Edited version of your written advice

Authorisation Number: 1012731623295

Ruling

Subject: Goods and services tax (GST) and adjustable beds

Question 1

Will GST be payable on your sale of the following models of bed?

Model X

Model Y

Answer

No, because your sale of these beds will be GST-free under the medical aids and appliances exemption - section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

A sale of an electronically operated adjustable bed is covered by item 60 in the table in Schedule 3 to the GST Act.

A sale of a bed covered by item 60 is GST-free provided that it is specifically designed for people with an illness or disability and it is not widely used by people without an illness or disability. The models of bed in question meet these requirements.

Question 2

Will GST be payable on the importation of model X and model Y?

Answer

No.

Paragraph 13-10(b) of the GST Act provides that an importation is a non-taxable importation for GST purposes if the sale of the good would be GST-free.

As the sale of the beds is GST-free, GST is not payable on the importation of the beds.

Relevant facts and circumstances

You are registered for GST.

You received a previous ruling on whether your sales of various models of beds (as specified in the table in the previous ruling) are GST-free: The previous ruling did not consider models X and Y

Other information contained in previous ruling in regards to models specified in the table in the previous ruling:

You import the adjustable beds from company A (overseas country) and wholesale the beds under a certain brand.

These beds are electronically adjustable beds. They are manufactured in an overseas country for you (under a certain brand) and are designed specifically for people who have an illness or disability.

The beds enable people who have an illness or disability to have a comfortable and more beneficial sleep and also assist them in mobility by raising the head or foot areas of the bed electronically.

The adjustable beds will also benefit those people with poor circulatory illnesses or disabilities through adjusting the foot (leg) area of the bed.

You have advised the beds are designed to adjust to the recommended therapeutic positions required to give relief to a number of medical conditions such as to assist and aid people with poor breathing conditions caused by respiratory illness.

The principle design of the (brand name) adjustable bed is similar to hospital beds and each bed has an electric motor with an option for both head and leg area vibration massage units, to relieve poor circulation problems.

The beds also have a built in back up battery system to assist in situations of power failure. When the bed is in the raised position the ends are supported by steel legs which are activated as the bed ends elevate to the desired position so as to give total stability when in use.

You anticipate the majority of the beds will be sold to people who have disabilities and are/or seeking relief from various medical conditions.

Your marketing strategy is to promote the therapeutic value of these beds.

You have advised that other competitors' brands of adjustable beds are sold as GST-free.

You intend to wholesale the beds under the certain brand to specified retailers.

You have advised that you do not have any agreement with your customers to treat the supply of electronically adjustable beds as not GST-free.

New models

You have now added to your range of adjustable beds. The new models are model X and model Y.

The new models will be imported from a different manufacturer/supplier in (overseas country) - company B, which is a different company to company A.

The functions of the new models of beds are basically the same as the company A factory beds you already import (it's mostly aesthetics and surrounds of the bed bases that are different).

The new models will have mostly the same key adjustable bed features as the adjustable beds referred in in your previous ruling. The only differences are as follows:

• The lower end model (model X) doesn't have any massage feature but the head and leg adjustments are the same as in the bed models referred to in the previous ruling

• Model Y will have a few extra features other than the standard adjustable bed features. These include:

• A bed surround that the adjustable bed base sits on top of. This bed surround serves no purpose other than aesthetics.

• USB charging points.

• An extra head tilt movement feature on the head area.

• A separate adjustable lumber for the lower back.

• The bed has an inbuilt stereo speaker system.

• The bed has the option to control the bed via Wifi using a tablet or phone via a downloadable App.

The new models of bed will be sold through a variety of retail stores including home health care type stores like (specified retailers) and also more mainstream bedding stores like (specified retailers) as you have found that these stores are now also actively trying to cater for the health care market and capture these types of customers also. The bed models they sell currently are all GST-free.

As with your current adjustable beds (as referred to in your previous ruling) which you have been supplying to the market since a certain year, you have found that your competitors who also sell their adjustable beds GST-free have improved the aesthetics and some features of their beds in comparison to your current (brand name) beds and this is why you have now sourced a new range that can sell alongside your existing adjustable beds to assist you in offering something new and helping you maintain and grow your market share with your competitors who also sell GST-free beds. The basic bed features and adjustability that make the beds attractive to people with illnesses and disabilities still remain however.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 13-5

A New Tax System (Goods and Services Tax) Act 1999 paragraph 13-10(b)

A New Tax System (Goods and Services Tax) Act 1999 section 13-15

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