Edited version of your written advice

Authorisation Number: 1012817987587

Ruling

Subject: Goods and services tax (GST) and bedding products

Question 1

Is GST payable on your sale of manually operated adjustable beds?

Answer

No.

Question 2

Is GST payable on your sale of electronically operated adjustable beds?

Answer

No.

Question 3

Is GST payable on your sale of pressure management mattresses?

Answer

No.

Question 4

Is GST payable on your sale of pressure management overlays?

Answer

No.

Question 5

Is GST payable on your sale of ergonomic pillows?

Answer

No.

Question 6

Is GST payable on your sale of orthopaedic pillows?

Answer

No.

Relevant facts and circumstances

You (X) is registered for GST.

You sell the following bedding products:

• Manually operated adjustable beds

• Electronically operated adjustable beds

• Pressure management mattresses

• Pressure management overlays

• Ergonomic pillows

• Orthopaedic pillows

Adjustable beds

The bed structure (which is the basis for all X beds) has been designed (branded by you as the (brand name)) as an ergonomic structure.

The bed is specifically designed for people with an illness or disability.

The bed is also adjustable (manually or electronically), allowing customers to select a variety of positioning adjustments at both the head and feet are, depending on the customer's personal and medical requirements. The adjustments allow the customer to elevate the positioning of the bed at the head and foot of the bed from horizontal positioning to vertically upright.

The beds are almost exclusively sold to customers with disabilities and illnesses.

Pressure Management mattress and overlays

Your mattresses have a core technology that is designed to evenly distribute the pressure exerted on the mattress across the whole body of the person on the mattress. The overlay on the mattress performs a similar function.

Almost 100% of purchasers of the overlay also purchased or have purchased a bed, and the mattresses and overlays are specifically designed and intended to complement the bed bases.

Ergonomic pillows

Your ergonomic pillows are specifically designed for people with an illness or disability.

Many purchasers of ergonomic pillows also purchased or have previously purchased a bed, mattress and/or overlay and the ergonomic pillows are specifically designed and intended to complement the bed, mattress and overlays.

Orthopaedic pillows

Your orthopaedic pillows are specifically designed for people with an illness or disability.

Over a certain percentage of purchasers of orthopaedic pillows also purchased or have previously purchased a bed, mattress and/or overlay and orthopaedic pillows and specifically designed and intended to complement the bed, mattress and overlays.

Further information about your market and marketing

A sample has been taken of a number of randomly selected customers showing that a certain percentage of customers suffered from an illness or disability.

The products are being offered to the public in the sense that it adopts a public advertising/marketing approach to advertising/marketing.

Notwithstanding those 'wider market' activities undertaken previously by Y and now by you, the ultimate consumers of your products (ie. those who are using the products) are those consumers who are specifically suffering from an illness or disability, and the products are pitched to such consumers. That is, when selling your products, you focus almost exclusively on the significant health benefits of the relevant supplies (by reason of the special design features etc. as discussed above). The result being for the relevant supplies, that significant health benefit is the fundamental thing that distinguishes the relevant supplies from standard products.

This distinction is clearly enhanced by the fact the relevant supplies are materially more expensive that other standard products (or a similar kind in the market). The premium price is clearly evidence of the superior design technology and quality inherent in the relevant supplies.

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 38-45

Reasons for decisions

Summary

GST is not payable on your sales of the products in question because they are GST-free sales of medical aids and appliances under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Detailed reasoning

GST is payable by you on your taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which 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 the GST Act)

A supply of a medical aid or appliance is GST-free under section 38-45(1) of the GST Act if certain requirements are met. It 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.

Questions 1 and 2

Adjustable beds

Item 59 in the table in Schedule 3 to the GST Act (item 59) is manually operated adjustable beds.

Item 60 in the table in Schedule 3 (item 60) is electronically operated adjustable beds.

Items 59 and 60 come under the category heading 'Mobility or people with disabilities - physical bedding for people with disabilities'.

Section 182-15 of the GST Act provides that the category heading in Schedule 3 is not an operative part of the GST Act but may be used, as per subsection 182-10(2) of the GST Act, amongst other things, to "confirm the meaning if the ordinary meaning conveyed by its text" or "in determining the purpose or object underlying the provision".

The category heading in Schedule 3 does provide some guidance as to the purpose or object underlying the provision. The words of the category heading convey an intention that the adjustable bed should possess characteristics such that the bed is suitable for use by people with a disability in order to provide greater mobility.

People with a disability often have difficulty getting in and out of bed and some are incapable of doing so, unassisted. By adjusting the upper section of the adjustable bed the occupant can achieve a sitting or semi standing position to assist the occupant to get in and out of the bed unaided. As such the adjustable bed has characteristics that make it suitable for use by people with a disability or illness in order to provide greater mobility.

Your adjustable beds are capable of being adjusted in height at both the head and foot area. These adjustments allow the customer to elevate the positioning of the bed at the head and foot of the bed from horizontal to vertically upright.

These adjustable features would assist a person with a mobility impairment get in and out of bed unaided. Therefore, your adjustable beds are covered by items 59 and 60 respectively. Hence, they meet the requirement of paragraph 38-45(1)(a) of the GST Act.

In accordance with issue 1.c. of the Pharmaceutical Health Forum - issues register, in determining whether a medical aid and appliance is specifically designed for people with an illness or disability reference should be made to the designer's/manufacturer's intention of how the good is to be used and it's features. Indicators of the designer's/manufacturer's intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased.

In accordance with paragraph 5.27 of the explanatory memorandum to the A New Tax System (Goods and Serve Tax) Bill 1998, certain aids and appliances designed for people with an illness or disability which are not of a kind ordinarily used in the wider community are GST-free.

We accept that the adjustable beds are specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Hence, they meet the requirements of paragraph 38-45(1)(b) of the GST Act.

Therefore, your sales of adjustable beds are GST-free because they meet the requirements of subsection 38-45(1) of the GST Act. Hence, GST is not payable.

Question 3

Pressure management mattresses

Item 66 in the table in Schedule 3 to the GST Act (item 66) is pressure management mattresses and overlays.

In accordance with ATO Interpretative Decision ATO ID 2005/5, a pressure management mattress is a mattress designed to provide comfort and prevent bed sores by evenly distributing the pressure exerted by the mattress on the patient's body.

In accordance with ATO Interpretative Decision ATO ID 2002/1059, a pressure management overlay is an overlay that is designed to provide comfort and to prevent bed sores by evenly distributing the pressure exerted on the user's body.

Your pressure management mattresses manage pressure. Therefore, your pressure management mattresses are covered by item 66. Hence, they meet the requirement of paragraph 38-45(1)(a) of the GST Act.

We accept that your pressure management mattresses are specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Hence, they meet the requirements of paragraph 38-45(1)(b) of the GST Act.

Therefore, your sales of pressure management mattresses are GST-free because they meet the requirements of subsection 38-45(1) of the GST Act. Hence, GST is not payable.

Question 4

Pressure management overlays

Your pressure management overlays manage pressure and are overlays for a mattress. Therefore, your pressure management overlays are covered by item 66. Hence, they meet the requirement of paragraph 38-45(1)(a) of the GST Act.

We accept that your pressure management overlays are specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Hence, they meet the requirements of paragraph 38-45(1)(b) of the GST Act.

Therefore, your sales of pressure management overlays are GST-free because they meet the requirements of subsection 38-45(1) of the GST Act. Hence, GST is not payable.

Question 5

Ergonomic pillows

Item 82 in the table in Schedule 3 (item 82) is night-time positioning equipment modifications.

In accordance with ATO Interpretative Decision ATO ID 2014/21, a contoured pillow is covered by item 82 because it is a product that modifies the function of a mattress, which is 'night time positioning equipment' as held by the Administrative Appeal Tribunal in Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation [2013] AATA 802. The contoured pillow is designed to be placed on and used in conjunction with a mattress to alter the flat, horizontal surface of the mattress and to change the sleeping position of the user by altering the position of the user's head and neck while they sleep.

Your ergonomic pillows alter the flat, horizontal surface of a mattress and change the sleeping position of the user by altering the position of the user's head and neck while they sleep. Hence, they are night-time positioning equipment modifications. Therefore, they are covered by item 82. Hence, they meet the requirement of paragraph 38-45(1)(a).of the GST Act.

Your ergonomic pillows are specifically designed for people with an illness or disability.

We accept that your ergonomic pillows are specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Hence, they meet the requirements of paragraph 38-45(1)(b) of the GST Act.

Therefore, your sales of ergonomic pillows are GST-free because they meet the requirements of subsection 38-45(1) of the GST Act. Hence, GST is not payable.

Question 6

Orthopaedic pillows

Your orthopaedic pillows are covered by item 82. Hence, they meet the requirement of paragraph 38-45(1)(a) of the GST Act.

Your orthopaedic pillows are specifically designed for people with an illness or disability.

We accept that your orthopaedic pillows are specifically designed for people with an illness or disability and would not be widely used by people without an illness or disability. Hence, they meet the requirements of paragraph 38-45(1)(b) of the GST Act.

Therefore, your sales of orthopaedic pillows are GST-free under because they meet the requirements of subsection 38-45(1) of the GST Act. Hence, GST is not payable.