Edited version of your private ruling

Authorisation Number: 1011946712599

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Ruling

Subject: GST and supply of medical equipment

Questions

1. Are bone injection guns and associated accessories (including Item M) GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer:

No, the supply of the bone injection guns and associated accessories are not GST-free under subsection 38-45(1) of the GST Act. The supplies are all taxable supplies.

2. Are supplies of defibrillators and associated accessories GST-free?

Answers:

Yes, the supplies of the defibrillators are GST-free.

No, the supplies of the defibrillators and accessories that are to be used for training purposes are not GST-free. The supplies are taxable supplies.

The supply of Item X and Item Y, when sold separately, is GST-free under subsection 38-45(2) of the GST Act.

Items A, B, C, D, E, F and G, when sold separately are taxable supplies. However, where any of the above items are initially supplied as a package with the supply of any of the defibrillators, the supply is GST-free.

Relevant facts

You are an Australian company and your business activity is sale of medical products. You are registered for the goods and services tax (GST).

You have provided us with a list of the following items and would like to know the GST status of these items when used separately and in conjunction with a medical appliance or device and when the items are consumed in a training session. You sell these items through a distribution network of resellers.

You advised that the customer, when initially ordering for a defibrillator and depending on their circumstance, will order the items they need with the defibrillator at the same time as a package. All items are separately priced.

You have no agreement with the recipient not to treat the supplies of these items as GST-free supplies.

Bone injection guns (B.I.G.)

This device can only be used by qualified people, normally senior paramedics or doctor, each of whom has first been trained in its use. The device is used in trauma and emergency services as a life saving procedure to gain access to the vascular system for administration of blood transfusion, vital drugs and medication. The B.I.G. has particular application as away from hospital emergency trauma treatment.

The B.I.G. is a single use item and is discarded following one use. Needles are part of the B.I.G. unit and are not sold separately.

All B.I.G. products are specifically designed for people with an illness or injury.

B.I.G. Training devices

B.I.G. training devices are reloadable B.I.G. training guns. The devices are used for training the personnel in the correct techniques of the procedure. They are purchased at the same time when the personnel purchase the B.I.G.

When B.I.G.'s are used in a training session, they have a limited number of discharges before they are discarded. The plastic leg and plastic leg cover are used in the training for the use of the device.

Training items

The items used in training sessions are used for training purposes only. They are wholly consumed in training, but may be used for more than one session before they are discarded.

The items used by trainers are not used for people with illness or injury, but to train in the correct use of the device. Medical persons must be trained before the use of a device for illness or injury.

Defibrillators

You advised that the defibrillators are used in a cardiac emergency situation. The defibrillator checks the heart beat, provides audio guidance on how to do the electroshock to the heart to resuscitate the patient and continues monitoring the heart beat until ambulance arrives or the person arrives at a hospital.

The is an apparatus used to produce defibrillation by application of brief electroshock to the heart, through electrodes placed on the chest wall. It is known as an AED meaning Automatic External Defibrillator, being a portable unit which operates in an automated way such that it can be used by persons without substantial medical training who are responding to a cardiac emergency.

The device is used to correct a dangerously abnormal heart rhythm, usually ventricular fibrillation, or to restart the heart by depolarising its electrical conduction system and delivering brief measured electrical shocks to the chest wall or the heart muscle itself through contacts fixed externally to the chest.

The AED unit uses a biphasic self-compensating output pulse envelope waveform. This is produced from electricity sourced from a battery within the unit. The unit is controlled by a purpose designed electronic program. A visual display provides guidance and an audio output gives instruction during the use of the unit.

The unit can be used multiple times. The battery requires replacement from becoming discharged through use or by a time expiry date.

Public Access Defibrillator (PAD) and AED are an easy to use medical device especially designed for public access use, to administer lifesaving treatment for sudden cardiac arrest. Portable, light and easy to transport and designed to be used in almost any environmental condition.

These defibrillators are used in a wide range of away from hospital environments such as airports, airplanes, boats, hotels, fitness centres, schools, churches, sports clubs, intense activity areas, shopping malls, workplaces and any public gathering places, as well as in private homes. You sell the devices through a distribution network of resellers.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5;

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(2);

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

A New Tax System (Goods and Services Tax) Regulations 1999.

Reasons for decisions

You are liable for GST when you make a taxable supply. You make a taxable supply under section 9-5 of the GST Act if:

(a) you make the supply for consideration;

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

(c) the supply is connected with Australia; and

(d) you are registered or required to be registered for GST.

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

From the facts given, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as:

(a) you receive consideration for the supply of these items;

(b) the supply is made in the course of a business that you carry on;

(c) the supply is connected with Australia as the items are delivered or made available in Australia to your reseller, and

(d) you are registered for GST.

However, the supply of the items will not be a taxable supply to the extent that they are input taxed or GST-free.

There is no provision in the GST Act that will make the supply of these items input taxed. The next step is to determine whether the supply of these items is GST-free.

GST-free

Relevant to the supply of these items is section 38-45 of the GST Act.

Under subsection 38-45(1) of the GST Act, 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.

Both paragraphs must be satisfied for a supply of medical aid or appliance to be GST-free under subsection 38-45(1) of the GST Act.

Items which are GST-free under subsection 38-45(1) of the GST Act are GST-free at all points in the supply chain from the point in time that they become that listed item and not only when supplied to a person who has an illness or disability.

One exception to this applies and that is when the supplier and the recipient agree to treat the supply as if it were a taxable supply pursuant to subsection 38-45(3) of the GST Act.

Bone Injection guns

The purpose of the bone injection guns is to assist qualified emergency personnel in gaining access to the vascular system for administration of blood transfusion, vital drugs and medication. It operates by inserting a needle in to the bone marrow by external application through the skin and the bone. The needle is inserted by release of pre loaded spring pressure. After access is established, a cannula is placed and the device is then used to infuse fluid into the patient's vascular system for the treatment of the patient medical condition.

The bone injection guns are not covered under any of the items listed in the table in Schedule 3 nor is it specified in the GST regulations. Paragraph 38-45(1)(a) of the GST Act is therefore not satisfied.

Accordingly, the supply of the bone injection guns is not GST-free under subsection 38-45(1) of the GST Act. As all the elements of section 9-5 of the GST Act are satisfied, your supply of the bone injection guns is a taxable supply.

A supply may be characterised as consisting of one or more things or parts. That is, the supply may be regarded as commercially distinct in its own right or it may be regarded as having several identifiable parts.

If you make a supply that contains a dominant part and the supply includes something that is integral, ancillary or incidental to that part, then the supply is a composite supply. A composite supply is treated as a supply of a single thing.

Whether a particular part of a supply is integral, ancillary or incidental in relation to the whole supply is a question of fact and degree. It is considered that a part of a supply will be integral, ancillary or incidental where it is insignificant in value or function, or merely contributes to or complements the use or enjoyment of the dominant part of the supply.

From the facts given, when the B.I.G. is purchased originally the purchaser will also purchase other items and the training package at the same time as they will be required to be trained first before being able to use the B.IG. In this instance we consider you are making two distinct supplies as the supplies are for specific purposes. The two distinct supplies are:

· Supply of B.I.G. with an ancillary item to the B.I.G. when supplied together with the B.I.G.

· Supply of B.I.G. training package.

We will now determine whether these two supplies are GST-free.

Supply of B.I.G. with additional item(s)

The supply of the B.I.G. with an ancillary item when supplied together with the B.I.G. is a supply of one thing, being a supply of the B.I.G. As discussed in question (a) the supply of the B.I.G. is a taxable supply. The supply of the B.I.G. with additional item(s) is therefore a taxable supply.

Supply of B.I.G. training package

The B.I.G. training package is specially designed for training purposes. As the supply of the B.I.G. itself is a taxable supply, it follows that the supply of the B.I.G. training package will also be taxable. Additionally, the B.I.G. training package is not covered by any of the items that are listed in the table in Schedule 3 to the GST Act or the GST regulations.

Subsection 38-45(1) of the GST Act

Item M is not covered under any of the items listed in the table in Schedule 3 nor is it specified in the GST regulations. As such the supply of the Item M is not GST-free under subsection 38-45(1) of the GST Act since paragraph 38-45(1)(a) of the GST Act is not satisfied. The supply is therefore a taxable supply.

Subsection 38-45(2) of the GST Act

Under subsection 38-45(2) of the GST Act, 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 38-45(1) of the GST Act.

We consider that for the purposes of subsection 38-45(2) of the GST Act, a spare part is a part which has been specifically designed to replace a faulty, worn out or broken part of a medical aid or appliance.

From the facts received, Item M is used for ease of rapid deployment of B.I.G. devices and you consider it to be a spare part when sold separately.

In this case, Item M for GST purposes is not a spare part when sold separately since it is not specifically designed to replace a faulty, worn out or broken part of the B.I.G. Instead it is an item that has its own purpose since it does not contribute to the function of the B.I.G. Subsection 38-45(2) of the GST Act is therefore not satisfied and the supply is subject to GST.

Summary

To summarise, the supply of Item M is a taxable supply.

Training aids

The bone injection guns including items that are used for training purposes are specifically designed for training purposes. In this instance, we do not consider them to be a supply of medical aids and appliances for GST purposes and therefore section 38-45 of the GST Act is not applicable to this supply.

Accordingly, the supply of the bone injection guns including items that are used for training purposes is a taxable supply.

Defibrillators

Item 1 in the table in Schedule 3 to the GST Act (Item 1) lists heart monitors. A heart monitor is a device with a primary function of monitoring a patient's heart beat. It is considered that Item 1 covers AEDs that are used both to monitor a patient's heartbeat and when necessary, are used to start the patient's heart beating again. Item 1 does not cover those defibrillators that can only be used to start a patient's heart beating or those that can only be used for diagnostic purposes.

From the facts given, the defibrillators (AEDs) that you are supplying are used to check the heartbeat of the patient and when necessary are used to start the patient's heart beating again. After the electro shock, the AED is used to monitor the heart beat until an ambulance arrives or the patient arrives at a hospital. Accordingly, the AEDs fall within Item1.

Further, the AEDs are specifically designed for people with an illness or disability and, are not widely used by people without an illness or disability.

Accordingly, all the requirements in subsection 38-45(1) of the GST Act are satisfied. The supply of the defibrillators GST-free all the way down the supply chain - from manufacturer to consumer.

Training use

From the facts given, the defibrillators that are to be used for training purposes and the items that are used in a defibrillator training session are specifically designed for training purposes. Further, the training items would not replace a faulty, worn out or broken part of the defibrillators.

In this instance, the items listed are not part of the defibrillators and therefore do not satisfy the requirements in subsections 38-45(1) and 38-45(2) of the GST Act. Consequently, the supply is a taxable supply.

Defibrillators - miscellaneous items

Subsection 38-45(1) of the GST Act

None of the items listed are covered under any of the items listed in the table in Schedule 3 nor are they specified in the GST regulations. Paragraph 38-45(1)(a) of the GST Act is therefore not satisfied. Accordingly, your supply of all the items listed is a taxable supply under section 9-5 of the GST Act.

The next step is to consider subsection 38-45(2) of the GST Act as you treat your supply of the items listed in this question to be a supply of spare parts when sold separately.

Subsection 38-45(2) of the GST Act

As explained in question (c) above, a supply is GST-free under subsection 38-45(2) of the GST Act 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 38-45(1) of the GST Act.

We consider that for the purposes of subsection 38-45(2) of the GST Act ,a spare part is a part which has been specifically designed to replace a faulty, worn out or broken part of a medical aid or appliance.

However, generic parts are not GST-free under subsection 38-45(2) of the GST Act since they are not specifically designed for a GST-free medical aid or appliance.

Cable

From the facts given, the USB cable is a generic USB cable and you consider it to be a spare part when sold separately.

In this instance, the generic USB cable is not considered to be specifically designed to replace a faulty, worn out or broken part of the defibrillator. Subsection 38-45(2) of the GST Act is therefore not satisfied.

Summary

To summarise, the supply of the USB cable when sold separately is a taxable supply.

Case

From the facts given, the item is designed for use with a defibrillator in harsh environments. It is used for storing the AED when the environment is extremely humid so as to ensure functionality in an emergency. It is not sold for any other purpose and can be sold separately. It is designed to fit only certain defibrillators and you consider it to be a spare part when sold separately.

From the above information, the supply of the item is not a supply of spare part for GST purposes since it is not designed to replace a faulty, worn out or broken part of the defibrillator. Instead, it is an item that has its own purpose and therefore is not GST-free under subsection 38-45(2) of the GST Act.

Summary

To summarise, the supply of the item is a taxable supply.

Wall mount

From the facts received, the item is used as a wall mount in certain situations. It is designed only for use with specific defibrillators. The item can be sold separately and you consider it is a supply of spare part when it is sold separately.

From the above information, the supply of the item is not a supply of spare part for GST purposes since it is not designed to replace a faulty, worn out or broken part of the defibrillator. Instead, it is an item that has its own purpose and therefore is not GST-free under subsection 38-45(2) of the GST Act.

Summary

To summarise, your supply of the item is a taxable supply under section 9-5 of the GST Act.

Cabinets

From the facts given, the item is a standard cabinet for specific defibrillators only and the other item the same but is fitted with an alarm and light. They are designed for public access locations and for use only with a defibrillator. They are not sold with the defibrillators at all times. They are for use where the public access situation requires prevention of tampering with or theft of the defibrillator. When they are sold separately you consider them to be a supply of spare part. The base cabinet is generic and modifications limit the use as it is only for defibrillator housing.

Based on the above information, the supply of both items is not a supply of spare part for GST purposes since the items are not designed to replace a faulty, worn out or broken part of the defibrillator. Instead, they are items that have their own purpose and therefore, are not GST-free under subsection 38-45(2) of the GST Act.

Summary

To summarise, your supply of both items is a taxable supply under section 9-5 of the GST Act.

Signage

From the facts given, the item is an wall sticker that enables the device to be readily located in an emergency. It is only used in conjunction with a defibrillator and can be sold separately. The is an angle bracket wall sign that enables the device to be readily located in an emergency. It is only used in conjunction with a defibrillator and can be sold separately.

From the above information, the supply of both items is not a supply of spare part for GST purposes since the items are not designed to replace a faulty, worn out or broken part of the defibrillator. Instead, they are items that have their own purpose and therefore, are not GST-free under subsection 38-45(2) of the GST Act.

Summary

To summarise, your supply of the items is a taxable supply under section 9-5 of the GST Act.

Batteries

This item is a battery and has its own TGA number as a medical device. It is essential for the operation of certain defibrillators. It has no other use and can be sold separately. The other two items are not generic batteries.

From the above information, the two items contribute to the operation of the defibrillators and are specifically designed to be used in conjunction with the defibrillators. Accordingly, for GST purposes the items are spare parts for the defibrillators when sold separately. The requirement in subsection 38-45(2) of the GST Act is therefore satisfied since the supply of the defibrillators is GST-free under subsection 38-45(1) of the GST Act.

Summary

Your supply of the two items, separately, is GST-free under subsection 38-45(2) of the GST Act.

Preparation Kit

This item is a preparation kit designed for use with a defibrillator situation. The kit consists of a selection of regular first aid items. These items include a CPR mask, a razor to remove chest hair prior to attaching contact pads, a drying towel to remove moisture prior to attaching contact pad, universal shears to cut clothing quickly, disposable gloves to avoid contamination, and so on, all of which collectively makes up a preparation kit specifically required when using a defibrillator. The kit is not designed for any other purpose. The pre-packed sealed kit limits the use to a defibrillator situation. It is discarded if the seal is broken. When it is sold separately you consider it to be a supply of spare part. It is not a first aid kit.

In this instance, the supply of the item is not a supply of a spare part for GST purposes despite the fact you consider it to be a supply of spare part since it is not designed to replace a faulty, worn out or broken part of the defibrillator. Further, they are not specifically designed to contribute to the operation of the defibrillator. The requirement in subsection 38-45(2) of the GST Act is not satisfied.

Summary

To summarise your supply of the this item is a taxable supply.

Items listed supplied together with the supply of the defibrillators

A supply may be characterised as consisting of one or more things or parts. That is, the supply may be regarded as commercially distinct in its own right or it may be regarded as having several identifiable parts.

Where a supply is identifiable as having more than one part and each part is taxable, GST is payable on the whole supply. Similarly, if all the parts of the supply are identifiable as being non-taxable, GST is not payable on any part of the supply.

However, where a supply consists of a combination of separately identifiable taxable and non-taxable parts, it is necessary to identify the taxable part of the supply so that the consideration for the supply can be apportioned and the GST payable on the taxable part of the supply can be worked out.

Goods and Services Tax Ruling GSTR 2001/8 (available at www.ato.gov.au) provides guidance on composite and mixed supplies by describing the characteristics of supplies that contain taxable and non-taxable parts (mixed supplies) and the characteristics of supplies that appear to have more than one part but are essentially supplies of one thing (composite supplies).

Paragraphs 16 and 17 of GSTR 2001/8 state:

16. A mixed supply is a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised.

17. If you make a supply that contains a dominant part and the supply includes something that is integral, ancillary or incidental to that part, then the supply is composite. You treat a composite supply as a supply of a single thing.

Whether a particular part of a supply is integral, ancillary or incidental in relation to the whole supply is a question of fact and degree. It is considered that a part of a supply will be integral, ancillary or incidental where it is insignificant in value or function, or merely contributes to or complements the use or enjoyment of the dominant part of the supply.

We consider that when any of the items listed in this question is initially supplied together with the supply of any of the defibrillators, the supply of the item will be incidental to the supply of the defibrillator since it contributes to or complements the use or enjoyment of the defibrillators.

Hence, when any of the items listed in this question is initially supplied together with the defibrillator, the supply is a composite supply that is a supply of a single thing which is the defibrillator.

As discussed in question (f) the supply of the defibrillators is GST-free under subsection 38-45(1) of the GST Act. Accordingly, when any of the items listed in this question is initially supplied together with the defibrillator, the supply will be GST-free under subsection 38-45(1) of the GST Act.