Edited version of private advice

Authorisation Number: 1012629295183

Ruling

Subject: GST and supply of goods and services to people with a disability

Question 1

Is your supply of services GST-free under Subdivision 38-B of the GST Act?

Answer

No. The supply of your services is not GST-free under Division 38 of the GST Act. The supply of your services is a taxable supply under section 9-5 of the GST Act.

Question 2

Is your supply of technology products GST-free under section 38-45 of the GST Act?

Answer

Your products that satisfy the requirements of section 38-45 of the GST Act are GST-free. Your products that do not satisfy the requirements of section 38-45 of the GST Act are taxable supplies under section 9-5 of the GST Act.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

• You provide services to people with a disability.

• Your initial involvement is often at the request of health professionals.

• You receive payment for your services from people with a disability and also from third parties such as health insurers.

• You supply technology products to people with a disability.

• Your services involve setting up, customising, configuring, implementing, training and assisting people with a disability to use the technology products.

• You do not hold any medical qualifications.

• You are not a member of any professional body or organisation.

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

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Section 9-5

Section 38-7

Section 38-10

Section 38-45

Section 195-1

Schedule 3

A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

Part 3-1

Health Insurance Act 1973 (HIA) Part II

Reasons for decision

Subsection 7-1(1) of the GST Act provides that GST is payable on taxable supplies and taxable importations.

Section 9-40 of the GST provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act provides that you make a taxable supply if:

• you make the supply for consideration

• the supply is made in the course or furtherance of an enterprise that you carry on

• the supply is connected with Australia, and

• you are registered, or required to be registered for GST.

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

You make your supply of services for consideration in the course of carrying on your enterprise in Australia and you are registered for GST. As such, your supply satisfies the requirements of section 9-5 of the GST Act and is a taxable supply to the extent the supply is input taxed or GST-free.

The input taxed provisions in Division 40 of the GST Act do not apply to the facts in your case. It is, therefore, necessary to determine if the GST-free provisions apply.

Subdivision 38-B of the GST Act provides that certain goods and services relating to the health industry are GST-free. Of relevance to your case are subsection 38-7(1) and subsection 38-10(1) of the GST Act.

Medical services - subsection 38-7(1) of the GST Act

Under subsection 38-7(1) of the GST Act, the supply of a 'medical service' is GST-free.

Section 195-1 of the GST Act defines a 'medical service' as:

• a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973 (first limb); or

• any other service supplied by or on behalf of a medical practitioner or approved pathology practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply (second limb).

The definition of a 'medical service' has two limbs. Any supply of a service that falls within either the first or second limb of the definition is GST-free.

First limb

Part II, section 10 of the Health Insurance Act 1973 (HIA) provides that a Medicare benefit will be payable for medical expenses incurred in respect of a professional service. The facts you have provided do not indicate that a Medicare benefit is payable for your services. As such, the requirements of the first limb are not satisfied.

Second limb

Consequently, for your supply of services to be GST-free medical services, it must satisfy the requirements of the second limb. This requires that the service be supplied by or on behalf of a medical practitioner or an approved pathology practitioner.

Section 195-1 of the GST Act defines the terms 'medical practitioner' and 'approved pathology practitioner' as a person who is, for the purposes of the HIA, a 'medical practitioner' or an 'approved pathology practitioner'.

Section 3 of the HIA defines a 'medical practitioner' as a person registered or licensed as a medical practitioner under a law of a State or Territory that provides for the registration or licensing of medical practitioners.

Section 3 of the HIA defines an 'approved pathology practitioner' as 'a person in respect of whom there is in force an undertaking given by the person, and accepted by the Minister, under section 23DC [of the HIA]'.

You are neither a medical practitioner nor an approved pathology practitioner for the purposes of the HIA.

The phrase 'on behalf of' for the purposes of the definition of 'medical service' means the performance of a component of the service provided by a practitioner that is not necessarily supervised by that practitioner. An example is where a laboratory technician assists in undertaking pathology testing of specimens.

However, 'on behalf of' does not include a service performed on referral by another person because such a service is not a component of the supply being provided by the first practitioner. The service being provided by the second person will be a separate supply, the GST-free status of which must be examined by reference to the supply by that second person.

You do not supply your services on behalf of a medical practitioner or an approved pathology practitioner. You supply your services on referral from other health professionals. Your supply is not a component of the supply of services by those health professionals. You make a separate supply.

The services you supply do not satisfy the definition of medical services in section 195-1 of the GST Act. As such, the supply is not GST-free under subsection 38-7(1) of the GST Act.

Other health services - subsection 38-10(1) of the GST Act

Under subsection 38-10(1) of the GST Act, a supply is GST-free if:

(a) it is a service of a kind specified in the table in the 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 services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

All the above elements must be satisfied for a supply to be GST free.

Paragraph 38-10(1)(a) of the GST Act provides that the supply must be a service of a kind specified in the table in the subsection, or of a kind specified in the regulations.

Table in subsection 38-10(1) of the GST Act

To qualify for a service of a kind specified above in the table in subsection 38-10(1) of the GST Act (the table), the service must be the provision of one of those actual services listed and not just something similar to one of the services. Support for this argument is found in the table where both 'Audiology' and 'Audiometry' are listed at Item 3 of the table. If it were intended that it was sufficient that the supply of a service be similar to one mentioned in the table, one of the terms 'Audiology' and 'Audiometry' would be superfluous. Similarly, there is the inclusion of 'traditional Chinese herbal medicine' under 'Herbal medicine' at Item 8 of the table. One of these terms would be superfluous if the list was not strictly interpreted as the actual service listed in the table.

However, a service that is not listed in the table may be considered to be a technique of one of the listed services. For example, a massage by a massage therapist would not be GST-free because massage is not listed in the table. But where it is administered as part of physiotherapy services, it may be GST-free where all the other requirements of subsection 38-10(1)(a) of the GST Act are satisfied.

The services you supply are not listed as services of a kind specified in the table in the subsection, or of a kind specified in the regulations. Furthermore, your services are not considered to be a technique of one of the listed services. As such, paragraph 38-10(1)(a) of the GST Act is not satisfied. Therefore, the supply of your services is not GST-free under subsection 38-10(1) of the GST Act.

Question 2

Is your supply of technology products GST-free under section 38-45 of the GST Act?

Detailed reasoning

Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance is:

• covered by Schedule 3 to the GST Act or specified in the GST Regulations,

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

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

All the above elements must be satisfied for an item to be GST-free under subsection 38-45(1) of the GST Act. The supply of an item that satisfies subsection 38-45(1) of the GST Act will be GST-free all the way down the supply chain and not only when supplied to a person with an illness or disability.

However, pursuant to subsection 38-45(3) of the GST Act, a supplier and purchaser can agree to not treat a supply as GST-free.

First requirement

In determining the first requirement of whether a product supplied is covered by the table in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations, the task is to determine the essential character of the goods, what essentially the goods are, not some characteristic the goods might have.

Second requirement

In determining the second requirement of whether the medical aids and appliances are specifically designed for people with an illness or disability, we will consider the designer's or manufacturer's intentions of how the goods are to be used and its features. Indicators of the designer's or manufacturer's intention of how the goods are to be used include how the goods are marketed and the type of retail outlets at which the goods can be purchased.

Third requirement

In determining the third requirement of whether the medical aids and appliances are used by people without an illness or disability, we will consider how the wider community uses the goods, which 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 medical aids and appliances to be determined by reference to the actual use for which they are being purchased but rather focuses on the purpose for which the wider community purchases these products.

Some of the technology products you supply are GST-free because they satisfy all the requirements of subsection 38-45(1) of the GST Act.

The remaining products are not covered by any of the items listed in the table in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations. As such, the first requirement in subsection 38-45(1) of the GST Act is not satisfied and the supply of these products is not GST-free. You are registered for GST and the supply of these products satisfies all the requirements of section 9-5 of the GST Act. Therefore, you are making a taxable supply under section 9-5 of the GST Act when you supply these products.

Installation of the products

The GST Act does not provide for the supply of labour services relating to medical aids and appliances to be GST-free. For example, labour for the installation of a GST-free medical aid or appliance that is not provided by the supplier of the medical aid or appliance, or that is provided by the same supplier but in a later transaction that is distinct and separate to the supply of the medical aid or appliance, does not form part of the GST-free supply of the medical aid or appliance and is not GST-free under subsection 38-45(1) of the GST Act.

However, where the medical aid or appliance is supplied together with a labour component as part of one single transaction, the GST treatment of that transaction will depend on how the supply is characterised. Goods and Services Tax Ruling 2001/8 (GSTR 2001/8) provides guidance on how you should apportion the consideration for a supply that includes taxable and non-taxable parts.

A supply of a medical aid or appliance together with a labour component may be characterised in one of three ways:

1) the main supply is the GST-free medical aid or appliance and the labour is integral, ancillary or incidental to that main supply. In this case, there is a single GST-free supply of a medical aid or appliance (which includes the labour),

2) the main supply is the labour (as is usually the case for repair work) and the GST-free medical aid or appliance (or most commonly, its GST-free spare part) is integral, ancillary or incidental to that main supply. In this case, there is a single taxable supply of labour and the GST-free medical aid or appliance or spare part also becomes taxable, or

3) there are separately identifiable supplies of GST-free medical aids or appliances and labour, neither of which is integral, ancillary or incidental to the other. In this case, the supplies are partly taxable and partly GST-free and must be apportioned on a reasonable basis.

Some indicators that something may be integral, ancillary or incidental to another thing are:

• it represents a marginal proportion of the total value of the package compared to the dominant part,

• it is necessary or contributes to the supply as a whole but cannot be identified as the dominant part of the supply,

• it contributes to the proper performance of the contract to supply the dominant part, and

• a supplier would reasonably conclude that it does not constitute for customers an aim in itself, but is a means of better enjoying the dominant thing supplied.

Therefore, a part of a supply will be integral, ancillary or incidental to another part of the supply where it is insignificant in value or function, or merely complements the dominant part of the supply.

Where the installation is integral to the supply of the GST-free technology products that you make, we consider that the installation of those products is not the dominant part of the supply and merely complements the main supply of the products.

You have stated that you supply and install the technology products in a single transaction and that the installation is directly related to your supply of the technology products. In this case, we consider that the installation is integral to your supply of those products.

Therefore, the services you provide in installing the GST-free technology products will be GST-free because they form part of your GST-free supply of those products under subsection 38-45(1) of the GST Act. Your supply and installation of the GST-free technology products in a single transaction is GST-free under subsection 38-45(1) of the GST Act.