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Edited version of private advice
Authorisation Number: 1012655386846
Ruling
Subject: GST and medical aids and appliances
Question 1
Is the supply of a system described as a portable emergency oxygen system, a GST-free supply of a medical aid or appliance under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No, the supply of the system described as a portable emergency oxygen system is not a GST-free supply of a medical aid or appliance under section 38-45 of the GST Act.
Relevant facts and circumstances
The system described as a portable emergency oxygen system does not store oxygen. Instead, the cartridge contains a dry powder and a proprietary catalyst, which produce oxygen at the turn of a knob.
Upon activation, the chemical powders are released into the accelerant to start the reaction.
The medically pure oxygen produced is delivered to the user via the flexible delivery tube and mask which is included with the system.
Oxygen is produced immediately upon turning the knob and will continue as a catalytic exothermic reaction producing an average of no less than X litres per minute for XX minutes.
Once activated, the reaction may not be stopped and will continue producing oxygen throughout the XX minutes cycle.
It has a shelf life of xx years.
It weighs approximately X kg and can be carried using the included shoulder strap for convenient transport.
The outer housing of the system is reusable and can be replenished with easy to insert disposable cartridges.
The brochure provided indicated the system can be used for the following:
• Cardiovascular emergencies,
• Respiratory emergencies
• General medical emergencies,
• Potential altitude induced hypoxic events,
• Workplace, school or at home pre-positioning for individuals in need of quick access to oxygen for survival and/or initial stabilisation.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 38-45,
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3,
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3, table items 135 and 136,
Reasons for decision
Subsection 38-45(1) of the GST Act provides that a supply of a medical aid or appliance is GST-free where:
• it is covered by an item listed in the table in Schedule 3 to the GST Act or specified in the table in Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), and
• it is specifically designed for people with an illness or disability, and
• it is not widely used by people without an illness or disability.
A medical aid or appliance must meet all three elements of subsection 38-45(1) of the GST Act to be GST-free. Once an item meets all of the above elements, then its supply will be GST-free all the way down the supply chain and not only when supplied to a person who has an illness or disability. One exception to this applies, and that is when the supplier and the recipient agree to treat the supply as if it were taxable pursuant to subsection 38-45(3) of the GST Act.
The only item in the table in Schedule 3 to the GST Act that may be relevant to the system is item 135 which lists 'bottled oxygen and associated hardware'. This phrase is not defined in the GST Act. It is necessary to determine whether the system is bottled oxygen. ATO ID 2001/637 on' GST and bottled oxygen and associated hardware' explains that where a phrase is not defined in the GST Act, it is appropriate to examine the ordinary meaning of that phrase.
The ordinary meaning of 'bottle' needs to be examined in order to determine whether the system is bottled oxygen. The Macquarie dictionary defines a bottle as - "a portable vessel with a narrow neck that can be closed with a cap or cork, for containing liquids."
In the case of the system, the information provided shows that it is not a bottle. Further, the oxygen is not stored in the system or in any other container. It is not until the chemicals inside the cartridge are combined by turning the knob on the unit that oxygen is produced and continues to be produced for XX minutes. After this time, the device is empty and another cartridge needs to be inserted if more oxygen is required.
At no stage does the system stores oxygen.
As a result, the system is not covered by item 135 in the table in Schedule 3 to the GST Act.
Item 136 in the table in Schedule 3 to the GST Act lists 'Oxygen concentrator'. As described in Attachment A in the GST Pharmaceutical Heath Forum issues register, this is a device used to concentrate the amount of oxygen in/from the surrounding air.
The system does not fit into the above description as it does not use outside air. It uses a chemical reaction to produce oxygen.
As a result, the system is not covered by item 136 in the table in Schedule 3 to the GST Act.
Therefore, as the system is not covered by any item listed in the table in Schedule 3 to the GST Act it does not meet the first criteria set out in subsection 38-45(1) of the GST Act and the supply of this item would be a taxable supply.
As the first requirement in subsection 38-45(1) of the GST Act is not satisfied, it is not necessary to consider the other requirements in that subsection.