Edited version of your private ruling

Authorisation Number: 1012485910272

Ruling

Subject: GST and the supplies of medical services and medical aids

Question 1

Is the supply of a service to upgrade a medical aid GST-free under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of a service to upgrade a medical aid is GST-free under subsection 38-10(1) of the GST Act.

Question 2

Is the supply of a medical aid, capable to be upgraded GST-free under subsection 38-45(1) of the GST Act?

Answer

Yes, the supply of a medical aid, capable to be upgraded, is GST-free under subsection 38-45(1) of the GST Act.

Relevant facts and circumstances

You own and operate a network of clinics.

You are registered for GST.

Your clinics are run by professionals that assist people with hearing difficulties.

A customer's hearing impairment is not static and will often change (usually deteriorate) as they age. In addition, as a customer becomes accustomed to the use of a hearing aid, they will seek to access a higher quality hearing aid and hence hearing experience.

This means that the original hearing aid provided to the customer may become ineffective overtime. Under the traditional approach, when this occurred the customer would be reassessed by a professional. Following the reassessment the professional would recommend a new hearing aid with features to effectively treat the customers changed level of hearing impairment and would supply the new hearing aid to the customer. The old hearing aid became redundant.

The hearing aids you intend to release to the market are the first with the capacity to have their features modified by a professional in response to changes in customers' hearing impairment. Customers who purchase these hearing aids will not have to purchase a new hearing aid if their hearing condition alters or the functionality of the hearing aid that they seek changes.

When the hearing aid is originally supplied, your professionals will assess the customer's hearing and determine the appropriate hearing aid and features to meet their needs.

Once the customer has been using the hearing aid for a period they will return to your professionals for a reassessment. Your professionals will assess the customer's current hearing and determine what changes to the hearing aid features are to meet the audio logical assessment of the customer.

The audiologist will then upgrade the existing hearing aid by activating the new features of a particular technology level.

Your medical hearing aid is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. You have not entered into an agreement with anybody that your supplies of the hearing aid are not to be treated as GST-free supplies.

You informed us that you are an accredited service provider and employ professionals that perform the upgrade service thereby satisfying the 'recognised professional' requirement that would be accepted as necessary for the appropriate treatment of the customer.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-10

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

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

Reasons for decision

A supply of a health service is GST-free under Division 38, where the requirements of subsection 38-10(1) of the GST Act are satisfied.

Subsection 38-10(1) of the GST Act provides that a supply is GST-free if:  

(a) it is a service of a kind specified in the table in this subsection, or of a kind specified in the regulations; and

(b) the supplier is a recognised professional in relation to the supply of services of that kind; and

(c) the supply would generally be accepted, in the profession associated with supplying such services, as being necessary for the appropriate treatment of the recipient of the supply.

All the elements of subsection 38-10 (1) of the GST Act must be satisfied in order for a supply to be GST-free under the subsection.

Service of a kind

You informed us that you own and operate a national network of clinics and provide health services and medical aids.

The health services you provide is listed as an item in the table to subsection 38-10(1)(a) of the GST Act as a specified service for the purposes of this paragraph. Accordingly, this requirement is satisfied.

Recognised professional

Section 195-1 of the GST Act defines a person as a 'recognised professional', in relation to supplies of audiology services, if:

(a) the service is supplied in a State or Territory in which the person has a permission or approval, or is registered, under a State law or Territory law prohibiting the supply of services of that kind without such permission, approval or registration; or

(b) the service is supplied in a State or Territory in which there is no State or Territory law requiring such permission, approval or registration, and the person is a member of a professional association that has uniform national registration requirements relating to the supply of services of that kind;

(c) in the case of services covered by item 3 in the table - the service is supplied by an accredited service provider within the meaning of section 4 of the Hearing Services Administration Act 1997.

You informed us that under section 4 of the Hearing Services Administration Act 1997, an 'accredited service provider' means an entity accredited under the accreditation scheme. You also told us that you are an accredited service provider and employ professionals that perform the upgrade service thereby satisfying the 'recognised professional' requirement.

Generally be accepted for the appropriate treatment of the recipient of the supply

This paragraph requires interpretation as to what is meant by 'generally accepted' and 'appropriate treatment of the recipient'.

It is considered that for a supply to be 'generally accepted', the particular service being provided and the circumstances in which it is provided must be generally accepted by the concerned profession.

In addition, the definition requires that the service be for the 'appropriate treatment of the recipient'. It is considered that appropriate treatment will be established where the practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and will include subsequent supplies for the assessed process.

Section 195-1 defines recipient in relation to a supply to mean 'the entity to which the supply was made'.

Accordingly, where an individual with a hearing impairment attends one of your clinics and is seen by a professional to have their hearing reassessed by the professional who then modifies the features on the individual's hearing aid; then such services will be considered as 'appropriate treatment' of the individual and will be GST-free.

Question 2

Detailed reasoning

Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances will be GST-free where the medical aid or appliance:

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

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

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

The medical aid you provide for people with disabilities is listed in Schedule 3 to the GST Act as your device is designed to make sound appear larger and/or clearer and more intelligible.

In your case, you are providing a product for use by people with a hearing impairment.

Hearing aids

The new generation hearing aids you intend to release to the market have the capacity to have their features modified by your professionals in response to changes in customers' hearing impairment.

You are supplying a product that is capable to operate at different technology levels, providing great/exceptional sound quality, control of comfort and clarity, restoring the ears' natural acoustic and the best speech understanding, even in tough listening situations. Therefore, we consider your product to come under an item in the table in Schedule 3 to the GST Act.

Since your product is specifically designed and manufactured to benefit a person with a hearing impairment who wears a hearing aid, it is specifically designed for people with an illness or disability. Further, it is not widely used by people without an illness or disability. As such, the product satisfies all the requirements in subsection 38-45(1) of the GST Act.

Subsection 38-45(3) of the GST Act provides that a supply is not GST-free under subsection 38-45(1) of the GST Act 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.

You informed us that you have not entered into an agreement with anybody that your supplies of the hearing aid are not to be treated as GST-free supplies.

Therefore, you are making a GST-free supply under subsection 38-45(1) of the GST Act when you supply your product to people with hearing difficulties.