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Ruling

Subject: GST and electronically operated adjustable beds

Question

Is the supply of your adjustable beds GST-free?

Answer

Yes, the supply of your adjustable beds is GST-free.

Relevant facts and circumstances

You are registered for the goods and services tax (GST).

You sell a number of bed products including electronically operated adjustable beds.

The beds are designed for people with an illness or a disability.

Due to the special features of the beds, they would be used by people with an illness or a disability and they would not be widely used by people without an illness or a disability.

The products are sold to bedding retailers.

These beds are electronically operated and adjustable and have design characteristics that would assist the ill or disabled person get in and out of bed unaided.

Being adjustable, the beds are able to elevate different parts of the body including the upper and lower parts that may alleviate the effects of a number of medical conditions.

Medical conditions that the adjustable characteristics of the bed may assist with were listed.

You do not have any agreements in place with any of the recipients to treat the supply of the beds as taxable.

Relevant legislative provisions

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

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

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

Reasons for decision

Subsection 7-1(1) of the A New Tax System (Goods and Services Tax Act) 1999 (GST Act) provides that GST is payable on taxable supplies and taxable importations.

Section 9-5 of the GST Act states that 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.

For the supply of your electronically operated adjustable beds to be a taxable supply, all of the requirements listed in section 9-5 of the GST Act must be satisfied.

From the facts in your case, you make the supply for consideration, the supply is made in the course or furtherance of your enterprise of importing and selling number of bed products including the electronically operated adjustable beds, the supply is connected with Australia as the sale is made in Australia and you are registered for GST. Therefore, what remains to be considered is whether the supply of your electronically operated adjustable beds is GST-free or input taxed.

There are no provisions in the GST Act or of another Act to treat the supply of your electronically operated adjustable beds as input taxed.

Therefore, we need to consider whether the supply of your electronically operated adjustable beds is GST-free. Division 38 of the GST Act sets out the supplies that are GST-free. In particular, section 38-45 of the GST Act states:

A supply is GST-free if:

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

· 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.

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 (1).

However, a supply is not GST-free under subsection (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.

Covered by Schedule 3 or the Regulations

'Electronically operated adjustable beds' are listed at Item 60 in the table in Schedule 3 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 but may be used, as per subsection 182-10(2) of the GST Act, amongst other things, to 'confirm the meaning if 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 the adjustable bed the occupant can achieve a sitting or semi standing position to assist the occupant to get in and out of the bed unaided. As such the adjustable bed has features that make it suitable for use by people with a disability or illness in order to provide greater mobility.

The bed in question is adjustable and electronically operated and has characteristics such that it will provide greater mobility to a person with a disability. Therefore the adjustable bed is covered by Item 60 in the table in Schedule 3 to the GST Act.

What then needs to be considered is whether these beds are specifically designed for people with an illness or disability, and are not widely used by people without an illness or disability

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:

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.

The bed has design characteristics such that it will assist people with an illness or disability to get in and out of bed unaided.

Additionally 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 application to alleviate the effects of a number of medical conditions.

Medical conditions that the adjustable characteristics of the bed have application to were listed.

The design features of these types of beds indicate that the dominant market for such beds would be aged and disabled people who have difficulty getting in and out of bed and/or those suffering from specific health problems. Furthermore, it is accepted that these beds are designed to cater for the needs of this class of people.

As such, where an electronically operated adjustable bed has such design characteristics, it is considered that the bed 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:

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) of the GST Act 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 stated that you believe that the electronically operated adjustable beds are not widely used by people without an illness or disability. Rather, because of the design features they are generally purchased by the ill or disabled people who have difficulty or are unable to get in and out of bed unassisted or who suffer from medical conditions.

From the information provided by you, the electronically operated adjustable beds are covered by Item 60 in the table in Schedule 3 to the GST Act and are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.

Therefore the supply of the electronically operated adjustable beds is GST-free as a supply of a medical aid or appliance under section 38-45 of the GST Act.