Edited version of private advice

Authorisation Number: 1052290696483

Date of advice: 12 November 2024

Ruling

Subject: GST - free health goods

Question 1

Is the supply of a product (Product 1) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

No, the supply of Product 1 is not a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 2

Is the supply of a product (Product 2) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 2

No, the supply of Product 2 is not a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 3

As agreed, question 3 has been removed from this private ruling and will be addressed separately.

Question 4

Is the supply of a product (Product 4) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 4

Yes, the supply of Product 4 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 5

Is the supply of a product (Product 5) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 5

Yes, the supply of Product 5 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 6

Is the supply of a product (Product 6) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 6

Yes, the supply of Product 6 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 7

Is the supply of a product (Product 7) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 7

Yes, the supply of Product 7 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 8

Is the supply of a product (Product 8) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 8

Yes, the supply of Product 8 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 9

Is the supply of a Product 9 a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 9

Yes, the supply of Product 9 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Question 10

Is the supply of a product (Product 10) a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act?

Answer 10

Yes, the supply of Product 10 is a GST-free supply of other health goods pursuant to subsection 38-47(1) of the GST Act.

Relevant facts and circumstances

You are registered for goods and services tax (GST). You carry on an enterprise that involves supplying products in Australia including the following ten products (collectively the Products):

•                     Product 1

•                     Product 2

•                     Product 4

•                     Product 5

•                     Product 6

•                     Product 7

•                     Product 8

•                     Product 9

•                     Product 10

The Products are regulated in Australia by the Therapeutic Goods Administration (TGA) requiring entry in the Australian Register of Therapeutic Goods (ARTG). Each of the Products are issued with an ARTG ID with details of the Products entry set out in the public summary of entry on the TGA website https://www.tga.gov.au/resources/artg/(ARTG Summary).

The Products display their respective AUST L numbers (corresponding to their ARTG ID number) on the labels of their respective packaging.

Details in relation to each of the Products is set out in tables in the following appendices which form part of the Scheme:

•                     Appendix A in relation to Product 1

•                     Appendix B in relation to Product 2

•                     Appendix D in relation to Product 4

•                     Appendix E in relation to Product 5

•                     Appendix F in relation to Product 6

•                     Appendix G in relation to Product 7

•                     Appendix H in relation to Product 8

•                     Appendix I in relation to Product 9

•                     Appendix J in relation to Product 10

Relevant Legislative Provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 38-47

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Taxable supply

Under section 9-5 of the GST Act you make a taxable supply on which GST is payable if:

•                     you make a supply for consideration

•                     the supply is made in the course or furtherance of an enterprise that you carry on

•                     the supply is connected with the indirect tax zone, and

•                     you are registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

To the extent a supply of a Product is GST-free it is not a taxable supply.

Under section 9-5 of the GST Act you make a taxable supply on which GST is payable if:

•                     you make a supply for consideration

•                     the supply is made in the course or furtherance of an enterprise that you carry and

•                     the supply is connected with the indirect tax zone, and

•                     you are registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

As you are registered for GST and making supplies of the Products for consideration in the course of an enterprise you carry on in Australia and the supply of each Product is not input taxed, the issue is whether the supply of each Product is a GST-free supply.

Other GST-free health goods

Division 38 of the GST Act sets out those health-related supplies that are GST-free. In particular, subsection 38-47(1) of the GST Act relevantly provides that the supply of goods is GST-free where the good (Product) is 'of a kind' declared in writing by the Health Minister to be GST-free.

The Health Minister has made the A New Tax System (Goods and Services Tax) (GST-free Health Goods) Determination 2022 (Health Minister'sDetermination) and declared at section 5 that for the purposes of subsection 38-47(1) of the GST Act, goods of a kind that are:

(a)          specified in Schedule 1 to the Health Minister's Determination (Schedule); and

(b)          required, or in a class of goods required, to be included in the ARTG under the Therapeutic Goods Act 1989 (TG Act)

are goods the supply of which is GST-free.

Within the Schedule, table item 5 (Item 5) specifies sunscreen preparations for dermal application that are:

•                     marketed principally for use as sunscreen; and

•                     have a sun protection factor (SPF) of 15 or more.

A supplier and a recipient can choose to agree that a supply, or supplies of a kind, of a product that would otherwise be GST-free, be treated as not GST-free (subsection 38-47(2) of the GST Act).

'of a kind'

The phrase 'of a kind' is not defined in the GST Act, nor in the Health Minister's Determination. However, the phrase has been considered by the courts in the context of classification of food products under the GST Act. [1]In these cases, 'of a kind' has been interpreted as an operative phrase that adds further generality to the description of a genus, class, or category of items.[2]

Determining whether a product is 'of a kind' involves identifying the attributes of that kind that are required by the relevant provision, followed by an assessment of whether the product in question is a product of that kind.

A product will be 'of a kind' if it possesses the same sort of distinguishing features as those which belong to a particular genus, class, or category of products. The genus, class, or category of sunscreen products, the supply of which is GST-free, has been determined by the Health Minister as having 4 attributes:

•                     is a sunscreen preparation for dermal application

•                     has a SPF of 15 or more

•                     is required to be included in the ARTG under the TGA, and

•                     is marketed principally for use as a sunscreen.

Sunscreen preparation for dermal application

A sunscreen preparation for dermal application is a preparation containing sunscreen that is manufactured or compounded for application to the skin (including the lips) to reduce the incidence of skin damage caused by exposure to ultraviolet (UV) radiation.

Sunscreen preparations may be in various forms including creams, lotions, gels, balms, oils or mousses and be packaged in bottles, tubes, pump packs, sprays or sticks.

Sun protection factor of 15 or more

The SPF of a sunscreen product is determined in accordance with the Australian Sunscreen Standards. [3] The SPF of the product will be clearly identified on the product's packaging. Products with an SPF of 15 or more will have the required attribute.

Supplies of products with an SPF of less than 15 are not GST-free.

Required to be included in the Australian Register of Therapeutic Goods

Sunscreens classified as therapeutic goods under the TGA are regulated in Australia to ensure their safety, quality, and efficacy. Unless excluded or exempt, therapeutic sunscreens are required by the TGA to be listed or registered in the ARTG before they can legally be supplied in Australia.[4]

According to paragraph 18 of Draft Goods and Services Tax Determination GSTD 2024/D2 Goods and services tax: supplies of sunscreen (GSTD 2024/D2) which explains our preliminary view on when a supply of a sunscreen product is GST-free, if a sunscreen product has an AUST L or AUST R number on its packaging, it is of a kind required to be included on the ARTG.

Marketed principally for use as sunscreen

In determining whether a product is of a kind marketed principally for use as sunscreen, it is necessary to consider the kinds of sunscreens that are marketed principally for use as sunscreens. The marketed use of a product is to be determined objectively, having regard to what a reasonable observer would understand from the content of the marketing.[5]

Marketed principally

The marketing of a product involves the end-to-end process where products are put onto the market. This includes promotional and sales activities.[6] The content of the marketing is what those activities objectively convey to the market.[7] Marketing includes:

•                     labelling (including the name),

•                     packaging,

•                     display circumstances,

•                     product placement,

•                     promotion and advertising.[8]

The activities of all suppliers in a supply chain will be relevant, including those of a manufacturer, importer, wholesaler and retailer. The marketing activities carried out by competitors in the market are also relevant to identifying the genus, class, or category of products marketed principally for use as a sunscreen.[9] A product will generally have the same GST treatment, whether it is sold at the wholesale or retail level.

The marketing test is a 'marketed principally' test. It will not be sufficient that the product has some marketing for use as sunscreen. The marketing for use as sunscreen must be the principally marketed use - that is, the product must be marketed 'mainly, chiefly, predominantly or preponderantly'[10] for use as sunscreen. Where the marketing of a product includes more than one use, the use of the product as sunscreen must be the main, chief or predominant marketed use.

Whether a sunscreen product is of a genus, class, or category of products marketed principally for use as a sunscreen is a matter of 'overall impression'.[11] Where there is no clear principal use discernible from the marketing of a product, it will not be of a kind marketed principally for use as sunscreen.

Use as sunscreen

Sunscreen is used to protect the skin from the harmful effects of the sun. Over-exposure to UV radiation causes eye damage, sunburn, tanning and other skin damage that can ultimately result in skin cancer. It is also recognised that the effects of sun damage to the skin includes premature ageing of the skin.

Statements in marketing that a sunscreen product can aid in the prevention of premature skin ageing, solar keratosis and sunspots and may reduce the risk of, or assist in preventing, some skin cancers are statements consistent with use of the product as sunscreen.

For sunscreen to provide effective protection from UV radiation, it is recommended that sunscreen is:

•                     carefully and generously applied to skin before going outside

•                     reapplied at regular intervals

•                     reapplied after swimming, sweating, or towelling

•                     used within the use-by date and stored in cool, dry conditions, and

•                     used in combination with other sun protection measures for best protection (such as sun-protective clothing).[12]

Sunscreen products of a kind marketed principally for use as a sunscreen are typically labelled with directions for use that are consistent with the effective prevention of skin damage caused by UV radiation. Inclusion of these directions is not determinative of the marketed use of a product. However, absence of these directions is uncharacteristic of the kind of products marketed principally for use as a sunscreen.

Marketed for use other than sun protection

In some cases, a sunscreen product may be marketed solely for use as a sunscreen. If so, the product will be of a kind principally marketed for use as a sunscreen.

Some sunscreen products are marketed as having a use other than sun protection. These products may still be marketed principally as sunscreen where the use as sunscreen is the main, chief or predominant marketed use. Whether a sunscreen product is marketed principally for use as sunscreen is a matter of overall impression involving an objective assessment of all the marketing information.

Sunscreen products are also often marketed as having features relevant to their suitability and effectiveness for use in different environmental conditions or on different parts of the body or skin types. Whether these features merely complement the sunscreen and make it more suitable for sun protection use or represent a separate use other than sunscreen is to be determined objectively with regard to the overall marketing of the product.

Labelling and packaging, including name of the product

While no single factor will be determinative, the labelling and packaging of a product is a primary and consistent source of marketing information. Therefore, the labelling and packaging of a product will be of particular importance to the formation of an overall impression of the product's marketed use. A label will not govern the classification of a sunscreen product for the purposes of the GST Act[13], but it must be taken into account. Any impression gained from the labelling and packaging of a product will need to be weighed against impressions gained from other forms of marketing.

Where a product is advertised as having a use additional to a sunscreen use, the name of the product can be an important indication of which use is primary. For example, a 'moisturising sunscreen' is primarily identified as a sunscreen with a supplementary moisturising benefit. However, 'SPF moisturiser' or 'moisturiser with SPF' may be a factor indicating the reverse.

Descriptions of products as multi-use or multi-functional, either explicitly or through descriptors such as '2-in-1' or '3-in-1', are indicative of products with multiple equal uses and no main, chief or predominant marketed use. These products are not of a kind marketed principally for use as sunscreen.

It is relevant to consider the ordering and sizing of marketing content on the label and packaging to form an overall impression as to whether any particular use is given prominence. If the use of a product as a sunscreen appears more prominently in advertising materials than any other use, this is a factor that indicates the product may be of a kind marketed principally for use as sunscreen.

How the product is promoted or advertised

Marketing materials published on websites or in other advertisements (print, video, other media) are an important factor in forming an overall impression as to the principally marketed use of a product.

Marketing materials may emphasise different uses in different contexts. In this situation, it is necessary to form an overall impression as to the principally marketed use of the product based on the totality of the material, considering the relative prominence of differing messages. The existence of competing or conflicting messaging about multiple uses of a product may indicate that no main, chief or predominant use is presented in the marketing of the product.

It is common for product advertising to be prepared and endorsed by the brand itself for use broadly by retail outlets. This marketing material will therefore be consistent and prominent across the market. As a result, it will generally be more persuasive in assessing the marketed use of the product than additional or ancillary advertising by an individual retailer.

Placement of the product

Products of a kind marketed principally for use as a sunscreen are generally grouped together, either on shelves in stores or in product categories on websites. Designation or categorisation of a product by the brand itself will be more persuasive than those made by individual retailers in establishing the principally marketed use of a product. For example, where a brand places a product in its sunscreens category of products on its website, rather than in the brand's moisturiser category of products on its website.

However, product placement is not a determinative factor. Products may be placed in different locations or categories at the retail level based on arbitrary factors. Placement with other products that are of a kind principally marketed for use as sunscreen may indicate that the product is of that kind. However, where products are not placed according to use, the product placement will carry less weight in the overall assessment of the marketing.

Overall impression

Whether a sunscreen product is marketed principally for use as sunscreen is a matter of overall impression. No one factor is determinative, although the labelling and packaging, including the name of the product, is of particular importance in the overall objective assessment of the marketing of a particular product.

Application of indicators to each of the Products

The Products in question each possess the following distinguishing qualities in common with the class or genus of 'sunscreen preparations':

•                     is for dermal application being presented as a lotion or cream or oil or gel or balm or mouse to be applied topically to the skin

•                     has an SPF of 15, 30 or 50+ which is more than SPF 15 (Item 5(b) of the Determination satisfied)

•                     displays an AUST L number (ARTG number) identifying it as a therapeutic good regulated by the TGA requiring inclusion in the ARTG under the TG Act (section 5(b) of the Determination satisfied).

Factors in determining whether each of the Products are marketed principally for use as sunscreen are considered below.

Marketed principally for use as a sunscreen

Question 1 Product 1

Whilst there is marketing of Product 1 as sunscreen, having regard to the total marketing process and those individual factors in that process whereby Product 1 is put on the market for sale, the overall impression is that Product 1 is not marketed principally for use as sunscreen and does not satisfy the requirement of Item 5(a) of Schedule 1 to the Determination.

Conclusion

As Product 1 does not satisfy the requirements under section 5 of the Determination of a good of a kind that is specified in an item (Item 5) of the table in Schedule 1 to the Determination, the supply of Product 1 is not GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 2 Product 2

Whilst there is marketing of Product 2 as sunscreen, having regard to the total marketing process and those individual factors in that process whereby Product 2 is put on the market for sale, the overall impression is that Product 2 is not marketed principally for use as sunscreen and does not satisfy the requirement of Item 5(a) of Schedule 1 to the Determination.

Conclusion

As Product 2 does not satisfy the requirements under section 5 of the Determination of a good of a kind that is specified in an item (Item 5) of the table in Schedule 1 to the Determination, the supply of Product 2 is not GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 3 as agreed, has been removed from this private ruling and will be addressed separately.

Question 4 Product 4

Having had regard to the total marketing process and those individual factors in that process whereby Product 4 is put on the market for sale, the overall impression is that Product 4 is marketed principally for use as sunscreen.

As Product 4 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 4 is specified in Item 5.

Conclusion

As Product 4 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 4 is GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 5 Product 5

Having had regard to the total marketing process and those individual factors in that process whereby Product 5 is put on the market for sale, the overall impression is that Product 5 is marketed principally for use as sunscreen.

As Product 5 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 5 is specified in Item 5.

Conclusion

As Product 5 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 5 is GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 6 Product 6

Having had regard to the total marketing process and those individual factors in that process whereby Product 6 is put on the market for sale, the overall impression is that Product 6 is marketed principally for use as sunscreen.

As Product 6 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 6 is specified in Item 5.

Conclusion

As Product 6 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 6 is GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 7 Product 7

Having had regard to the total marketing process and those individual factors in that process whereby Product 7 is put on the market for sale, the overall impression is that Product 7 is marketed principally for use as sunscreen.

As Product 7 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 7 is specified in Item 5.

Conclusion

As Product 7 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 7 is GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 8 Product 8

Having had regard to the total marketing process and those individual factors in that process whereby Product 8 is put on the market for sale, the overall impression is that Product 8 is marketed principally for use as sunscreen.

As Product 8 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 8 is specified in Item 5.

Conclusion

As Product 8 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 8 is GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 9 Product 9

Having had regard to the total marketing process and those individual factors in that process whereby Product 9 is put on the market for sale, the overall impression is that Product 9 is marketed principally for use as sunscreen.

As Product 9 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 9 is specified in Item 5.

Conclusion

As Product 9 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 9 is GST-free pursuant to subsection 38-47(1) of the GST Act.

Question 10 Product 10

Having had regard to the total marketing process and those individual factors in that process whereby Product 10 is put on the market for sale, the overall impression is that Product 10 is marketed principally for use as sunscreen.

As Product 10 meets the requirements of a sunscreen preparation for dermal application that is marketed principally for use as sunscreen Product 10 is specified in Item 5.

Conclusion

As Product 10 satisfies the requirements under section 5 of the Determination for being a good of a kind that is

•                     specified in an item (Item 5) of the table in Schedule 1 and

•                     required, or in a class of goods required to be included in the ARTG under the TG Act,

the supply of Product 10 is GST-free pursuant to subsection 38-47(1) of the GST Act.

[1] See Lansell House Pty Ltd v Commissioner of Taxation[2010] FCA 329;(Lansell House FCA)Lansell House Pty Ltd v Commissioner of Taxation[2011] FCAFC 6 (Lansell House FCAFC)Cascade Brewery Company Pty Limited v Commissioner of Taxation [2006] FCA 821 (Cascade) Simplot Australia Pty Limited v Commissioner of Taxation [2023] FCA 1115 (Simplot).

[2] Lansell House FCA at [19]; Lansell House FCAFC at [30] Simplot at [98].

[3] See the Department of Health and Aged Care, Therapeutic Goods Administration (2023) Australian regulatory guidelines for sunscreens, version 3.0, https://www.tga.gov.au/resources/resource/guidance/australian-regulatory-guidelines-sunscreens-args, which describe the regulatory requirements and standards for sunscreens (and their ingredients) regulated as therapeutic goods in Australia by the Therapeutic Goods Administration under the TGA.

[4] Sections 26A and 25 of the Therapeutic Goods Act 1989.

[5] Simplot at [108].

[6] Cascade at [24].

[7] Simplot at [105], [108] and [110].

[8] Cascade at [23].

[9] Simplot at [106]; Cascade at [11].

[10] Cascade at [61].

[11] Lansell House FCA at [108].

[12] Australian Radiation Protection and Nuclear Safety Agency https://www.arpansa.gov.au/understanding-radiation/radiation-sources/more-radiation-sources/sun-protection-sunscreen [website], accessed 8 August 2024.

[13] Lansell House FCA at [109]; Simplot at [108].