Edited version of your private ruling

Authorisation Number: 1012014562166

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.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: goods and services tax (GST) and medical aids & appliances

Question 1

Is GST payable on your sale of the electronically adjustable and manually adjustable beds?

Answer

No.

Question 2

Is GST payable on your sale of the mattresses?

Answer

No.

Question 3

Is GST payable on your sale of the overlays?

Answer

No.

Question 4

Is GST payable on your sale of the pillows?

Answer

Yes.

This ruling applies for the following periods:

The scheme commences on:

Relevant facts and circumstances

You are registered for GST

You sell various bedding products as detailed below.

You supply the products wholly within Australia.

The beds

The beds are manually or electronically operated adjustable beds allowing people to select a variety of positioning adjustments at both the head and feet area, depending on the customer's personal and medical requirements. The adjustments allow the person to elevate the positioning of the bed at the head and foot of the bed from horizontally positioning to vertically upright.

You market the beds to medical professionals, medical retailers, medical institutions, bedding stores.

You believe that because of the adjustable features and pressure relieving properties of the beds and the prohibitive cost of these beds compared to normal beds that do not have such design features, the beds would not be widely used by people without an illness or disability. However, a very small portion of users of the beds would not be ill or disabled.

The mattresses

Your pressure management mattresses have a technology that is designed to evenly distribute the pressure exerted on the mattress across the whole body of the person on the mattress. The design and function of the mattresses achieve a pressure management effect.

The mattresses are specially designed to offer stability, maximum elasticity and ergonomic properties for pressure management.

The mattress yields at the precise points where pressure management is required and provides support in areas where the spine requires greater support, regardless of the weight or size of the person on the mattress. Compared to inner spring mattresses that bear more load on the springs, this mattress effectively reduces pressure points to evenly distribute the weight of the sleeper.

The adjustability of the bed, together with the pressure support of the mattress, assists sleepers in maintaining an anatomically neutral position during sleep - helping to keep the spine in alignment, to alleviate the issues of many sleepers with back and neck injuries.

The mattresses are therefore designed and operate in such a way that the body weight is evenly distributed across the whole of the mattress.

The stability of the mattresses is designed to minimise movement of the whole mattress when a sleeper turns, which minimises poor sleep due to partners disturbance.

The overlays

The overlay contours the mattress and works to compliment the design of the mattress, to achieve the same pressure distribution effects as outlined above. The overlays are padded in the load bearing areas of the mattress, such as the head and shoulder region, to provide greater support (and general comfort) for the pressure distributed to those areas.

Additionally, the overlays are designed to capture moisture (that is, excessive sweat) and are able to be washed in standard washing machines up to a certain temperature, which kills most mites, reduces bacteria, mould, fungi and other allergens - helping skin disorders, allergy sufferers, asthma sufferers and other respiratory related health conditions.

Ergonomic pillows

The same design technology has been applied to the production of the ergonomic pillow as that of the pressure management mattresses, such that the ergonomic pillow is specifically designed to provide optimal spine support for customers who suffer from back or neck problems

Additionally, the ergonomic pillows are designed to capture moisture (that is, excessive sweat) and are able to be washed in standard washing machines up to a certain temperature, which kills most mites, reduces bacteria, mould, fungi and other allergens - helping skin disorders, allergy sufferers, asthma sufferers and other respiratory related health conditions.

Orthopaedic pillows

You primarily sell the something orthopaedic pillows, which have qualities that enable it to benefit those users with a disability.

The pillow is height adjustable and has specially designed pillow fibre which is breathable and washable. However, most importantly, the inner of the pillow has been designed to be removable in any quantity, meaning that the user can adjust the pillow height to their exact height requirements, assisting sleepers who snore or have sleep apnoea, by allowing them to increase or decrease the elevation of their airways.

Specifically designed for people with an illness or disability - all products in question

The products in question used in combination are specifically designed to help relieve the pain of arthritis and rheumatism sufferers. These products have been developed in cooperation with sleep researchers, naturopaths, sports medicine institutions and orthopaedic surgeons.

As well as having orthopaedic properties, the products in question are all made with silver zeolites woven through the textile fibre, which has antibacterial and germ inhibiting qualities (you have branded this union of silver and fibre as something).

The use of this something has been shown to effectively reduce allergies in customers, particularly those suffering allergies to dust mites

Not widely used by people without an illness or disability - all products in question

You have done market research that reveals that a large percentage of customers have health related issues.

The ultimate consumers of your products are those customers who are specifically suffering from an illness or disability and the products are pitched to such consumers. That is, when you sell your products, you focus almost exclusively on the significant health benefits of the products (by reason of the special design features etc as discussed above). The result being, for the products in question, that significant health benefit is the fundamental thing that distinguishes the products in question from standard products.

As a practical matter, this distinction is clearly enhanced by the fact that the products in question are materially more expensive than other standard products (of a similar kind in the market). This premium price is clearly evidence of the superior design technology and quality inherent in the products in question. This is also consistent with the results from the sample market research that has been undertaken, as outlined above.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 182-10(2)

A New Tax System (Goods and Services Tax) Act 1999 section 182-15

Reasons for decisions

GST is payable by you where you make a taxable supply.

You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that

· you *carry on; and

· the supply is *connected with Australia; and

· 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)

In your case, you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you supply the products in question for consideration and in the course or furtherance of an enterprise that you carry on. Additionally, these supplies are connected with Australia and you are registered for GST.

There are no provisions in the GST Act under which your sales of the products in question could be input taxed.

Therefore, what remains to be determined is whether your sales of the products in question are GST-free.

Under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the supply of a medical aid or appliance is GST-free where the medical aid or appliance is:

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

(b) specifically designed for people with an illness or disability, and not widely used by people without an illness or disability.

There are no other provisions in the GST Act under which your sales of the products in question could be GST-free.

Question 1

Summary

GST is not payable on your sale of the beds as:

- they are medical aids or appliances covered by items 59 and 60 of Schedule 3 to

the GST Act

- they are specifically designed for people with an illness or disability; and

- they would not be widely used by people without an illness or disability.

Detailed reasoning

"Manually operated adjustable beds" are listed at item 59 of Schedule 3 to the GST Act under the category heading of "Mobility of people with disabilities physical: bedding for people with disabilities".

"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".

Section 182-15 of the GST Act provides that the category heading in Schedule 3 is not an operative part of the GST Act. However, the category heading may be used, as per subsection 182-10(2) of the GST Act, to, amongst other things, "confirm the provision's meaning is the ordinary meaning conveyed by its text" or "in determining the purpose or object underlying the provision".

The category heading in Schedule 3 does provide some guidance as to the purpose or object underlying the provision. The words of the category heading convey an intention that the adjustable bed should possess characteristics such that the bed is suitable for use by people with a disability in order to provide greater mobility.

People with a disability often have difficulty getting in and out of bed and some are incapable of doing so unassisted. By adjusting the upper section of an 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, an adjustable bed has characteristics that make it suitable for use by people with an illness or disability in order to provide greater mobility.

The beds in your case are manually and electronically operated adjustable beds and have characteristics such that they will provide greater mobility to a person with a disability. Therefore, the beds are covered by item 59 and item 60 of Schedule 3 to the GST Act.

Specifically designed for people with an illness or disability

In determining whether a medical aid and appliance is specifically designed for people with an illness or disability reference should be made to the designers/ manufacturers intention of how the good is to be used and its features. Indicators of the designers/manufacturers intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased.

We consider that manually and electronically operated adjustable beds will be specifically designed for people with an illness or disability when the designer of the bed has considered the needs of people with an illness or disability and the end product possesses the design characteristics that make it capable of providing assistance to people with an illness or disability.

A manually operated adjustable bed and an electronically operated adjustable bed will have design characteristics that will assist people with an illness or disability to get in and out of bed unaided, and the adjustable characteristics of the bed will allow people with an illness or disability to sleep or rest with the upper or lower body in an elevated position, which has the application to alleviate the effects of a number of medical conditions. For example, by elevating the lower section of the bed the occupant can raise their legs to a level above that of their heart to aid their circulation.

The beds in your case have design characteristics that assist people with an illness or disability get in and out of bed unaided, and 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 the application to alleviate the effects of a number of medical conditions.

You market the beds to medical professionals, medical retailers, medical institutions, bedding stores. Medical professionals, medical retailers and medical institutions are more likely to require a bed that is specifically designed for the ill or disabled.

Based on the facts provided, the manufacturer of the beds in your case considered the needs of people with an illness or disability when designing the bed.

Hence, the beds in your case are specifically designed for people with an illness or disability.

Not widely used by people without an illness or disability

Manually operated adjustable beds and electronically operated adjustable beds are generally purchased by ill or disabled people who have difficulty in getting, 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.

You believe that because of the adjustable features and pressure relieving properties of the beds in your case and the prohibitive cost of these beds compared to normal beds that do not have such design features, the beds in your case would not be widely used by people without an illness or disability.

You did market research, which revealed that a large percentage of your customers had health related issues.

The ultimate consumers of your products are those consumers who are specifically suffering from an illness or disability and the products are pitched to such consumers that is, you, when selling your products focus almost exclusively on the significant health benefits of the products (by reason of the special design features etc). The result being, for the products in question, that significant health benefits are the fundamental thing that distinguishes the products in question from standard products.

As a practical matter, this distinction is clearly enhanced by the fact that the products in question are materially more expensive than other standard products (of a similar kind in the market). This premium price is clearly evidence of the superior design technology and quality inherent in the products

As such, although the beds in your case may be used by people who do not have an illness or disability, we believe that the beds would not be widely used by such people.

Hence, the requirements of paragraph 38-45(1)(b) of the GST Act are satisfied.

Consequently, your sales of the beds in your case are GST-free under subsection 38-45(1) of the GST Act, as the beds satisfy all of the requirements of that provision.

Question 2

Summary

GST is not payable on your sale of the mattresses as:

- they are medical aids or appliances covered by item 66 of Schedule 3 to the GST Act

- they are specifically designed for people with an illness or disability; and

- they would not be widely used by people without an illness or disability.

Detailed reasoning

Item 66 of Schedule 3 to the GST Act lists pressure management mattresses and overlays.

A pressure management mattress is a mattress designed to provide comfort and prevent pressure sores by evenly distributing the pressure exerted by the mattress on a patient's body.

Your pressure management mattresses are designed to evenly distribute the pressure exerted on the mattress across the whole body of the person on the mattress. The unique design and function of the mattresses achieve a pressure management effect.

Therefore, your mattresses are covered by item 66 of Schedule 3 to the GST Act.

Specifically designed for people with an illness or disability

The products in question used in combination are specifically designed to help relieve the pain of arthritis and rheumatism sufferers. These products have been developed in cooperation with sleep researchers, naturopaths, sports medicine institutions and orthopaedic surgeons.

As well as having orthopaedic properties, the products in question are all made with something woven through the textile fibre, which has antibacterial and germ inhibiting qualities (you have branded this union of something and fibre as something).

The use of this something has been shown to effectively reduce allergies in customers, particularly those suffering allergies to dust mites

The adjustability of the bed, together with the pressure support of the mattresses, assist sleepers in maintaining an anatomically neutral position during sleep - helping to keep the spine in alignment, to alleviate the issues or many sleepers with back and neck injuries.

The ultimate consumers of your products are those consumers who are specifically suffering from an illness or disability and the products are pitched to such consumers that is, you, when selling your products focus almost exclusively on the significant health benefits of the products (by reason of the special design features etc). The result being, for the products in question, that significant health benefits are the fundamental thing that distinguishes the products in question from standard products.

Therefore, we consider that that the mattresses are specifically designed for people with an illness or disability.

Not widely used by people without an illness or disability.

You did market research, which revealed that a large percentage of your customers had health related issues.

The ultimate consumers of your products are those consumers who are specifically suffering from an illness or disability and the products are pitched to such consumers that is, you, when selling your products focus almost exclusively on the significant health benefits of the products (by reason of the special design features etc). The result being, for the products in question, that significant health benefits are the fundamental thing that distinguishes the products in question from standard products.

As a practical matter, this distinction is clearly enhanced by the fact that the products in question are materially more expensive than other standard products (of a similar kind in the market). This premium price is clearly evidence of the superior design technology and quality inherent in the products

Based on this information, we accept that the mattresses would not be widely used by people without an illness or disability.

Question 3

Summary

GST is not payable on your sale of the overlays as:

- they are medical aids or appliances covered by item 66 of Schedule 3 to the GST Act

- they are specifically designed for people with an illness or disability; and

- they would not be widely used by people without an illness or disability.

Detailed reasoning

Item 66 of Schedule 3 to the GST Act lists overlays.

A pressure management mattress is a mattress designed to provide comfort and prevent pressure sores by evenly distributing the pressure exerted by the mattress on a patient's body. A pressure management overlay is an overlay for a mattress that provides the same benefits as a pressure management mattress.

Your overlays contour the mattresses and work to compliment the design of the mattresses to achieve the same pressure distribution effects as outlined above.

Therefore, your overlays are covered by item 66 of Schedule 3 to the GST Act.

Specifically designed for people with an illness or disability

The products in question used in combination are specifically designed to help relieve the pain of arthritis and rheumatism sufferers. These products have been developed in cooperation with sleep researchers, naturopaths, sports medicine institutions and orthopaedic surgeons.

As well as having orthopaedic properties, the products in question are all made with something woven through the textile fibre, which has antibacterial and germ inhibiting qualities (you have branded this union of something and fibre as something).

The use of this something has been shown to effectively reduce allergies in customers, particularly those suffering allergies to dust mites

The overlays are also designed to capture moisture (that is, excessive sweat) and are able to be washed in standard washing machines up to a certain temperature, which kills dust mites, reduces bacteria, mould, fungi and other allergens helping skin disorders, allergy sufferers, asthma sufferers and other respiratory related medical conditions.

Therefore, we consider that that the overlays are specifically designed for people with an illness or disability.

Not widely used by people without an illness or disability.

You did market research, which revealed that a large percentage of your customers had health related issues.

The ultimate consumers of your products are those consumers who are specifically suffering from an illness or disability and the products are pitched to such consumers that is, you, when selling your products focus almost exclusively on the significant health benefits of the products (by reason of the special design features etc). The result being, for the products in question, that significant health benefits are the fundamental thing that distinguishes the products in question from standard products.

As a practical matter, this distinction is clearly enhanced by the fact that the products in question are materially more expensive than other standard products (of a similar kind in the market). This premium price is clearly evidence of the superior design technology and quality inherent in the products.

Based on this information, we accept that the overlays would not be widely used by people without an illness or disability.

Question 4

Summary

GST is payable on your sales of the pillows as the requirements of section 9-5 of the GST Act are satisfied.

Detailed reasoning

Item 87 of Schedule 3 to the GST Act lists 'cushions specifically designed for people with disabilities'. To come within this item, the goods must satisfy the following requirements.

It must be a 'cushion'. As the word cushion is not a technical word, in applying general rules of statutory interpretation we should interpret this word as taking its normal or ordinary meaning.

The Macquarie Dictionary defines a 'cushion' as, among other things, 'a soft bag of cloth, leather or rubber filled with feathers, air etc used to sit, kneel or lie on or anything of similar appearance or use'. This definition is similar to that of a pillow 'a bag or case filled with feathers, down, or other soft material, commonly used as a support for the head during sleep or rest'. The Concise Oxford Dictionary provides a similar definition.

While the definitions for pillows and cushions are not the same, there is considerable overlap in meaning between a pillow and a cushion. That is, cushions and pillows can be said to be soft bags of cloth containing a soft substance or material that can be used interchangeably to support a part of the body. However, on applying a definitional approach, cushions and pillows can be separated on the basis of the area in which they are used. That is, pillows are used predominantly to support the head and neck regions while cushions are used to support other areas of the body.

This position is consistent with Parliament's intent as indicated by the health category heading of Schedule 3 to the GST Act 'Mobility of people with disabilities physical: seating aids'. Even though this heading is not an operative part of the Schedule it may be used in certain cases of ambiguity or to confirm the normal meaning of the words used to describe the product.

In the present circumstances, pursuant to section 182-15 of the GST Act, we can use the category heading to 'confirm the provisions meaning is the ordinary meaning conveyed by its text, taking into account its context in this Act and the purpose or object underlying the provision' or 'in determining the purpose or object underlying the provision'.

The category heading in Schedule 3 to the GST Act confirms the intent of Parliament in including the word 'cushions' was to cover those used by people requiring support while seated, such as those used by people in wheelchairs. Having regard to the purpose or object underlying the provision, we can determine that the word 'cushion' as mentioned in item 87 of Schedule 3 to the GST Act means a support for sitting. This is distinct from the purpose of a pillow which is designed to support the head and neck during sleep or rest.

This means that for the purposes of item 87 of Schedule 3 to the GST Act, a cushion will not include a pillow that is primarily used to support the head and neck area for rest or sleep purposes.

Additionally, the pillows are not covered by any other item in Schedule 3 to the GST Act. As such, it is considered that the pillows do not satisfy all of the requirements of subsection 38-45(1) of the GST Act.

Therefore, your supply of pillows will be subject to GST.