Edited version of your private ruling

Authorisation Number: 1012126976772

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Subject: GST and medical aids and appliances

Question

Is GST payable on the supply of the Z chair range of products?

Answer

Yes.

This ruling applies for the following period

The scheme commenced on

Relevant facts

You sell a range of chairs (the product).

The product has the widest range of adjustment and can adapt to the majority of spinal considerations that appear in the population.

The product exhibits the following design characteristics:

· adjustable height

· adjustable back angle

· adjustable and appropriately shaped/steed lumbar support

· adjustable seat height and depth - conforms to the Australian standards

· adjustable seat base angle

· swing away armrests or removable arm rests

· optional wide armrests

· optional 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

· optional locking breaks

The product is designed to help people who sit for long periods of time and to prevent the injuries that are well documented and caused by this process.

Generally anyone sitting in the workplace either commercially or home office would purchase the product. The product can be purchased directly from you or through selected distribution points in the country. Your website lists a number of office furniture retailers as distributors of the product.

You provided the following information about the product:

· The chair has a revolutionary design that works to save your entire body from the stress of sitting. The chair supports your pelvic and lower spine in the most effective posture to minimise muscle stress and strain.

· Chairs can be custom tailored and prices will vary according to fabric choice, feature and style options.

· There are a number of ranges which are suitable for various work environments.

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 Section 38-45

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

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

Reasons for decision

Summary

GST is payable on the supply of the Z chair range of products.

Detailed reasoning

GST is payable on any taxable supply that you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) sets out the requirements of a taxable supply and it 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 for GST.

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 as:

(a) you supply the product for consideration

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

(c) the supply is connected with Australia, and

(d) you are registered for GST.

The supply of the product is not input taxed under the GST Act or under any other Act. Therefore, what is left to determine is whether the supply is GST-free.

Section 38-45(1) of the GST Act lists GST-free medical aid or appliances. Subsection 38-45(1) states:

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.

Item 16 in the table in Schedule 3 to the Regulations (Item 16) specifies 'postural support seating'. Postural support seating as listed in Item 16 needs to be a specific type of seating possessing characteristics that satisfies both the description of the item and the use requirement of paragraph 38-45(1)(b) of the GST Act.

The phrase 'postural support seating' is not defined in the GST Act.

Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222).

In consultation with the Health Industry, it is considered that for the purposes of Item 16 and to be a thing that is specifically designed for people with an illness or disability, 'postural support seating' should be:

(i) Custom made to suit the particular person's anatomical shape in order to provide correct postural support; or

(ii) Adjustable to such an extent that the product can be customised to the individual's body shape or size in order to provide correct postural support; or

(iii) 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 height so as to attain 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 seat height and depth;

· adjustable seat base angle;

· adjustable shoulder and trunk supports;

· side supports;

· calf support;

· 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; and

· pressure reducing cushions.

Furthermore, to be GST-free they must not be widely used by people without an illness or disability.

Factors taken into account in determining whether a medical aid or appliance is not widely used by people without an illness or disability are discussed in the GST Pharmaceutical Health Forum Issues Register. Issue number 1.d states:

1.d. What factors should be taken into account in determining whether a medical aid or appliance is widely used by people without an illness or disability?

In determining whether a medical aid and appliance is used by people without an illness or disability reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased.

Subsection 38-45(1) does not require the GST treatment of a medical aid and appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products.

Accordingly, it is considered that irregular and uncommon use of a medical aid and appliance in a way contrary to its manufactured purpose will not prevent the good from being GST-free.

You advised that the product has the widest range of adjustment and can adapt to the majority of spinal considerations that appear in the population. It is marketed as a product which improves health and posture as it supports the pelvic and lower spine to minimise muscle stress and strain.

While the product's design characteristics are similar to the items listed in Item 16 at paragraph (iii), the product does not meet the requirement of being specifically designed for people with an illness or disability. As such the product does not satisfy the requirements of postural support seating listed in Item 16.

Furthermore, the requirement that the product must not be widely used by people without an illness or disability is not satisfied because the product contemplates a wide use throughout a large number of persons and to a wide extent. The product is designed for common use and marketed for use by the wider community and not specifically for persons with an illness or disability. We consider that the product is of a type that is commonly referred to as an ergonomic chair, and its characteristics are preventative rather than of a kind regarded as a medical aid or appliance.

As such, the product is not a GST-free medical aid or appliance under subsection 38-45(1) of the GST Act.

The supply of the product is not GST-free under any other provision of the GST Act or any other Act. Therefore, as all the requirements of section 9-5 of the GST Act are met, you are making a taxable supply when you supply the product.