Edited version of your private ruling

Authorisation Number: 1012530968955

Ruling

Subject: GST-free medical aids and appliances

Question 1

Is your supply of a movement therapy device, and all its variations, a GST-free supply of a medical aid and appliance?

Answer

No, your supply of a movement therapy device, and all its variations, is not GST-free. It is a taxable supply.

Question 2

Is your supply of an electrical muscle stimulation machine a GST-free supply of a medical aid and appliance?

Answer

No, your supply of an electrical muscle stimulation machine is not GST-free. It is a taxable supply.

Relevant facts and circumstances

You are a company providing rehabilitation products, wheelchairs and wheelchair-related products.

The subject of this private ruling concerns two products you offer in particular: a movement therapy device and an electrical muscle stimulation machine.

Movement therapy device

The movement therapy device is designed for mobility impaired users. It allows for motorised assistance during movement therapy. The user engages pedals with his or her legs and his or her movements can be electrically assisted by the product with varying levels of resistance. The device comes in a number of variations, including a model that can assist users who are supine, a paediatric model, and a model that incorporates upper body movement as well.

The device is not designed for carriage of a mobility impaired person. It is a device that remains stationary throughout its use.

The product contains specialised software programming. The software provides an analysis at the end of each use of the device and can detect changes in tone and symmetry of movement. This software also operates a safety mechanism as it can detect a spasm in the user.

The movement therapy device is marketed as promoting walking ability, reducing spasticity, encouraging the use of muscle strength, improving mental and physical wellbeing, and counteracting the consequences of a lack of movement.

Electrical muscle stimulation machine

The electrical muscle stimulation machine is a mobile functional electrical stimulator. It generates electrical impulses for the stimulation of muscles through surface electrodes.

Marketing materials for the electrical muscle stimulation machine provide that the machine's main emphasis is on the field of electrical stimulation. The machine can be used to control additional movement sequences for paralysed limbs and can be used in conjunction with an ergometer.

The electrical muscle stimulation machine is also marketed as improving muscle function (the activation and building up of muscles and boosting blood circulation), to reduce spasticity, to treat pain and incontinence, and for many other purposes.

A user can set the parameters of the machine to operate similarly to a transcutaneous nerve stimulator machine ('TENS machine'), but its main function is muscle stimulation rather than pain relief.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 sections 9-5 and 38-45.

Reasons for decision

Question 1

Summary

Your supply of the movement therapy device, and all its variations, is not GST-free because it is not a medical aid or appliance covered by Schedule 3 to the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act') or Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 ('GST Regulations').

Detailed reasoning

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 term defined in section 195-1 of the GST Act.

In your case, you make a supply of the movement therapy device for consideration, the supply is made in the course or furtherance of your enterprise, the supply is connected with Australia, and you are registered for GST. Thus, your supply of the movement therapy device is a taxable supply to the extent that it is not a GST-free or input taxed supply.

There is no provision of the GST Act that would operate to make your supply of the movement therapy device an input taxed supply. It must now be determined to what extent, if any, your supply of the movement therapy device is GST-free.

Subsection 38-45(1) of the GST Act states:

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.

A movement therapy device is not covered by Schedule 3 to the GST Act or specified in Schedule 3 to the GST Regulations.

Items 105, 106, 107 and 108 of Schedule 3 to the GST Act contain the category 'Mobility of people with disabilities - physical: wheelchairs and accessories' of medical aids and appliances. However, these medical aids and appliances are for the carriage of people with disabilities. The movement therapy device is not designed for the carriage of people with disabilities and remains stationary during use.

Item 8 of Schedule 3 to the GST Act lists 'software programs specifically designed for people with disabilities.' Item 8 is part of the category 'Communication aids for people with disabilities.' The software installed in the movement therapy device is not a communication aid for people with disabilities.

As your supply of the movement therapy device is not covered by Schedule 3 to the GST Act or specified in Schedule 3 to the GST Regulations, it is not GST-free under section 38-45 of the GST Act.

Question 2

Summary

Your supply of the electrical muscle stimulation machine is not GST-free because it is not a medical aid or appliance covered by Schedule 3 to the GST Act or Schedule 3 to the GST Regulations.

Detailed reasoning

As above, your supply of the electrical muscle stimulation machine is a taxable supply to the extent that it is not a GST-free or input taxed supply.

There is no provision of the GST Act that would operate to make your supply of the electrical muscle stimulation machine an input taxed supply. It must now be determined to what extent, if any, your supply of the electrical muscle stimulation machine is GST-free.

An electrical muscle stimulation machine is not specifically listed in Schedule 3 to the GST Act or specified in the GST Regulations. However, Item 141 in Schedule 3 to the GST Act lists 'transcutaneous nerve stimulator machines' ('TENS machine').

ATO Interpretative Decision ATO ID 2001/281 Goods and Services Tax: GST and Non-invasive acupuncture point electric stimulators ('ATO ID 2001/281') provides guidance on the factors considered when determining whether a particular product is a TENS machine.

ATO ID 2001/281 provides that the phrase 'transcutaneous nerve stimulator machine' is not defined in the GST Act. When a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning.

ATO ID 2001/281 provides that given the phrase 'transcutaneous nerve stimulator machine' appears in the context of a list of medical aids and appliances, it is considered to have a special or technical meaning. ATO ID 2001/281 provides that when a word or phrase has a technical meaning it is necessary to determine the meaning by reference to the industry in which that word or phrase relates.

ATO ID 2001/281 states:

The Concise Medical Dictionary (1998) defines 'transcutaneous electric nerve stimulation' as:

'the introduction of pulses of low-voltage electricity into tissue for the relief of pain. It is effected by means of a small portable battery-operated unit with leads connected to electrodes attached to the skin; the strength and frequency of the pulses, which prevent the passage of pain impulses to the brain, can be adjusted by the patient. TENS is used mainly for the relief of rheumatic pain; as a method of producing pain relief in labour, it is less frequently used than epidural anaesthesia (see spinal anaesthesia), which has a much wider application for pain relief in obstetrics.'

Black's Medical Dictionary (1995) defines 'transcutaneous nerve stimulation' as:

'a method of electrical stimulation that is being used for the relief of pain, including that of migraine, neuralgia and phantom limbs. Known as TENS, its mode of action appears to have some resemblance to that of acupuncture. Several controlled trials suggest that it provides at least a modicum of relief of pain after operations, thereby reducing the amount of analgesics that may be called for.'

Based on the above definitions, it is considered that a TENS machine is a small portable battery-operated unit with leads connected to electrodes that are then attached to the skin. The purpose of the machine is to aid pain relief by preventing the passage of pain impulses to the brain. As such, a TENS machine only includes those devices which are developed primarily for the purpose of pain relief.

In your case, the electrical muscle stimulation machine is a mobile functional electrical stimulator. It generates electrical impulses for the stimulation of muscles. Although it may be used as a TENS machine if its parameters are modified, the electrical muscle stimulation machine has been developed primarily for the stimulation of muscles. Its primary purpose is not pain relief, but muscle stimulation. Thus, the electrical muscle stimulation machine is not a TENS machine for the purpose of Item 141 in Schedule 3 to the GST Act.

The electrical muscle stimulation machine is not covered under any other item in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations. As your supply of the electrical muscle stimulation machine is not covered by Schedule 3 to the GST Act or specified in Schedule 3 to the GST Regulations, it is not GST-free under section 38-45 of the GST Act.