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Edited version of your written advice
Authorisation Number: 1012897180937
Date of advice: 20 October 2015
Ruling
Subject: GST and medical aids
Question 1
Is the entity making a GST-free supply under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 when it sells the Type A range of beds?
Answer
Yes, sales of the Type A range of beds is, GST-free when sold as either a base and mattress ensemble or as a base-only.
Question 2
Is the entity making a GST-free supply under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 when it sells the type B range of beds?
Answer
Yes, sales of the Type B range of beds, is GST-free when sold as either a base and mattress ensemble or as a base-only.
Relevant facts and circumstances
The entity imports and sells bed products through various retail outlets throughout Australia.
The Type A and Type B range of electronically operated adjustable beds are sold in a variety of sizes either as a base-only or as a base and mattress ensemble.
The entity has stated that the beds were designed for people with an illness or disability.
The entity has stated that electronically operated adjustable beds are generally purchased by the aged, ill or disabled people who have difficulty in getting in or out, or are unable to get in or out or bed unassisted, or who suffer from medical conditions such as back problems, hiatus hernia, acid reflux and breathing problems.
The entity's website suggests that adjustable beds are used by as many people without any medical condition.
However, you have advised that the beds are not widely used by people without an illness or disability even though you have advised that you do not maintain a sales breakdown or data in relation to who purchases your products.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1)
A New Tax System (Goods and Services Tax) Act 1999 Schedule 3
Reasons for decision
Supplies of certain medical aids and appliances are GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where:
• the thing is mentioned in Schedule 3 to the GST Act or is specified in the regulations; and
• the thing is specifically designed for people with an illness or disability;
• and the thing is not widely used by people without an illness or disability.
Item 60 in the table in Schedule 3 to the GST Act mentions 'electronically operated adjustable beds' as a medical aid or appliance that may be supplied GST-free under subsection 38-45 of the GST Act where the other requirements are met. Both types of beds are electronically operated adjustable beds.
The GST Pharmaceutical Health Forum - issues register is published on the ATO website and provides guidance on the factors that should be taken into account in determining whether a medical aid or appliance is specifically designed for people with an illness or disability. It states:
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.
Although the beds are sold through general bedding retail stores and the marketing appears to be focussed on the aesthetic appeal and comfort of the beds, you have advised that the beds were specifically designed for people with an illness or disability.
The GST Pharmaceutical Health Forum - issues register also provides guidance on the factors that should be taken into account in determining whether a medical aid or appliance is widely used by people without an illness or disability. It states:
In determining whether a medical aid and appliance is used by people without an illness or disability reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased.
Subsection 38-45(1) does not require the GST treatment of a medical aid and appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products.
Accordingly, it is considered that irregular and uncommon use of a medical aid and appliance in a way contrary to its manufactured purpose will not prevent the good from being GST-free.
Although the beds are sold alongside normal non-adjustable beds in retail stores and despite your website articulating that adjustable beds are used by as many people without any medical conditions, you have advised that the beds are not widely used by people without an illness or disability.
You have advised that both types of beds are adjustable beds that are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. Accordingly, supplies of these beds are GST-free under subsection 38-45(1) of the GST Act.