Edited version of your private ruling

Authorisation Number: 1012479158880

Ruling

Subject: GST and medical aids

Question

Is your supply of the device a GST-free supply 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 device to an Australian customer is not GST-free pursuant to subsection 38-45(1) of the GST Act.

Relevant facts and circumstances

You are a sole trader from overseas and you plan to carry on a business in Australia. You will register for ABN and GST in Australia. You wish to import the device from overseas to sell in Australia.

The device is a sensor that is used as an aid for fall prevention and is plugged/connected to a call system. It is designed to be used in situations where patients/nursing home residents need to be monitored as they are at a high risk of falling and/or injuring themselves if they move unaided. The Recommended Retail Price of the device is in the range of $XX to $YY Australian dollars.

The device cannot act as an alarm on its own, it needs to be connected to a call system to trigger the system's alarm and alert medical staff.

You will target nursing homes, hospitals, carers, and so on, for marketing the device, because this device can be used to care for people in hospitals, residential /nursing care with impaired/restricted or limited mobility patients, those suffering from dementia and/or confusion, or suffering from side-effects of prescribed drugs or recovering from an operation.

You are aware that sensors are not listed on Schedule 3 to the GST Act (Schedule 3). You are not sure if the device's monitoring functions fall within the meaning of a medical alert device under item 33 of Schedule 3.

Reasons for decision

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(d) 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. You also plan to register for GST in Australia.

The supply of the device is not input taxed under Division 40 of the GST Act. The next step is to consider whether your supply of the device 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:

(1) 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.

(1) 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).

(2) 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 device 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 and schedule 3 to the GST regulations consist of a table of medical aids and appliances.

The device is neither specifically listed in Schedule 3 to the GST Act, nor in Schedule 3 to the GST regulations.

However, an item that may be of relevance is "medical alert" devices which is shown at item 33 in the table in Schedule 3 to the GST Act (Item 33). The term '"medical alert" devices' is not defined in the GST Act.

The definition of a medical alert device is listed in our ATO Interpretative Decision (ATO ID) 2001/509 which can be found at the tax office website www.ato.gov.au as follows:

a medical alert device is a device that is designed for the purpose of alerting medical/caring personnel or an ambulance service that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment.

We also refer you to Fact Sheet- 'GST and medical aids and appliances'- NAT 4651, which contains Schedule 3 to the GST Act  and can be found on www.ato.gov.au

To determine whether a thing is covered by an item in Schedule 3 to the GST Act or the GST Regulations, it is considered necessary to have regard to the essential character of the thing. This means deciding what the goods essentially are, as distinct from merely identifying one of a number of characteristics the goods might have. This approach relies upon deciding what the basic nature of the goods is and involves consideration of what the goods are made of and what they might be used for.

From the facts, the device is specifically designed to plug into most specific call systems. It cannot act as an alarm on its own as it needs to be connected to a call system to trigger the system's alarm and alert medical staff. Its primary purpose is to detect movement. You will target your marketing of the device towards nursing homes, hospitals, carers, and so on, because this device can be used in caring for people in hospitals, residential nursing home with impaired/restricted or limited mobility patients, those suffering from dementia and/or confusion, or suffering from side-effects of prescribed drugs or recovering from an operation.

We consider that the primary purpose of a medical alert device is to alert. The primary function of the device is to monitor the movement of individual patients. The device is not a medical alert device in itself. The fact that the device can be plugged into a call system to alert the medical staff/carers is merely a function within the device. The device retains its characteristics as a movement sensor even when it is plugged in as part of the call system. We do not consider that your device qualifies as a medical alert device since it is not designed for the purpose of alerting medical/caring personnel or an ambulance service that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment. Hence, we consider that the device is not covered by Item 33 in the table in Schedule 3 to the GST Act.

As the device is not covered by Schedule 3 of the GST Act, or the GST Regulations, it is not GST-free under paragraph 38-45(1)(a) of the GST Act. Hence we do not have to discuss the requirements in paragraph 38-45(1)(b) of the GST Act and the supply of the device is not GST-free. It will be a taxable supply once you are registered for GST.

In summary, you are making a taxable supply under section 9-5 of the GST Act when you supply the device.

Note: The ATO cannot add new medical aids and appliances to schedule 3 to the GST Act or schedule 3 to the GST regulations- only Parliament can do this.