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Authorisation Number: 1011985336939

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Ruling

Subject: GST and supply of a defibrillator as a medical aid and appliance

Question

Will the supply of the specified defibrillator (DX defibrillator) be GST-free under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the DX defibrillator will be GST-free under section 38-45 of the GST Act.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

· You are a supplier of various medical aids and appliances, and medical training aids.

· You are registered for GST.

· None of the recipients of your supplies have agreed that the supplies not be treated as GST-free supplies.

· One of the products that you supply is the DX defibrillator.

· You have previously requested a private ruling for the specified defibrillator (DY Defibrillator), however, you could not provide a reference to that ruling as you have not been able to locate it. You believe one ruling was issued on a specified date and the GST-free status of certain defibrillators was extended in a subsequent ruling by the Tax Office.

· You have provided a copy of the brochure for the DX defibrillator.

· The functions of the DX defibrillator are:

o Evaluate the key attributes of a patient's presenting heart rhythm.

o Advise whether to initially treat shockable rhythms such as ventricular fibrillation with a shock, or with cardiopulmonary resuscitation (CPR) immediately followed by a shock.

o Provide visual guidance and corrective feedback on CPR compressions.

o Where appropriate, provide the necessary shock.

· The initial function of the product is to monitor the heart rhythm of a patient and indicate whether CPR and/or defibrillating shock is required.

· The DX defibrillator is supplied in 2 specified bundles:

o Bundle A which includes the DX defibrillator Automated External Defibrillator (AED), SMART Pads 111, battery, user documentation and HeartStart Configure software.

o Bundle B includes DX defibrillator AED, SMART Pads 111, battery, configuration card, user documentation, HeartStart Configure software, Q-CPR technology by you, system case and data card.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Ch3-Pt3-1-Div 38.

A New Tax System (Goods and Services Tax) Act 1999 Ch2-Pt2-2-Div9-SDiv 9-A.

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

A New Tax System (Goods and Services Tax) Act 1999 Ch3-Pt3-1-Div38-SDiv 38-B.

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1).

Reasons for decision

Supply of DX defibrillator

In considering whether a supply is subject to GST, regard must be had to section 9-5 of the GST Act which provides:

You make a taxable supply 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.

Therefore, where the requirements of paragraphs (a) to (d) of section 9-5 are satisfied, you will be liable for GST on supplies you make unless the supply is GST-free or input taxed.

It is considered that the provisions of the GST Act dealing with input taxed supplies will have no application in relation to the supplies you have identified.

In determining whether the supplies are GST-free, Division 38 of the GST Act needs to be considered.

Section 38-45 of the GST Act identifies the circumstances in which a supply of medical aids and appliances is GST-free. It provides that:

(1) A supply is GST-free if:

(a) it is covered by Schedule 3 (medical aids and appliances) to the GST Act (Schedule 3), 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.

(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 38-45(1) of the GST Act.

(3) However, a supply is not GST-free under subsection 38-45(1) or (2) of the GST Act 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.

Subsection 38-45(1) of the GST Act essentially has three elements, all of which must be satisfied before the supply can be GST-free. It must be:

· listed in Schedule 3 or in the GST Regulations

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

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

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 the item listed in Schedule 3 and not only when supplied to a person who has an illness or disability.

'Heart monitors' is listed as a medical aid and appliance under item 1 of Schedule 3.

The DX defibrillators that you supply are primarily machines that are used to monitor the heartbeat of patients in emergency situations with the ability to deliver a defibrillating shock if necessary. Accordingly, the DX defibrillator that you supply is a medical aid and appliance covered by Schedule 3. Therefore, the first criterion of subsection 38-45(1) of the GST Act is met.

The second criterion is that the device must be specifically designed for people with an illness or disability. The DX defibrillators are designed for the main purpose of treating people who are ill and in need of immediate medical attention and monitoring. Accordingly, they satisfy the second criterion of subsection 38-45(1) of the GST Act.

Thirdly the defibrillators must not be widely used by people without an illness or disability. The main function of the DX defibrillator is to monitor the heartbeat of patients in emergency situations to indicate whether CPR and/or defibrillating shock is required. Accordingly, it is a medical aid and appliance that is not widely used by people without an illness or disability. Accordingly, the third criterion under subsection 38-45(1) of the GST Act is met.

All the elements of subsection 38-45(1) of the GST Act are met. In addition, none of the recipients of your supplies have agreed that the supplies not be treated as GST-free supplies. Therefore, your supply of the DX defibrillator will be GST-free.

Additional information

Supply of spare parts and other items

Spare parts

From the facts provided, you may also provide items specifically designed for the DX defibrillator unit such as pads, cables, battery pack and replacement data card to operate and record data from the unit. Further, you may also provide other items that include a protective pouch in a soft or hard case, a kit containing scissors, CPR mask, gloves, razor and zip-lock bags.

These items may be supplied together with the DX defibrillator unit, as a bundle or separately.

Under subsection 38-45(2) of the GST Act, a supply of a spare part will be a GST-free supply if the spare part is:

· supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act; and

· specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1).

The first requirement is that the thing supplied must be supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.

The term 'spare part' is not defined in the GST Act. 'Spare part' is defined in The Macquarie Dictionary, 1997, 3^rd edition, The Macquarie Library Pty Ltd NSW, as a 'part which replaces a faulty, worn or broken part of a machine'. Accordingly, a part need not actually be replacing something which is faulty, worn or broken to qualify as a spare part, but just be capable of doing so.

The second requirement in subsection 38-45(2) of the GST Act is that the spare part must be specifically designed as a spare part for the GST-free medical aid or appliance.

Where the pads, cables, battery pack and data card are all necessary for the DX defibrillator to be fully effective and are specifically designed for the DX defibrillator, they will meet all the requirements of subsection 38-45(2) of the GST Act as a spare part.

As the supply of the DX defibrillator is GST-free, where the pads, cables, specifically designed batteries and data cards are considered to be spare parts for the DX defibrillator, the supply of these items will be GST-free under subsection 38-45(2) of the GST Act, whether supplied with the unit or separately.

However under subsection 38-45(3) of the GST Act a supply is not GST-free under subsection 38-45(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.

You have stated that you do not have such agreements in place with the recipients of your supplies. Therefore, subsection 38-45(3) of the GST Act does not apply.

Other items

From the facts provided, you may also supply the following items for use with the DX defibrillator.

· A protective pouch in either a soft or hard case

· A kit containing scissors, mask, towel, gloves, razor and zip-lock bags

· batteries

These items are not listed in Schedule 3 to the GST Act or the GST Regulations nor are they a spare part for, or specifically designed as a spare part for, the DX defibrillator the supply of which is GST-free under subsection 38-45(1) of the GST Act. These items are generic in nature. Therefore, they are not GST-free when sold separately.

The GST treatment of these items, when supplied with the DX defibrillator unit will depend on whether the supply is considered a mixed supply or a composite supply.

Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts 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…

When sold with the DX defibrillator unit as in Bundle A and Bundle B, the pouch and kit are considered to be integral, ancillary or incidental to DX defibrillator. Therefore, the DX defibrillator bundle is considered a composite supply and the pouch and kit will take on the status of the supply of the DX defibrillator. That is, the composite supply will be GST-free.