Edited version of your private ruling

Authorisation Number: 1012253153576

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 fac 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: Medical aids and appliances

Question

Is your supply of postural support seating GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. Your supply of postural support seating is GST-free under subsection 38-45(1) of the GST Act.

Relevant facts and circumstances

Entity A (you) is a specialist manufacturer of ergonomic seating, lifestyle products and bedding.

You are registered for Goods and Services Tax (GST).

You have requested us to determine whether your supply of postural support seating is a GST-free supply of medical aids and appliances in accordance with subsection 38-45(1) of the GST Act. You have told us these products will fall within items 78, 86 and 87 of Schedule 3 - Medical aids and appliances of the GST Act and Item 16 of Schedule 3 - Medical aids and appliances of the A new Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Your postural support seating has an adjustable posture support system which is designed to optimise seating postures and can be fully personalised to the needs of individual users. It consists of a series of adjustable straps that maintain full support of the back. The uppermost strap provides support to the thoracic region, the central straps give optimised lumbar support and the lower strap supports the sacrum. These straps can be adjusted so that they fit the specific back shape of individual users thus providing total contact and support to the back and also lateral support to the back. The adjustable posture system is highly dynamic which allows the posture support seating to cradle the user's back and provide total support regardless of the user's seated position.

Your postural support seating is designed in a variety of standard and custom configurations. The mechanical design is built around several different configurations based on the condition of the user and the use of the chair. The adjustable posture support system contained within your postural support seating works by relieving lumbar disc pressure and reducing muscle activity in the back thus providing pain relief for those who suffer from chronic back pain. It can be set up quickly and easily to minimize the amount of existing back pain and aid in the prevention or worsening of the following conditions:

Lumber pain

Coccyx issues

Sacral problems

Thoracis & Neck pain

Where your postural support seating is used for medical and rehabilitative treatment, it can be manufactured to have a substantive recline of up to a zero gravity position. If used in therapy or resting, it may incorporate a slight forward tilt and recline mechanisms.

Your postural support seating may also have a synchronised action between the seat and the back or individually controlled back and/or seat function. When used in rehabilitation or for therapy, it may also include an incorporated footrest and headrest or a detached footrest. The use of tilt and or swivel and raising and lowering of the postural support seating is also determined by its application and the user's condition. Arm rest are typically supplied with the postural support seating.

All your postural support seating have a Class 1 Medical Classification from the Therapeutic Goods Administration (TGA) and is included on the Australian Register of Therapeutic Goods (ARTG Certificate).

Some of your postural support seating helps maintain an upright posture when sitting which many users find beneficial for their backs and legs. The upright posture is maintained when feet are placed flat on the floor at a greater width than conventional seating and with the weight of the legs taken through the feet, the upper body is stabilised accordingly and the pelvis held securely in a natural position.

Your postural support seating is marketed through educational presentations, seminars, and tailored training programs for retailers, private practise therapists, the health sector (hospitals and insurance companies) as well as corporate Occupational Health & Safety Officers. It is also marketed through trade, safety, health, and other appropriate shows and exhibitions.

The retailers of your postural support seating are required to undertake special training in the usage of these products. You hold regular training sessions which are conducted by your occupational therapists. Often custom assessments are performed by your occupational therapists directly with the end users during which the end users' health insurance representative may also be present.

Due to the design of your postural support seating, the main source of your sales is via occupational therapist and other health professional referrals. You have received extensive feedback from your distributors stating that people without an illness or disability do not purchase your postural support seating due to their aesthetic design, complex set up and cost. You have advised that a high percentage of sales of your postural support seating are as a result of referrals made by medical practitioners, physiotherapists and chiropractors.

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 Schedule 3

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

Reasons for decision

Section 9-5 of the GST Act 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 defined term in section 195-1 of the GST Act)

In this case, you make a supply for consideration in the course of your enterprise. The supply is connected with Australia and you are registered for GST. Further, the supply does not fall within any provision of the GST Act which would be input taxed. Therefore, what remains to be determined is whether your supply is GST-free.

Subsection 38-45(1) of the GST Act outlines the circumstances in which the supply of certain medical aids and appliances will be GST-free and states:

38-45 Medical aids and appliances

(1) A supply is GST-free if:

o it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations; and

o 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.

Subsection 38-45(1) of the GST Act essentially sets out three elements, all of which must be satisfied before a supply can be considered GST-free. These are the supply must be:

o listed in the table in Schedule 3 to the GST Act or in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations),

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

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

Listed in the table in Schedule 3 to the GST Act

You have asked us to consider your products under item 16 of Schedule 3 of the GST Regulations and items 78, 86 and 87 of Schedule 3 of the GST Act.

Item 16 of Schedule 3 of the GST Regulations specifies 'postural support seating' as a medical aid or appliance for the category listed as 'Mobility of people with disabilities - physical: seating aids'.

Item 78 of Schedule 3 of the GST Act is listed under the category of 'Mobility of people with disabilities - physical: positioning aids' as 'alternative positional seating modifications'.

Items 86 and 87 of Schedule 3 of the GST Act is listed under the category of 'Mobility of people with disabilities - physical: seating aids' as 'electrically operated therapeutic lounge/recliner chairs specifically designed for people with disabilities' (item 86) and 'cushions specifically designed for people with disabilities' (item 87).

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

ATO Interpretive Decision ATO ID 2001/364: GST and the supply of an orthopaedic chair (ATO ID 2001/364) states as follows:

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).

The GST Pharmaceutical Health Forum - issues register - attachment B - schedule 3 - medical aid or appliance provides that in order to satisfy the description in item 16 and be considered to be specifically designed for people with an illness or disability, postural support seating should be:

· Custom made to suit the particular persons anatomical shape in order to provide correct postural support; or

· 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

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

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

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

o adjustable or appropriately shaped/sized lumbar support

o side supports

o adjustable seat height and depth

o adjustable seat base angle

o calf support

o adjustable shoulder and trunk supports

o footrests specifically designed for injured or disabled persons

o swing away arms or removable armrests

o wide arm rests

o integral push handles

o 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

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

o locking brakes

o suitable hand grips for disabled people

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

o pressure reducing cushions.

Additionally the product must not be widely used by people without an illness or disability. This test is a use test but it is very difficult to determine actual usage of individual products. An indication of actual usage can be gained from the classes of people to whom they are sold and the marketing strategies of the distributors/sellers of the products. Historical data based on sales is an acceptable indicator of usage however this may not be available for new and innovative products. In these situations estimates by manufacturers based on sales of similar categories of products may be considered.

Based on the information provided, your postural support seating has several of the characteristics from point 3 above. Furthermore your postural support seating can be custom made or is adjustable to such an extent that it can be customised to the individual's body shape or size in order to provide the correct postural support. As such your postural support seating will meet the requirements as set out in the GST Act and GST Regulations.

Specifically designed for people with an illness or disability

Factors taken into account in determining whether a medical aid or appliance is specifically designed for people with an illness or disability are discussed in the GST Pharmaceutical Health Forum Issues Register.

Issue number 1.c. in the GST pharmaceutical health forum issues register states:

1.c. What factors should be taken into account in determining whether a medical aid or appliance is 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 designer's/ manufacturer's intention of how the good is to be used and its features. Indicators of the designer's/manufacturer's 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.

In your case, your postural support seating has been specifically designed in a variety of standard and custom configurations resulting in an adjustable posture support system that works by relieving lumbar disc pressure and reducing muscle activity in the back region thus minimizing the amount of existing back pain and aiding in the prevention or worsening of the following conditions:

· Lumber pain

· Coccyx issues

· Sacral problems

· Thoracis & Neck pain

Your postural support seating is marketed through educational presentations, seminars, and tailored training programs for retailers, private practise therapists, the health sector (hospitals and insurance companies) as well as corporate Occupational Health & Safety Officers. It is also marketed through trade, safety, health, and other appropriate shows and exhibitions.

Given the above, we consider that your postural support seating will satisfy the requirement of being specifically designed for people with an illness or disability.

Not 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. in the GST pharmaceutical health forum issues register 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 have advised that due to the design of your postural support seating, the main source of your sales is via occupational therapist and other health professional referrals. You have received extensive feedback from your distributors stating that people without an illness or disability do not purchase these products due to their aesthetic design, complex set up and cost. You have advised that a high percentage of your sales of these products are as a result of referrals made by medical practitioners, physiotherapists and chiropractors.

Consequently, your supply of the postural support seating meet all of the requirements listed in paragraphs 38-45(1)(a) and 38-45(1)(b) of the GST Act and is GST-free under subsection 38-45(1) of the GST Act.