Edited version of your written advice

Authorisation Number: 1012892250314

Date of advice: 13 November 2015

Ruling

Subject: GST and a filter for a Spirometer

Question

Is the supply of a filter for a Spirometer (which is used to measure lung capacity) GST-free?

Answer

No, the supply of a filter for a Spirometer (which is used to measure lung capacity) is not GST-free.

Relevant facts and circumstances

You supply Spirometers.

The Spirometers that you supply are diagnostic devices that are used by medical professionals to measure lung function.

You also supply filters that are designed specifically to be used at the end of Spirometers. These filters are used as a single patient use item to minimise the chance of cross infection.

The filters are attached to the Spirometers and are then disposed of after each use.

Relevant legislative provisions

The relevant section to consider in this case is section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Subsection 38-45(1)

Under subsection 38-45(1) of the GST Act the supply of certain medical aids and equipment are GST-free if they meet all of the following three conditions:

• listed in schedule 3 to the GST Act or in schedule 3 to the GST regulations

• specifically designed for people with an illness or disability

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

Accordingly, the first requirement to be satisfied is that the medical aid or equipment is covered by Schedule 3 referred to in subsection 38-45(1) of the GST Act (Schedule 3).

There are no items in Schedule 3 or the GST Regulations that specifically list a filter that is attached to the end of a Spirometer. However, item 127 in the table in Schedule 3 (Item 127) lists 'respiratory appliance accessories'. Accordingly, it was necessary to consider whether a Spirometer could be considered as a respiratory appliance (as per items 123 to 128 of Schedule 3) and/or a respiratory appliance product for those with breathing difficulties (as per items 129 to 138 of Schedule 3) and if so, whether this filter is an accessory for any of these items.

Respiratory appliances (items 123-128)

It is our view that a respirator is a device that assists with breathing. A Spirometer on the other hand is a device that undertakes a test of the lung function in a hospital environment and is not a respirator. Accordingly, a filter that is attached to the end of a Spirometer does not fall within any of the items from 123-128 of Schedule 3.

Respiratory appliance products for those with breathing difficulties (items 129-138)

Relevantly items 129 and 137 of Schedule 3 were considered.

Item 129 - Peak-flow meter

A peak flow meter is a device that is generally used in a home environment by those who have breathing difficulties to measure how fast air is blown out at the maximum flow on a forced expiration.

A Spirometer on the other hand is used to undertake a test of the lung function in a hospital environment mostly by professionals. Spirometry is an objective and reproducible test of lung function that measures how much and how quickly air can be moved into and out of the lungs. A Spirometer is an instrument used to measure respired volumes and flows (i.e. spirometry). A peak flow meter and a Spirometer are two different devices used to measure lung function in different ways. Therefore, a Spirometer is not considered to be a peak flow meter: They are different devices used to measure lung function in different ways. Accordingly, it is our view that a Spirometer does not come within item 129 of Schedule 3.

Item 137 - breathing monitor

It was also considered whether a Spirometer can come within the meaning of a breathing monitor (which is listed as item 137 in Schedule 3). Given this, it was necessary to consider the definition of a breathing monitor.

The Oxford Dictionary, [Online], http://www.oxforddictionaries.com definition of the terms 'breath', 'breathing' and 'monitor' are as follows:

Breathe - The air taken into or expelled from the lungs

Breathing - The process of taking air into and expelling it from the lungs

Monitor - A device used for observing, checking, or keeping a continuous record of something

Further, the health industry considers a 'breathing monitor' to be a device with the primary purpose of measuring a patient's breathing in circumstances where such monitoring is essential (for example, the patient is unconscious or under an anaesthetic).

Accordingly, given the definitions above, and the use of the term ('breathing monitor') within the health industry, it is reasonable to limit the interpretation of 'breathing monitor' to a monitor that is keeping a continuous check of the physiological process of breathing over a period of time.

A Spirometer is an instrument used for measuring air inhaled into and exhaled out of the lungs, which is often used in forced breathing exercises/tests. It is not a respiratory appliance that is continuously used to monitor breathing as a breathing monitor does. Accordingly it is our view that a Spirometer is not a breathing monitor. Consequently, we are of the view that a Spirometer does not fall within Item 137 of Schedule 3 either.

It is our view that a Spirometer is not considered as a respiratory appliance product for those with breathing difficulties and is not an item listed in Schedule 3 of the GST Act. As such a filter that is attached to the end of a Spirometer is not an accessory for any of the respiratory appliance products for those with breathing difficulties as listed in items 129-138 of Schedule 3.

As the filters that are attached to the end of a Spirometer do not meet the first requirement of subsection 38-45(1) of the GST Act, they are not GST-free under subsection 38-45(1).

Subsection 38-45(2)

Subsection 38-45(2) of the GST Act states the following:

A supply is GST-free if the thing supplied is supplied as a spare part for, and is specifically designed as a spare part for, another thing the supply of which would be GST-free under subsection (1).

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

In order for a filter that is attached to the end of a Spirometer to be considered a GST-free spare part, a Spirometer must be a GST-free supply under subsection 38-45(1) of the GST Act.

It is our view that, for the reasons explained above; a Spirometer does not come within any of the items in Schedule 3 and therefore does not meet the requirements of subsection 38-45(1) of the GST Act.

Accordingly, a filter which is used at the end of a Spirometer cannot be considered as a spare part of a GST-free item under subsection 38-45(2) of the GST Act.

Therefore the supply of a filter which is used at the end of a Spirometer is not a GST-free supply under subsection 38-45 of the GST Act.

Section 9-5 of the GST Act states the following:

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 the indirect tax zone; 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.

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

This means that, where a particular supply does not meet all of the above mentioned requirements, it will not be a taxable supply and as such no GST will be payable on the supply. For example, if the supplier of the filter is not registered or required to be registered for GST, that supply is not a taxable supply and accordingly no GST is payable (even though a filter does not come within any of the GST-free provisions).

Additional information

It is noted that there may be a merging of Spirometers and breathing monitors such that certain models of Spirometers may incorporate features of a breathing monitor. These models of Spirometers may be viewed differently for GST purposes to a Spirometer such as the one that you are currently supplying. We consider that that the Spirometer that you are currently supplying is a testing device and does not have features of a breathing monitor.