Edited version of your private ruling

Authorisation Number: 1012470359338

Ruling

Subject: GST and medical aids

Question

Is the supply by you of the products to an Australian customer GST-free pursuant to subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, your supply of the products to an Australian customer is not GST-free pursuant to subsection 38-45(1) of the GST Act. However, if you are not required to be registered for GST then the supply is out of scope of the GST Act; and is not a taxable supply.

Relevant facts and circumstances

You are an Australian sole trader entity which intends to be the wholesaler and retailer for the products in Australia. Your main income comes from your salary as an employee four days a week for a private non government organisation. You work one day a week as a contractor. You also supply services to private individuals at their homes. You do not charge GST for your supply of contractor services, nor do you charge GST for your supply of services to private individuals.

You are not registered for GST, nor are you required to be registered for GST. Even after you launch the products, in the first year, you do not think your annual turnover (comprising of contractor earning, services to private individuals; and sales of the products) will reach the threshold of $75,000 per annum.

You advised that you do not intend to have any agreements with your customers which state that the supply of the products will not be treated as a GST-free supply.

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, Section 182

A New Tax System (Goods and Services Tax) Act 1999, Section 195-1

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

A New Tax System (Goods and Services Tax) Act 1999 Section 23-5

A New Tax System (Goods and Services Tax) Act 1999 Section 188-10

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 188-25(a)

Reasons for decision

Summary:

You state that you are not required to be registered for GST in the first year of launching your products since your GST annual turnover will be under $75,000 per annum. Hence your supply of the products is out of scope of the GST Act and is not a taxable supply because you do not satisfy paragraph 9-5(d) of the GST Act.

In the future if you reach the GST turnover threshold and are required to be registered for GST, we consider that the products do not fall within Schedule 3 of the GST Act and the requirement in paragraph 38-45(1)(a) of the GST Act that the supply of the products is covered by Schedule 3 is not satisfied. Hence we do not have to discuss the requirements in paragraph 38-45(1)(b) of the GST Act and the supply of the products is not GST-free. It will be a taxable supply once you are required to be registered for GST.

Detailed reasoning:

A supply is a taxable supply where the requirements of section 9-5 of the GST Act are satisfied. Section 9-5 of the GST Act 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.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed

(* denotes a defined term under section 195-1 of the GST Act)

Based on the facts provided, you will satisfy the requirements of paragraphs 9-5(a) to 9-5(c) of the GST Act as the supply made by you will be for consideration, made in the course of an enterprise carried on by you and you will make available the products to customers in Australia; hence your supply is connected with Australia. Next step is to consider whether you satisfy paragraph 9-5(d) of the GST Act.

Required to be registered for GST:

You are a sole trader not registered for GST and you do not think that you are required to be registered for GST in relation to your supply as a contractor and your supply of the products to Australian customers.

Section 23-5 of the GST Act provides that an entity is required to be registered for GST if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold.

Section 188-10 of the GST Act provides that your GST turnover meets the registration turnover threshold if:

· your current GST turnover is at or above $75,000 and the Commissioner is not satisfied that your projected GST turnover is below $75,000; or

· your projected GST turnover is at or above $75,000.

Your current GST turnover is the sum of the values of all supplies made in a particular month plus the previous 11 months. Your projected GST turnover is the sum of the values of all supplies made in a particular month plus the next 11 months.

In calculating current GST turnover and projected GST turnover, the following supplies (amongst others) are not included in the calculation:

· supplies that are input taxed (which includes financial supplies, residential rent and sale of residential premises).

· supplies that are not for consideration.

· supplies that are not made in connection with an enterprise that you carry on.

· supplies that are not connected with Australia.

Your supply of the products is for consideration and is not input-taxed supply under any provisions of the GST Act or any other legislation. Your supplies are made in connection with an enterprise that you carry on and they are connected with Australia since you sell the products in Australia. Therefore, your supply of the products is included in the calculation of your projected GST turnover.

You work one day a week as a contractor. Your supply as a contractor and your supply to private individuals are for consideration and are not input-taxed supplies under any provisions of the GST Act or any other legislation. Hence, the value of these supplies must be included in the calculation of your current and projected GST turnovers.

You state that you are not registered for GST, nor are you required to be registered for GST. Even after you launch the products, in the first year, you do not think your GST annual turnover (comprising of contractor earnings, services to private individuals; and sales of the products) will reach the threshold of $75,000 per annum.

Accordingly, you do not satisfy paragraph 9-5(d) of the GST Act and your supply of the products is out of scope of the GST Act. If you are not required to be registered for GST because your current and projected GST turnover would be under the GST registration turnover threshold of $75,000; then your supply of the products is not a taxable supply. Hence, you do not have to charge and remit GST to the ATO on your supply of the products.

Note: Please take note that in the future if you reach the GST turnover threshold and are required to be registered for GST, you will satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. The next step is to consider whether your supply of the products satisfies section 38-45 of the GST Act, and will be a GST-free supply or not.

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.

(* denotes a term defined in section 195-1 of the GST Act)

For the supply of your product to a customer in Australia to be a GST-free medical aid or appliance, it must:

· be covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

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

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

Covered by Schedule 3:

Schedule 3 to the GST Act or schedule 3 to the GST regulations consists of a table of medical aids and appliances.

We do not consider that the products fall within Schedule 3 of the GST Act and the requirement in paragraph 38-45(1)(a) of the GST Act that the supply of the products is covered by Schedule 3 is not satisfied. Hence we do not have to discuss the requirements in paragraph 38-45(1)(b) of the GST Act and the supply of the products is not GST-free. It will be a taxable supply once you are required to be registered for GST; and you will be liable to pay GST on that supply.

Note:

The ATO can not add new medical aid and appliances to schedule 3 to the GST Act or schedule 3 to the GST regulations- only Parliament can do this.