the above criteria the supply is GST-free and its GST-free status will apply all the way down the supply chain, unless the supplier has an agreement with the recipient under subsection 38-45(3) of the GST Act to treat their supply as not GST-free.

Item 60 of Schedule 3 to the GST Act- Electronically adjustable beds

Electronically operated adjustable beds are listed at item 60 of Schedule 3 to the GST Act under the category heading of 'Mobility of people with disabilities - physically: bedding for people with disabilities'.

The principle design of the adjustable bed is basically the same as hospital beds. Each bed has an electric motor to electronically adjust the bed positions. The bed has a back up battery system to assist in situations of power failure. When the bed is in the raised position the ends are supported by steel legs which are activated as the bed ends elevate to the desired position to provide greater mobility to a person with a disability. Therefore, the adjustable bed is covered by item 60 of Schedule 3 to the GST Act.

Specifically designed for people with an illness or disability

People with a disability often have difficulty getting in and out of bed and some are incapable of doing so, unassisted. Therefore the bed must have design characteristics which will assist people with an illness or disability to get in and out of bed unaided.

You have advised that the adjustable beds are designed specifically for people who have an illness or disability. The beds enable people who have disabilities to have a comfortable and beneficial sleep and also assist them in their mobility by raising the head or foot areas of the bed electronically.

By adjusting the upper section of the adjustable bed the occupant can achieve a sitting or semi standing position to assist them to get in and out of the bed unaided. As such the adjustable bed has characteristics that make it suitable for use by people with a disability in order to provide greater mobility.

You have also advised the beds are designed to adjust to the recommended therapeutic positions required to give relief to a number of medical conditions such as to assist and aid people with poor breathing conditions caused by respiratory illness and those people with poor circulatory illnesses or disabilities through adjusting the foot (leg) area of the bed.

The adjustable characteristics of the bed allow people with an illness or disability to sleep or rest with the upper or lower body in an elevated position, which has application to alleviate the effects of a number of medical conditions such as back problems, arthritis, rheumatism, hiatus hernia, acid reflux and breathing problems.

As the electronically operated adjustable beds have design characteristics that enable people who have disabilities and illness to have a comfortable and beneficial sleep, and assist them in their mobility by raising (electronically) the head or foot areas of the bed, it is considered that the beds satisfy the requirement of being specifically designed for people with an illness or disability.

Not widely used by people without an illness or disability

Electronically operated adjustable beds are generally purchased by aged, ill or disabled people who have difficulty or are unable to get in and out of bed unassisted. As such, whereas the adjustable beds may be used by other people, they are not widely used by people without an illness or disability.

You have advised that you are marketing the beds by promoting their therapeutic value through retailers who specialise in health products. You have also advised that your competitors' brands of adjustable beds are sold as GST-free. Therefore, we consider that the adjustable beds are not widely used by people without illness or disability.

You do not have any agreement under subsection 38-45(3) of the GST Act to treat the supply of adjustable beds as not GST-free.

Therefore, the supply of the adjustable bed is a GST-free supply under subsection 38-45(1) of the GST Act, as all requirements of this subsection have been met.