Edited version of private ruling

Authorisation Number: 1011716529288

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Ruling

Subject: GST and medical aids and appliances

Question 1

Are you making a GST-free supply when you supply the following products?

Product A;

Product B;

Product C;

Product D.

Answer

Yes, you are making a GST-free supply when you supply the following products:

Product A;

Product B;

Product C;

Product D.

Relevant facts and circumstances

You are registered for GST;

You sell supportive seating products;

You requested a private ruling as to the GST classification of the following products:

• Product A;
• Product B;
• Product C;
• Product D

The above products are manufactured by a supplier that manufactures a range of seating and other posture support products for children with disabilities;

We obtained specific information from the manufacturer's website that confirms the purpose for which the goods were designed and their intended market.

Specific information was also obtained from the manufacturer's website in regard to the specific products in question and the characteristics/features of those products which include:

Product A -

Key features include:

§ Adjustable back height;

§ Adjustable back recline angle;

§ Adjustable head support height, angle position and wing position;

§ Adjustable arm rest width and seat width;

§ Locking brakes;

§ Independent adjustable lateral support height, angle and width;

§ Removable/adjustable kneeblock;

§ Pommel (fits to the front of the seat to help abduct the legs);

§ Adjustable pommel positioning;

§ Clinically proven postural management;

§ Winged back (enhancing truck stability and comfort);

§ Height & Angle adjustable footplate;

§ Split Seat Facility - ideal for users with leg length variation. Kneeblocks are also available;

§ Lateral supports can be flipped aside for ease of transfer either manually or by sling and hoist.

Product B -

Features include:

§ Adjustable back angle;

§ Height adjustable base with prone & recline tilt in space;

§ Pommel option;

§ Retractable footplate & leg rest for standing transfers;

§ Adjustable hip & lateral supports;

§ Split seat adjustment (leg length discrepancy);

§ Adjustable thigh pads;

§ Adjustable height and angle footplates;

§ Large lockable castors;

§ Easily folded down for transportation;

§ Adjustable shoulder protraction pads;

§ Adjustable hip pads;

Product C -

Key features include:

§ Reclining back which hinges around the hip joint;

§ Strong, adjustable one piece footplate;

§ Interface options of bases for all environments including wheelchair chassis, electric wheelchair chassis, buggy chassis and various indoor chassis;

§ Biomechanical reclining back rotates around the hip joint, ensuring the trunk supports remain in the optimum position.

Product D -

An ideal introduction to supportive seating; the Product D is designed for infants with an adjustable back angle and tilt in space.

The Product D is designed to provide comfort and postural support. The system is only available in one size.

The seating system is not intended for those who have significant athetosis.

Clinically correct supports ensure that the Product D ensures the best postural management from an early age.

Features:

§ The product can also be supplied with a height adjustable base and a range of matching accessories;

§ For specific ages;

§ Ideal introduction to special seating;

§ Large range of size adjustment;

§ Back recline and tilt in space;

§ Adjust between static and rocking action;

§ Side rolls providing excellent lateral support;

§ Removable footplate (adjustable height and angle)

Service of all of the models above should be carried out by an approved repairer or a person with competent training of a Class 1 medical device.

Contentions

You contend that all of the products are designed for people with disabilities, mainly children and are not widely sold to the general public.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-45.

Reasons for decision

Subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that the supply of certain medical aids and appliances will be GST-free where:

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

The first requirement is that the medical aid or appliance is covered by Schedule 3 in the GST Act or GST Regulations. Item 16 of Schedule 3 to the GST Regulations specifies 'postural support seating' as a medical aid and appliance to which paragraph 38-45(1)(a) of the GST Act applies.

The GST Pharmaceutical Health Forum - issues register - attachment B - schedule 3 - medical aid or appliance (Regulation 38-45.01) on the ATO's website www.ato.gov.au provides guidance as to what is considered to be specifically designed for people with an illness or disability. In order to satisfy Item 16 of Schedule 3 to the GST Regulations postural support seating should be:

a) custom made to suit the particular persons anatomical shape in order to provide correct postural support, or

b) adjustable to such an extent that the product can be customised to the individuals body shape or size in order to provide correct postural support, or

c) incorporate several of the following design characteristics which will ensure the product provides the necessary postural support for people with an illness or disability:

§ adjustable in height so as to attain the correct seating position for the requirements of the individual

§ adjustable back angle to enable proper support (other than simply reclining) and contain appropriately positioned/shaped back supports

§ adjustable or appropriately shaped/sized lumbar support

§ side supports

§ adjustable seat height and depth

§ adjustable seat base angle

§ calf support

§ adjustable shoulder and trunk supports

§ footrests specifically designed for injured or disabled persons

§ swing away arms or removable armrests

§ wide arm rests

§ integral push handles

§ specifically designed to provide a correct sitting position that results in sitting firmly on the pelvic bones and that aligns and lifts the head, neck and back

§ fitted with wheels, glides or a mobile base suitable for movement of disabled people

§ locking brakes

§ suitable hand grips for disabled people

§ specific features to enable people with difficulties in rising to get in and out of the seating

§ pressure reducing cushions.

From the information extracted from the manufacture's website, the Product A, Product B, Product C and Product D will satisfy a classification of 'postural support seating' as the seating systems are adjustable to such an extent that the product can be customised to the individuals body shape or size in order to provide correct postural support. Additionally, these products incorporate several of the design characteristics listed above.

Literature obtained from the manufacturer's website also supports that the design, manufacture and provision of their seating and other posture support products are limited to persons with disabilities.

The final requirement is that the thing supplied is not widely used by people without an illness or disability. The word 'widely' is not defined in the act and therefore takes on its ordinary meaning. The Macquarie Dictionary defines 'widely' as being:

to a wide extent;

throughout a large number of persons; or

greatly or very much.

It is considered that to be regarded as not being widely used by people without an illness or disability the product would be designed for people with an illness or disability and there would have to be a significant use by people in this category.

As Product A, Product B and Product C satisfy all of the requirements discussed above, the supply of these products will be GST-free in accordance with subsection 38-45(1) of the GST Act.

In regard to Product D, the description of the product obtained from the manufacturer's website does not of itself indicate that the product is specifically designed for people with an illness or disability. The information indicates that the product is designed as a preventative measure aimed at postural management. This is evidenced by the description provided on the manufacturer's website.

However, given all the evidence and information provided including:

§ the recommended retail price of Product D;

§ limited distribution network;

§ registration with the relevant administrative body;

§ the manufacturer's declaration;

§ the process involved in an applicant requesting funding for the product;

it is considered that Product D is not in a class of goods that would be widely used by people without an illness or disability and as such is considered to be specifically designed for people with an illness or disability, and will therefore qualify as GST-free under subsection 38-45(1) of the GST Act.

Further issues for you to consider

We have limited our ruling to the questions raised in your application. There may be related issues that you should consider including:

Supply of individual components - 'spare parts'.

It is noted from the literature available that the seating systems are constructed from a combination of individual components such as headrest, shoulder pads, hip pads, footrest, etcetera and the specific combination of those components will depend on the individual's condition and needs.

As discussed above, when these components are combined to construct a postural support seating system, the seating system will be GST-free under subsection 38-45(1) of the GST Act. However the supply of individual components will not fall under this classification as they are not themselves 'postural seating'.

Are the individual components 'spare parts'?

Subsection 38-45(2) of the GST Act provides that the supply of a 'spare part' will be GST-free where 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 38-45(1) of the GST Act.

The Macquarie Dictionary (3rd edition) defines a spare part as:

a part which replaces a faulty, worn, or broken part of machine.

The supply of a part that can be used to replace a faulty, worn, or broken part of another thing, will be GST-free under subsection 38-45(2) of the GST Act provided that the part supplied is specifically designed for another thing, the supply of which will be GST-free under subsection 38-45(1). Supplies of parts that are GST-free under subsection 38-45(2) will be GST-free all the way down the supply chain.

For example, the supply of a replacement castor wheel specifically designed for the Product A support seating system will be GST-free. By contrast, a standard castor which is not designed specifically for the Product A seating system but designed for the general purpose or usage associated with a castor will not be GST-free under subsection 38-45(2) of the GST Act.

It is not necessary to determine that the part is being supplied in order to replace a faulty, worn or broken part of another thing, the supply of which would be GST-free under subsection 38-45(1). The fact that the part can be used to replace a faulty, worn, or broken part of another thing, the supply of which would be GST-free under subsection 38-45(1), is sufficient to establish that the supply is GST-free under subsection 38-45(2).