Edited version of private advice

Authorisation Number: 1051952988334

Date of advice: 7 March 2022

Ruling

Subject: GST and electronically operated adjustable beds

Question

Is your supply of electronically operated adjustable beds GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act')?

Answer

No, your supply of the beds are not GST-free under subsection 38-45(1) of the GST Act. The supply of the beds are a taxable supply.

This ruling applies from:

8 December 2021

Relevant facts and circumstances

You are registered for GST.

You manufacture and sell electronically operated adjustable beds in Australia

You do not currently have any agreement with your customers or suppliers to treat the supply of your products as a GST-free supply.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-5

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

A New Tax System (Goods and Services Tax) Act 1999 (Cth) subsection 38-45(2)

A New Tax System (Goods and Services Tax) Act 1999 (Cth) schedule 3

Reasons for decision

Electronically operated adjustable beds

Subsection 38-45(1) of the GST Act outlines the circumstances in which certain medical aids and appliances are GST-free. It 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.

Subsection 38-45(1) of the GST Act sets out three elements, all of which must be satisfied before a supply can be considered GST-free. These are the supply must be:

•                    listed in the table in Schedule 3 to the GST Act (Schedule 3) or in the A New Tax System (Goods and Services Tax) Regulations 1999 (Cth);

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

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

Covered by an item in Schedule 3

Schedule 3 provides a list of GST-free medical aid and appliances. Item 60 in the table in Schedule 3 (Item 60) lists 'electronically operated adjustable beds'.

Paragraph 4 of GSTD 2021/2 states:

4. Adjustable beds are covered by either table item 59 (manually operated) or table item 60 (electronically operated) of Schedule 3. A bed is covered by one of these table items if its upper and lower sections can be adjusted or manipulated to assist a person who has limited mobility to get in and out unaided, or to allow a person to rest with their upper or lower body elevated.

You advised that you supply electronically operated adjustable beds that allow for individual upper body and lower body elevation.

Based on the information provided, we consider your supply of electronically operated adjustable beds to be covered by Item 60.

Specifically designed for people with an illness or disability, and not widely used by people without an illness or disability

Factors considered in determining whether a medical aid or appliance is specifically designed for people with an illness or disability, and not widely used by people without an illness or disability are outlined in GSTD 2021/2. Paragraphs 7 to 10 states:

Specifically designed

7. The following factors are a non-exhaustive list of matters you should take into account when considering whether a particular product is specifically designed for people with an illness or disability:

•                    An objective view of the design features and characteristics of the product indicate whether its essential character is that it is specifically designed for people with an illness or disability.

•                    The designer's or manufacturer's intention of how the particular product is to be used. Indicators of the designer's or manufacturer's intention include an objective consideration of how the product is marketed and the type of outlets at which the product can be purchased.

Not widely used

8. The phrase 'not widely used' is not defined in the GST Act. It therefore takes its ordinary meaning, having regard to the context in which it appears.^[4] It is a question of degree whether a product is not widely used by people without an illness or disability. The Commissioner considers that it is reasonable to conclude that the test is not satisfied if the product is widely purchased by or on behalf of people without an illness or disability, without the need to examine how this class of people in fact use the product.

9. In the context of paragraph 38-45(1)(b), the Commissioner considers 'not widely used' to mean not used by many people who do not have an illness or disability.

10. The following factors will be relevant, but are not an exhaustive list, when considering whether a product is widely used by people without an illness or disability:

•                    The product is widely sold in retail or other outlets that predominantly sell standard beds (that is, beds that do not have features specifically designed for people with an illness or disability) to the general public.

•                    The marketing material for the product emphasises how it enhances the lifestyle of people without an illness or disability.

Your products are designed to allow the upper and lower body to be elevated. You believe these features have inherent medical benefits for people with an illness or disability and can assist individuals to get in-and-out of bed.

You believe your products are unlikely to be purchased by individuals without an illness or disability due to their features and design, associated cost in comparison to other standard beds, and reduction in storage capacity.

Your marketing material emphasises the aesthetical appeal, premium style, and quality of your products over their functionality, with no reference made to any medical benefits of your products.

You do not distinctly market or specify how your products are specifically designed to assist people with an illness or disability.

Although your product may be used by people with an illness or disability, the manner in which they are marketed and the channels in which they are sold indicate that your products are not specifically designed for people with an illness or disability and are widely used by people without an illness or disability.

Consequently, your products do not satisfy the requirements under subsection 38-45(1) of the GST Act. Therefore, your supply of electronically operated adjustable beds will not be GST-free and will be a taxable supply.