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Edited version of your written advice
Authorisation Number: 1012887489985
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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.
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Date of advice: 16 October 2015
Ruling
Subject: Medical aids and appliances
Question
Is the supply by you of the medical aid a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No, your supply of the medical aid is not GST-free under subsection 38-45(1) of the GST Act. You are making a taxable supply under section 9-5 of the GST Act.
Relevant facts and circumstances
You are an Australian company that is registered for GST.
You supply the medical aid which is used specifically as an accessory to drainage/collection devices.
The medical aid is a bedside hanger used in hospitals and medical institutions. You do not supply the medical aid with the accessory.
The medical aid is specifically made for bedposts.
The medical aid is marketed by a team of sales representatives who sell directly to hospitals and nursing homes.
You have provided images of the medical aid.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5.
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1).
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(2).
A New Tax System (Goods and Services Tax) Act 1999 Section 38-45.
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.
Reasons for the decision
GST is payable if an entity is making a taxable supply.
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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 defined term in the GST Act.)
The supply of the medical aid satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act as follows:
• the supply is made for consideration
• the supply is made in the course of your enterprise
• the supply is connected with Australia because the medical aid is made available in Australia to the recipient, and
• you are registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance:
• is covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations),
• is specifically designed for people with an illness or disability, and
• is not widely used by people without an illness or disability.
Medical aids or appliances which satisfy all the elements of subsection 38-45(1) are GST-free at all stages of the supply chain. The supply is GST-free no matter who makes the supply or who the supply is made to.
Item 15 of Schedule 3 (Item 15) lists these aids specifically as cover devices whose principal purpose is the collection of waste products. As such, this item would capture various drainage items.
The medical aid is a bedside hanger for drainage purposes. Although it may assist in making the collection of the products easier, the medical aid is in itself not an actual collection device and therefore is not covered by Item 15.
You should note that while some items in Schedule 3 list accessories, Item 15 does not cover accessories.
Therefore, the supply of the medical aid is not GST-free under subsection 38-45(1) of the GST Act.
Subsection 38-45(2) of the GST Act provides that a supply of a spare part will be a GST-free supply if the spare part is:
• supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act; and
• specifically designed as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act.
The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...'
The medical aid is not supplied to replace an existing part that is faulty, worn or broken. The medical aid is specifically made for the bedposts, and is designed to support/hold various items. The medical aid does not relate to the essential function of the medical device. As such, it is not considered to be a 'spare part' for the purposes of the GST Act. Hence, the supply does not satisfy the requirements of subsection 38-45(2) of the GST Act.
The supply of the medical aid is not GST-free under subsections 38-45(1) or (2) of the GST Act. The supply is not GST-free under any other provision of Division 38 of the GST Act. Furthermore, the supply is not input taxed under Division 40 of the GST Act. Therefore, as all the requirements of section 9-5 of the GST Act are met, the supply of the medical aid is a taxable supply.