Edited version of your written advice

Authorisation Number: 1012939683488

Date of advice: 8 February 2016

Ruling

Subject: Whether the supply of a medical device is GST-free

Question 1

Is the supply of an Australian Standard AS1735.1/12 medical device a GST-free supply?

Answer

No.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The Applicant is profoundly disabled, cannot move and confined to an electric wheelchair.

The Applicant's parent (Parent) currently resides in XX and provides full-time care to the Applicant. The Parent's other children reside in YY.

The Parent is putting in place a succession plan for the care of the Applicant.

As part of the succession plan the Parent's child has purchased a building located in YY which comprises a basement garage, one apartment on the ground floor and a second apartment on the first floor.

The child will occupy the apartment on the ground floor. The Parent will use the proceeds of sale of her/his home in XX to purchase the apartment on the first floor from the Applicant's child. The Parent and the Applicant will occupy the apartment on the first floor.

It is necessary to install a medical device which runs from the basement to the apartment on the first floor so that the Applicant can access that apartment. To that end the Parent wants to install a medical device suitable for a person with limited mobility. However the Parent has been advised that as the building will be occupied by two owners (i.e. the child will own the apartment on the ground floor and the Parent will own the apartment on the first floor) the relevant building code requires a commercial medical device to be installed. The Parent understands that installation of a commercial medical device will be more expensive (as it requires a larger medical device shaft) and subject to 10% GST whereas a medical device designed for a person with limited mobility is less expensive and can be supplied GST-free.

The Parent advised that the quote for the installation of the medical device refers to an Australian Standard AS1735.1/12 medical device and that, after speaking to the medical device installer, the Parent understood that she/he was required to install a General Passenger Medical device Part 1,2 or 3 as the medical device will be in the common area of two owners.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1).

Reasons for decision

Summary

The supply of a medical device that complies with Australian Standard AS1735.1/12 is not a GST-free supply pursuant to subsection 38-45(1) of the GST Act as the medical device does not meet the requirement of being specifically designed for people with disabilities and is widely used by people without an illness or disability.

Detailed reasoning

GST-free supplies of medical aids and appliances:

GST is payable on a taxable supply. However, section 9-5 of the GST Act states that a supply is not a taxable supply to the extent that it is GST-free.

Subdivision 38 of the GST Act provides that supplies of certain goods and services relating to health care are GST-free. Subsection 38-45(1) states:

(1) 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.

Covered by Schedule 3:

The first requirement in subsection 38-45(1) of the GST Act is that the medical device is covered by Schedule 3 to the GST Act. Item 88 in Schedule 3 (Item 88) refers to:

manual, electric, ceiling track or pool hoists specifically designed for people with disabilities

We consider that 'hoists' in Item 88 is broad enough to cover a medical device. Although the words 'manual, electric, ceiling track or pool hoists' in Item 88 refer to devices normally used to medical device a person from a bed to a wheelchair or from a wheelchair to a pool, the ordinary meaning of 'hoist' in The Macquarie Dictionary includes:

4. an apparatus for hoisting as a lift

5. a lift for heavy goods…

Specifically designed for people with disabilities:

The second requirement is that the medical device is specifically designed for people with disabilities.

The ATO accepts that medical devices that comply with:

AS1735.15 - low rise passenger medical devices - non automatically controlled. This applies to passenger medical devices that are intended primarily to provide vertical access for persons with limited mobility; and

AS1735.16 - medical devices for persons with limited mobility - restricted use - automatically controlled. This applies to automatically controlled, low speed passenger medical devices intended for infrequent use primarily by persons with limited mobility; and

are specifically designed for people with disabilities. For example, the design features of an AS1735.16 medical device include automatic and fully lockable controls, a fully enclosed medical device well, a slower speed and a maximum 1.6 square metre floor area.

Not widely used by people without an illness or disability:

A third requirement is contained in paragraph 38-45(1)(b) of the GST Act, i.e. that the medical device 'is not widely used by people without an illness or disability'.

The ATO accepts that medical devices which comply with AS 1735.15 and AS 1735.16 meet this requirement.

On the other hand, AS1735.12 applies to 'newly installed medical devices in the public access path, in newly constructed medical device wells in other than private residence, and for which a building authority having jurisdiction stipulates the provision of facilities for a person with disabilities'. The ATO considers that, while these medical devices have additional features for people with disabilities (e.g. handrails, tactile or Braille symbols on the control panels), they are medical devices which would be widely used by people without an illness or disability.

Application of these requirements to the AS1735.1/12 medical device which the Parent intends to install:

We understand that a medical device that complies with AS1735.1/12 is designed for commercial and public applications, complies with the Building Code of Australia, travels a maximum of 18 metres and travels at a faster speed than an AS1735.15 or AS1735.16 medical device. As such, an AS1735.1/12 medical device does not meet the requirement of being specifically designed for people with disabilities and is widely used by people without an illness or disability. Consequently the supply of such a medical device does not satisfy subsection 38-45(1) of the GST Act and is not GST-free.

In the ruling request the Parent submitted that any GST should be waived because she/he has no choice but to install a medical device so that the Applicant can access her/his apartment, the AS1735.1/12 medical device required by the building code is a secondary means of access which is intended to be used only to provide access for the Applicant and the stairs are the primary means of access to the apartment. Unfortunately the criteria in subsection 38-45(1) do not turn upon the actual use of the medical device but on the design of the medical device and whether a medical device of that type is widely used by people without an illness or disability.

As noted above, the ATO accepts that the supply of an AS1735.16 medical device satisfies subsection 38-45(1) of the GST Act and is GST-free. We understand that an AS1735.16 medical device can be installed over three levels but is very expensive and that disabled people living in three level houses have found it cheaper to install a passenger medical device (including paying 10% GST).

Installation costs:

We understand that a medical device installer will both supply and install the medical device. We consider that the supply of the installation services will be ancillary and incidental to the supply of the medical device and form part of a single supply. Thus if a medical device satisfies AS1735.15 or AS1735.16 the installation costs will be GST-free but in other cases the installation costs will be subject to 10% GST.