Edited version of your written advice

Authorisation Number: 1051361586271

Date of advice: 13 April 2018

Ruling

Subject: GST and medical appliances

Question 1

Are supplies of the products listed below GST-free under section 38-45 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

● contoured chiropractic Pillow

● contoured manually adjustable pressure managed chiropractic pillow

● manually adjustable pressure managed chiropractic mattress

● contoured chiropractic back support.

Answer

Yes, the products listed in question one are GST-free under section 38-45 of the GST Act.

Question 2

Are supplies of pillow cases, quilt covers and back support covers for the products listed at Question 1 above GST-free under section 38-45 of the GST Act?

Answer

No, the products listed in question two are not GST-free under section 38-45 of the GST Act, they are taxable supplies.

Relevant facts and circumstances

You design and manufactured the following products:

● contoured Pillow

● contoured adjustable pressure managed pillow

● manually adjustable pressure managed mattress

● contoured back support

● cases and covers for the products listed above.

The products you created are designed to relieve the pain associated with certain diseases or disabilities relating to the human skeleton. You market those products through a website and through medical clinics. The products are designed to provide relief to certain areas of the body. The products are not available to the general public. Some can be accessed through your website and most through visits to your clinics. The patient needs a referral from a doctor to access those clinics. Your products are substantially more expensive than similar products in the market which do not have the enhancements you designed for your products.

Reasons for decision

Under subsection 38-45(1) of the GST Act a supply of medical aids and appliances will be GST-free if it 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); and

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

● not widely used by people without an illness or disability.

Question 1

Based on the information you provided, your products are specifically designed for use by, and will normally only be used by people suffering from a relevant illness or disability. This means these products are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.

Listed in Schedule 3:

Since these particular products are listed in Schedule 3 or are specified in the GST Regulations then their supply will satisfy the first requirement of subsection 38-45(1) of the GST Act and consequently are GST-free.

Specifically designed for people with an illness or disability

We consider that your products are specifically designed for people with an illness or disability. You considered the needs of people with an illness or disability and the end products possess the design characteristics that make them capable of providing assistance to people with an illness or disability.

Not widely used by people without an illness or disability.

Your products are not going to be available for sale to the general public and will only be sold in medical clinics and on your website. Patients need a referral from a doctor to access those clinics.

The ultimate consumers of your products are those customers who are specifically suffering from an illness or disability and the products are pitched to such consumers. That is, when you sell your products, you focus on the significant health benefits of the products (by reason of the special design features). The result being that significant health benefit is the fundamental thing that distinguishes your products from standard products. As a practical matter, this distinction is enhanced by the fact that your products are materially more expensive than other standard products in the market of a similar kind. This premium price is clearly evidence of the superior design technology and quality inherent in your products.

Question 2

As per question 1 above, the first requirement to obtain the GST treatment available under section 38-45 is that the medical aid or appliance must be listed in Schedule 3 of the GST Act. A review of Schedule 3 indicates that none of the items listed in question 2 exactly fit the characteristics of your products.

Consequently we do not need to consider the other elements of section 38-45 to determine the GST status of the products listed in question 2. Therefore the supply of the products will not be GST-free supplies and they will be taxable supplies.