Edited version of your written advice

Authorisation Number: 1051195214124

Date of advice: 24 February 2017

Ruling

Subject: GST and goods supplied by an osteopath

Question 1

Is Goods and Services Tax (GST) applicable on the supply of the following goods dispensed by an osteopath during a consultation?

1. Lumbar braces

2. Lumbar belts

3. Pillows

4. Strapping tape

5. Anti-inflammatory supplements

6. Anti-inflammatory creams

7. Foam Rollers

8. Wobble Boards

9. Hot packs

Answer

1. No. The supply of lumbar braces is GST-free under section 38-45 of the GST Act.

2. Yes. The supply of lumbar belts is taxable.

3. Yes. The supply of pillows is taxable.

4. Where the tape is necessarily utilised as an integral part of a patient's treatment, required immediately during that specific GST-free osteopathy consultation, the supply of the tape will be GST-free. However, any additional tape supplied is not GST-free as it is not applied as a necessary part of the performance of the service.

5. Where it is necessary to break a hygienic seal on the capsule container and it is not possible for the good to be sold to any other person, it is considered that the complete container of capsules is GST-free regardless of the fact that the balance of the capsules are not used as a necessary part of that specific osteopathy consultation. However, any additional containers / bottles of capsules supplied are not GST-free.

6. Where it is necessary to break a hygienic seal on the tube of cream and it is not possible for the good to be sold to any other person, it is considered that the complete tube is GST-free regardless of the fact that the balance of the cream is not used as a necessary part of that specific osteopathy consultation. However, any additional tubes of cream supplied are not GST-free.

7. Yes. The supply of foam rollers is taxable.

8. Yes. The supply of wobble boards is taxable.

9. Where a hot pack is necessarily utilised as an integral part of a patient's treatment, required immediately during that specific GST-free osteopathy consultation, the supply of the hot pack will be GST-free. However, any additional hot packs supplied are not GST-free as they are not applied as a necessary part of the performance of the service.

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.

● You are registered for GST

● You are a registered osteopath

● You supply osteopathy services to clients

● The osteopathy services supplied are GST-free to clients

● When required, you also supply goods to clients at the time of consultation

● The goods are supplied on the premises at which the services are being supplied

● The goods are as follows:

1. Lumbar brace - is typically prescribed for pain and dysfunction arising from structures in the lower back such as lumbar disc bulges, lumbar disc prolapse, lumbar disc sequestration, lumbar facet sprain and intervertebral disc dysfunction. It is used to reduce pain, restrict motion, improve stability and support he lower back and pelvis. The brace is prescribed for use for less than three days when moving/walking/lifting and not to be used at rest/in the shower.

2. Lumbar belt - is suitable for pain and dysfunction arising from sacro illiac joint sprains and pregnancy induced lumbar/pelvic pain and pelvic instability. It can be used for lumbar disc bulges, lumbar disc prolapse, lumbar disc sequestration, lumbar facet sprain and intervertebral disc dysfunction if a lumbar brace is too large/uncomfortable. The belt is prescribed for use for less than three days when moving/walking/lifting and not to be used at rest/in the shower. The belt is like a Velcro bandage placed around the low back of a patient that is in spasm (within the consultation).

3. Pillows - these are adjustable pillows that you customise to fit the neck of patients who are being treated for neck pain. They are prescribed within the consultation and are not available to the general public in shops. You provided a website link showing a picture of the product and description.

4. Strapping Tape - elastic adhesive tape which can be applied in different ways to the body depending on the condition. It has the ability to re-educate the neuromuscular system, reduce inflammation, prevent injury and promote good circulation and healing. You provided a website link showing a picture of the product and description.

5. Anti-inflammatory supplements - provide temporary relief from the symptoms of arthritis and may reduce inflammation associated with trauma and injury. The Therapeutic Goods Administration website shows that the active ingredients contained in this product are not scheduled on the Standard for the Uniform Scheduling of Medicines and Poisons (the Poisons Schedule).

6. Anti-inflammatory Creams - these are used for temporary relief of sprains, swelling, bruises, bone and joint pain. The Therapeutic Goods Administration website shows that the active ingredients contained in one cream are scheduled S5 on the Poisons Schedule. The active ingredients in the other cream is not scheduled on the Poisons schedule. The tubes are opened and used in the consultation with the balance of the tube given to the patient.

7. Foam Roller - these are purchased and used by the patient in the consultation for rehabilitation of, for example, sprained ankles. The patient then takes them home to continue rehabilitation exercises. You provided a website link showing a picture and description of the product.

8. Wobble Board - You provided a website link showing a picture of the product and description.

9. Hot packs (instant) - The product is a 10 pack of self-adhesive heat pads which provide 12+ hours of heat each (non-reusable). You provided a website link showing a picture of the product and description.

Reasoning

Relevant to the supply of osteopathy services, a supply of goods is GST-free under subsection 38-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if:

(a) it is made to an individual in the course of supplying to the person a GST-free osteopathy service, and

(b) it is made at the premises at which the osteopathy service is supplied.

'In the course of supplying'

The phrase 'in the course of supplying', as it appears in subsection 38-10(3) of the GST Act, has been interpreted by the ATO to mean that:

The goods must be supplied at the same point in time at which the GST-free osteopathy service is supplied and the goods must have been either:

(a) customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free osteopathy service; or

(b) necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation/attendance.

Goods are necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation when the goods are necessarily supplied by that supplier as an integral part of the performance of that service for immediate treatment and not ongoing or later treatment.

For consumables (goods that are single use or no longer exist in their own right after application), they must be totally or partially used or consumed as a necessary part of the consultation. For example, where an ointment is necessarily applied to a patient as part of the performance of the consultation, it is often necessary to break a hygienic seal on the tube and it is not possible for the good to be sold to any other person. In this situation, the complete tube is GST-free regardless of the fact that the balance of the tube is not applied as a necessary part of the consultation. However, any additional tubes are not GST-free.

For non-consumables, only those applied in the performance of the service are supplied 'in the course of supplying'. For example, the application of a bandage is necessary for the performance of a service where the patient presents with a wound. However, any additional bandages are not GST-free. If it is not necessary for the good to be applied as part of the performance of the service, the good will not satisfy these requirements.

Goods which do not satisfy the requirements of subsection 38-10(3) of the GST Act may be GST-free where the requirements of another GST-free health provision are satisfied such as under section 38-45 (medical aids or appliances) or section 38-50 (drugs and medicinal preparations).

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, or Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)

● specifically designed for people with an illness or disability, and

● not widely used by people without and illness or disability

The supply of an item that satisfies all of the above elements of section 38-45 of the GST Act will be GST Free all the way down the supply chain and not only when supplied to a person with an illness or disability. However, pursuant to subsection 38-45(3) of the GST Act the supplier and purchaser can agree to treat the supply as if it were a taxable supply.

Under section 38-50 of the GST Act, the supply of certain drugs and medicinal preparations made to individuals for private or domestic, human use or consumption are GST-free.

Under subsection 38-50(1) of the GST Act, a supply of a drug or medicinal preparation is GST-free if the supply is on prescription and:

(a) Under a State law or Territory law in the State or Territory in which the supply takes place, supply of the drug or medicinal preparation is restricted, but may be supplied on prescription: or

(b) The drug or medicinal preparation is a pharmaceutical benefit (within the meaning of Part VII of the National Health Act 1953)

Paragraph (a) covers drugs and medicines specified in certain schedules of the Poisons Schedule that are only available on prescription. Many of these products were formerly labelled 'S4' and 'S8' medications. As at the 1 July 2000 it is compulsory to label these products as 'Prescription Medicine' and 'Controlled Drugs', respectively.

Paragraph (b) covers Pharmaceutical Benefits Scheme (PBS) drugs and medicines supplied on prescription as a pharmaceutical benefit within the meaning of Part VII of the National Health Act.

Subsection 38-50(2) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if, under a state law or a territory law in the state or territory in which it is supplied, the supply of the drug or medicinal preparation to an individual for private or domestic use or consumption is restricted, but may be made by:

(a) a medical practitioner, dental practitioner, or pharmacist or

(b) any other person permitted by or under that law to do so.

Many of these products were formerly labelled 'S2' and 'S3' medications. As at the 1 July 2000, it is compulsory to label these products as 'Pharmacy Medicine' and 'Pharmacy Only Medicine', respectively.

We will now consider each of the goods in question.

1. Lumbar Braces

Relevantly, item 68 of Schedule 3 to the GST Act lists 'spinal orthoses'. The term spinal orthoses is not defined in the GST Act. Therefore, it is necessary to determine what a spinal orthoses is with reference to its ordinary meaning.

The Macquarie Dictionary defines 'orthoses' as a device applied to the body to modify position or motion, as a supporting collar, plaster cast, etc. Further, the Stedman's Medical Dictionary defines 'orthoses' to mean an external orthopaedic appliance, as a brace or splint, that prevents or assists movement of the spine or the limbs

As such, it is considered that an item is an orthoses where it is a device that is designed to be applied to the body to change or alter position or motion, or prevent movement, of the spine of limbs.

The Macquarie Dictionary (1997) defines 'spinal' to mean:

'of relating, or belonging to any spine or thornlike structure, especially the backbone'

The Macquarie Dictionary (1997) defines 'spine' to mean:

'the vertebral or spinal column: the backbone'.

Therefore, it is considered that an item is a 'spinal orthoses' where it is designed to be applied to the body to change or alter position or motion, or prevent movement, of the vertebral or spinal column for the treatment of an illness or disability to the vertebral or spinal column.

Based on the information provided, a lumbar brace is considered to be covered by the item 'spinal orthoses'. Therefore, provided the lumbar brace is specifically designed for people with an illness or disability and not widely used by people without an illness or disability, the supply of a lumbar brace is GST-free.

2. Lumbar Belts

As lumbar belts/sacroiliac joint belts are not listed in Schedule 3 to the GST Act, nor are they specified in the GST Regulations, they are not GST-free under section 38-45 of the GST Act.

This supply is also not GST-free under subsection 38-10(3) of the GST Act as it would not be customised or manipulated for the exclusive treatment of the patient nor is it necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation. As a result, a supply of lumbar belts will be a taxable supply.

3. Pillows

Item 82 of Schedule 3 lists 'night-time positioning equipment modifications'.

The 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. For this reason, the pillow is covered by Item 82 because it is a product which modifies the function of a mattress which is 'night time positioning equipment'. This is in accordance with the decision in Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation AATA 802 and the ATO view in ATO Interpretative Decision, ATO ID 2014/21.

However, to be GST-free under subsection 38-45(1), the item must also be specifically designed for people with an illness or disability and not widely used by people without an illness or disability.

Issue 1.c. in the GST Pharmaceutical Health Forum Issues Register provides guidance in determining whether a medical aid and appliance is specifically designed for people with an illness or disability. It states that 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 ATO ID 2014/21 the contoured pillow in question was held to be specifically designed for people with an illness or disability because 'it's designed for people with head and/or neck injuries'. In the 'Note' at the bottom of the ATO ID, it states that “pillows which are not (emphasis added) specifically designed for people with an illness or disability do not satisfy subsection 38-45(1) of the GST Act. For example, a product which is designed to promote healthy posture while sleeping and prevent or reduce the risk of postural problems and neck stiffness from occurring in the future is not specifically designed for people with an illness or disability. Further, pillows (including contoured pillows) that are widely used by people without an illness or disability do not satisfy subsection 38-45(1).”

According to the description of the product which you provided, the pillows you supply are designed to mould and shape to the users head and neck, giving support to the spine while sleeping. This 'encourages the natural alignment of your spine by providing even support'.

On this basis, it is considered that the pillows you supply are designed to promote healthy posture while sleeping and prevent or reduce the risk of postural problems and neck stiffness from occurring rather than being designed specifically for people with an illness or disability. Therefore, the supply of the pillows is not GST-free under subsection 38-45(1) of the GST Act.

The description of the product provided also states that the pillows feature removable foam inserts which allow them to be adjusted in as many as 12 adjustment positions so that the user can create the pillow to suit their own comfort needs. You stated that you customise these pillows during the consultation to fit the neck of patients who are being treated for neck pain. However, it is considered that this does not meet the customised for the exclusive treatment of the particular patient requirement of part (a) of the interpretation of 'in the course of supplying' since the pillow is being adjusted into one of the adjustable positions available (which are available to all purchasers) most suitable for the patient. For this reason, the supply of the pillows are not GST-free under subsection 38-10(3) of the GST Act.

4. Strapping Tape

As strapping tape is not listed in Schedule 3 to the GST Act nor specified in Schedule 3 to the GST Regulations, the supply of the tape is not GST-free under section 38-45 of the GST Act.

Where the tape is necessarily utilised as an integral part of a patient's treatment, required immediately during that specific GST-free osteopathy attendance, the supply of the tape will be GST-free under subsection 38-10(3) of the GST Act. However, any additional tape supplied is not GST-free as it is not applied as a necessary part of the performance of the service.

5. Anti-inflammatory supplements

The supply of the capsules does not satisfy the requirements in section 38-50 of the GST Act to be a GST-free drug or medicinal preparation. These supplements are not required to be supplied on prescription and the active ingredients in these capsules are not restricted by the Poisons Schedule. They are not supplied on prescription as a PBS drug within the meaning of Part VII of the National Health Act 1953.

The supply of the Capsules is not GST-free under section 38-45 of the GST Act as herbal supplements are not listed in Schedule 3 to the GST Act nor specified in Schedule 3 to the GST Regulations.

You advised that some of these capsules are given to the patient at the time of the consultation and the balance is taken home. That is, they are partially used or consumed as a necessary part of the osteopathy consultation. In this case, where it is necessary to break a hygienic seal on the capsule container and it is not possible for the good to be sold to any other person it is considered that the complete container is GST-free regardless of the fact that the balance of the capsules is not used as a necessary part of that specific osteopathy consultation. However, any additional containers/bottles of capsules supplied are not GST-free.

6. Anti-inflammatory creams

The supply of herbal creams does not satisfy the requirements in section 38-50 of the GST Act to be GST-free drugs or medicinal preparations. These creams are not required to be supplied on prescription and the active ingredients in these creams are not restricted by the Poisons Schedule. They are not supplied on prescription as a PBS drug within the meaning of Part VII of the National Health Act 1953.

The supply of these creams is not GST-free under section 38-45 of the GST Act as they are not covered by any of the items listed in Schedule 3 to the GST Act, nor Schedule 3 to the GST Regulations.

You advised that these tubes of cream are opened and used in the consultation with the remaining tube of cream given to the patient. That is, they are partially used or consumed as a necessary part of the osteopathy consultation. In this case, where it is necessary to break a hygienic seal on the tube of cream and it is not possible for the good to be sold to any other person it is considered that the complete tube is GST-free regardless of the fact that the balance of the cream is not used as a necessary part of that specific osteopathy consultation. However, any additional tubes of cream supplied are not GST-free.

7. Foam Rollers

Foam rollers are not covered by any of the items in Schedule 3 to the GST Act, nor any items in Schedule 3 to the GST Regulations. Therefore, the supply of these items is not GST-free under section 38-45 of the GST Act.

In addition, it is considered that the supply of a foam roller is not GST-free under subsection 38-10(3) of the GST Act. This is because the product is not customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free osteopathy service nor is it necessarily utilised as an integral part of the patient's treatment, required immediately during performance of the GST-free osteopathy service.

8. Wobble Boards

As a 'wobble board' is not listed in Schedule 3 to the GST Act, nor specified in Schedule 3 to the GST Regulations, it will not be GST-free under section 38-45 of the GST Act.

In addition, it is considered that the supply of a wobble board is not GST-free under subsection 38-10(3) of the GST Act. This is because the product is not customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free osteopathy service nor is it necessarily utilised as an integral part of the patient's treatment, required immediately during performance of the GST-free osteopathy service.

9. Hot packs

Hot packs are not listed in Schedule 3 to the GST Act nor are they specified in Schedule 3 to the GST Regulations. Therefore, the supply of these items is not GST-free under section 38-45 of the GST Act.

Where a hot pack is necessarily utilised as an integral part of a patient's treatment, required immediately during that specific GST-free osteopathy attendance, the supply of the hot pack will be GST-free under subsection 38-10(3) of the GST Act. However, any additional hot packs supplied are not GST-free as they are not applied as a necessary part of the performance of the service.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 38-45

A New Tax System (Goods and Services Tax) Act 1999 section 38-10

A New Tax System (Goods and Services Tax) Act 1999 section 38-50