Edited version of your written advice

Authorisation Number: 1051400034105

Date of advice: 17 July 2018

Ruling

Subject: GST and medical aids and appliances

Question

Are you making a non-taxable importation pursuant to paragraph 13-10(b) of the A New Tax System (Goods and Services Tax Act) 1999 when you import certain specified items.

Answer

No

Relevant facts and circumstances

You are registered for GST effective from 1 July 2000.

You import a wide range of medical equipment to suit many needs across the broad medical industry.

You enter the equipment for home consumption.

You import electronically operated items typically used by practitioners in the fields of medicine.

The items in question are listed on the Australian Register of Therapeutic Goods.

You have provided a copy of the Australian Register of Therapeutic Goods Certificate.

The product is classified as a ‘Table, examination/Treatment under the certificate. The intended purpose of the tables was for: XYZ

Relevant legislative provisions

A New Tax System (Goods and Services Tax Act) 1999

Paragraph 13-10(b)

Section 13-15

Section 38-45

Subsection 182-10(2)

Section 182-15

Schedule 3

Customs Act 1901

Therapeutic Goods Act 1989

Section 3

Reasons for decision

Note: In this reasoning, unless otherwise stated,

● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

● reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au

Section 13-15 provides that you are liable for GST on taxable importation that you make.

You make a ‘taxable importation’ where you import goods and those goods are entered for home consumption within the meaning of the Customs Act 1901. However, the importation is not a ‘taxable importation’ to the extent it is a ‘non-taxable importation’.

Paragraph 13-10(b) provides that an importation is a non-taxable importation where the item would have been GST-free if supplied within Australia.

Under section 38-45, a supply of a medical aid or appliance is GST-free where the medical aid or appliance is:

● covered by Schedule 3 to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) or specified in Schedule 3 to 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.

All three criteria listed above must be satisfied for the medical aid or appliance to be GST-free.

In your case the product is designed for use by practitioners in the medical, hospital, podiatry, physiotherapy and Allied Health sector to examine or treat people with an illness or disability. It is not designed for use by people with an illness or disability.

Schedule 3 to the GST Act, and Schedule 3 to GST Regulations, list a range of items which may be GST-free medical aids or appliances.

Treatment or examination tables are not listed in Schedule 3 of the GST Act however you asked us to confirm that the product was exempt as an electronically operated adjustable bed.

In considering whether the products in question are covered by an item in Schedule 3, particular consideration was given to whether the products are covered by the following items:

Item 60 - electronically operated adjustable beds

Item 86 - electronically operated therapeutic lounge/recliner chairs

Section 182-15 provides that a category heading in Schedule 3 is not an operative part of the GST Act but may be used, per subsection 182-10(2) of the GST Act either to confirm a provision’s meaning is the ordinary meaning conveyed by its text (taking into account its context and the purpose or object underlying the provision) or determine a provision’s meaning if the provision is ambiguous or obscure.

Item 60 - electronically operated adjustable beds

The relevant category heading in Schedule 3 (i.e. ‘Mobility of people with disabilities – physical: bedding for people with disabilities’) provides some guidance in interpreting item 60 – ‘electronically operated adjustable beds’.

The opening words used in the category heading (i.e. ‘Mobility of people with disabilities – physical’) indicate that the nine medical aids or appliances listed under that category should have design features which assist with the mobility of people who have a physical disability.

The category heading then refers to ‘bedding for people with disabilities’. The nine medical aids and appliances listed under the category heading include three types of bed (manually operated adjustable beds, electronically operated adjustable beds (Item 60) and hospital-type beds) plus six items which form part of or are used in conjunction with a bed. This suggests that ‘bedding’ is intended to include a bed and an item which forms part of or is used in conjunction with a bed.

The term 'bed', is not defined in the GST Act, therefore will take its ordinary meaning. The Macquarie Dictionary contains the following meaning of ‘bed’:

Bed is defined as 'a piece of furniture upon which or within which a person sleeps,..',

Generally a bed is a standard size/width designed and intended primarily for sleep. Your products are not designed for the purpose of sleeping. In this case we do not consider the items in question to fall within the ordinary definition of a ‘bed’.

In addition each of the items under the heading mobility of people with disabilities- physical bedding for people with disabilities is to be used by people with disabilities. However the purpose of your product is for the treatment of those people. That is your products are primarily designed and intended for the examination, assessment and treatment of patients.

As such, the items in question will not be GST-free under Item 60 of Schedule 3.

Item 86 - electronically operated therapeutic lounge/recliner chairs

In this case, the relevant category heading in Schedule 3 is ‘Mobility of people with disabilities – physical: seating aids’.

Similar to previous category discussed above in regard to Item 60 of Schedule 3, the category heading indicates that the three medical aids or appliances listed under this category should have design features which assist with the mobility of people who have a physical disability.

The category heading in this case refers to ’seating aids’ with three items being listed including ‘electronically operated therapeutic lounge/recliner chairs specifically designed for people with disabilities’ (Item 86).

Section 3 of the Therapeutic Goods Act 1989 defines the term ‘therapeutic goods’ in part to mean goods included in a class of goods the sole or principal use of which is, or ordinarily is, a therapeutic use …

The term ‘therapeutic use’ is also defined in section 3 of the Therapeutic Goods Act 1989 as meaning use in or in connection with preventing, diagnosing, curing or alleviating a disease, ailment, defect or injury in persons …

Given the above, we consider the goods in question are therapeutic in nature. The next issue to consider is whether the products fall within the scope of a lounge/recliner chair.

The GST classification of medical aids and appliances was considered in Snugfit Australia Pty Ltd v Federal Commissioner of Taxation [2013] AATA 802 (Snugfit) with reference to case law under the sales tax legislation. In summary, the Court adopted what is referred to an ‘essential character test’. That is, to determine the correct classification of goods one needs to determine the essential character of the goods, what the goods essentially are, and not some characteristic that the goods might have. The ‘essential characteristics’ is derived from the basic nature of the goods, from what they are, through composition, function and other factors necessarily play a part.

We consider that the products in question, whilst they may be described as a ‘chair’, or a medical examination table do not have the essential characteristics of a therapeutic lounge/recliner chair.

The essential characteristic of the products in question are items that have been specifically designed for use by medical practitioners in the assessment, diagnosis and treatment of an individual with a disability rather than use by a person with a physical disability.

Conclusion

The items in question are not GST-free under Schedule 3. Furthermore, a supply of the items does not satisfy any other GST-free provisions.

Therefore the importation of the items will not be a ‘non-taxable importation’ under paragraph 13-10(b).