Edited version of private ruling

Authorisation Number: 1011670741640

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Ruling

Subject: GST and software programs

Question

Is your supply of the software program GST-free as a medical aid or appliance?

Answer: No.

Your supply of the software program is not GST-free as a medical aid or appliance.

Relevant facts and circumstances

You specialise in educational software aimed at children with learning disabilities. You are registered for GST.

One of the software products you sell is developed and produced by another entity in conjunction with disability specialists.

This software product includes a teaching manual and instruction guide and is mainly sold to schools and clinicians treating children with learning difficulties.

The product has features which make it suitable for children with disabilities and also for children without any disabilities.

This product is used by a student with a learning disability in conjunction with that student's teacher in a classroom situation. It is also used by schools for students, without a recognised disability, who require assistance with certain educational skills.

You consider this software product is specifically designed for students with a learning disability and is not of benefit to the general student population. You do not supply an educational program with this product. The instruction guide provided is sufficient.

This product is not available in Australia for sale in general software stores and can only be purchased from you or via specialist educational providers.

Detailed reasoning

A supply of goods is subject to GST if you are making a taxable supply.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(*denotes a term defined in section 195-1 of the GST Act)

You make the supply of the software product for consideration. The supplies are made in the course of you carrying on an enterprise in Australia. You are registered for GST. Therefore, your supplies satisfy paragraphs (a) to (d) in section 9-5 of the GST Act. However, your supply will not be taxable if it is input taxed or GST-free.

There is no provision in the GST Act or any other Act that make the supply of this software product input taxed. Now we need to consider the relevant GST-free provisions. A supply is GST-free if it is GST-free under Division 38 of the GST Act.

Medical aids and appliances

Subsection 38-45(1) of the GST Act provides that where the elements of that subsection are satisfied, a medical aid or appliance will be GST-free. Those elements are that 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)

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

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

An essential element for a supply to be GST-free as a medical aid or appliance is that the item is covered by Schedule 3.

Included in Schedule 3 is a description at Item 8 'software programs that are specifically designed for people with a disability'. In your private ruling application form you have advised that this software product is specifically designed to be used for students with learning disabilities. You have indicated that this view is supported by the producer's promotional brochure you provided. However, you have also acknowledged that in addition to helping students with learning disabilities the learning program is used more widely to provide help to students without a recognised disability requiring assistance with reading, writing and spelling skills. These skills are universal skills required by all students and the producer's promotional brochure has recognised that use of this learning program to assist students to improve these skills is an invaluable support for any child's education including students with learning difficulties and mainstream students.

The information provided in your website indicates that this product is also extremely effective in addressing the needs of some other students who are not disabled. In addition, your website provides that many teachers have found your software products generally to also be an effective classroom tool for teaching reading, spelling and comprehension to children without problems. This would suggest that this product is not used only by support teachers specifically for students with learning difficulties but is used more widely by teachers for all students.

We acknowledge that this program may have features that target special weakness of the memory, revision, organisation, reading, writing and learning skills of certain types of disabilities. However, these weaknesses can also exist in non disabled students.

In short, we consider that this product can be targeted at students who do not have learning difficulties as well as other students with a disability. Therefore, this product can be widely used by people without an illness or disability. This software product is not specifically developed/designed for people with disabilities.

Therefore, this software product is not a program of the kind described in Item 8 'software programs specifically designed for people with disabilities' nor does it appear to come within the description of any other Items listed in Schedule 3.

In addition there are no other provisions of the GST Act that would make the supply GST-free in your circumstances. Consequently, you are making a taxable supply under section 9-5 of the GST Act when you sell the software product to entities and consumers in Australia.