Sales Tax Determination

STD 98/4

Classification of fireplaces, space heaters and flue kits

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FOI status:

May be releasedFOI number: I 1218462

Background

Taxation Ruling ST 2255 dealt with the classification of fireplaces, space heaters and flue kits under the Sales Tax (Exemptions and Classifications) Act 1935.

With the introduction of Streamlined Sales Tax on 1 January 1993, the rulings in ST 2255 were preserved so that they apply to the Sales Tax (Exemptions and Classifications) Act 1992 (ST(E&C) Act). Decisions made by the Federal Court and the Administrative Appeals Tribunal subsequent to the issue of ST 2255 have caused the Australian Taxation Office (ATO) to review its position on the classification of goods covered by ST 2255.

Issues

What is the classification for sales tax purposes of fireplace inserts, fireboxes, free standing fireplaces, space heaters and flue kits?

Decision

Metal fireplace inserts and fireboxes

Metal fireplace inserts and fireboxes are exempt from sales tax under subitem 39(1)(h) in Schedule 1 to the ST(E&C) Act. The exemption applies where the metal fireplace inserts and fireboxes are designed for use with wood fires, and designed to be inserted into:

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an existing open cavity brick fireplace; or

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a cavity that has been created using, for example, timber frames and plaster board, such that they become an integral part of the building.

The exemption applies even if they incorporate a door that is made totally or partly of heat resistant glass.

Metal accessories to fireplace inserts and fireboxes

Metal accessories to fireplace inserts and fireboxes, being goods that become an integral part of the building, such as smoke gathers, zero clearance kits, surrounds and fascias are also exempt under subitem 39(1)(h) in Schedule 1.

Electric fans attached to fireboxes

Electric fans attached to fireboxes are covered by subitem 1(1)(h) in Schedule 2 to the ST(E&C) Act if they are of a kind ordinarily used for household purposes. They are taxable at the Schedule 2 rate which is currently 12%.

If a fan is attached to an exempt fireplace insert or firebox by the manufacturer, the taxpayer's sales tax liability will be satisfied by accounting for tax on the wholesale value of the fan and any other taxable components (such as the moveable grates and ash pans mentioned below) sold with the firebox.

Moveable grates and ash pans

Moveable grates and ash pans are covered by subitem 1(1)(f) in Schedule 2 if they are of a kind ordinarily used for household purposes. They are taxable at the Schedule 2 rate.

Freestanding fireplaces

Freestanding fireplaces, i.e., fireplaces which are not incorporated into brick cavities or into the walls of buildings, are covered by subitem 1(1)(f) in Schedule 2 if they are of a kind ordinarily used for household purposes. They are taxable at the Schedule 2 rate.

Gas, electric and oil space heaters

Gas, electric and oil space heaters, whether of the insert, freestanding or console type, are covered by subitem 1(1)(f) in Schedule 2 if they are of a kind ordinarily used for household purposes. They are taxable at the Schedule 2 rate.

Gas-fired log or coal fires

Gas-fired log or coal fires, that are designed to be inserted into either an existing fireplace or a metal firebox, are covered by subitem 1(1)(f) in Schedule 2 if they are of a kind ordinarily used for household purposes. They are taxable at the Schedule 2 rate.

Flue-pipes

Flue-pipes (including the inner and outer pipe) for all types of heaters, including wood, gas, electric, and oil, and insert, console and freestanding types, are exempt from tax under subitem 39(1)(j) in Schedule 1.

Parts and fittings for flue-pipes

Parts and fittings for flue-pipes such as elbows, baffles, dampers, ceiling rings and rain cowls are exempt under subitem 39(1)(j) in Schedule 1.

Heat shields

Heat shields that are flat sheets of metal for attachment to part of a building to protect that part of the building from the heat radiated from the flue-pipe are exempt under subitem 39(1)(h) in Schedule 1.

Fire bricks, mortar, lintels and roof flashing

Fire-bricks, mortar, lintels and roof flashing are exempt from sales tax as follows:

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fire bricks are exempt under subitem 39(1)(a) in Schedule 1;

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mortar is exempt under subitem 41(2) in Schedule 1;

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lintels are exempt under subitem 39(1)(h) in Schedule 1; and

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roof flashing is exempt under subitem 39(1)(e) in Schedule 1.

Date of effect

This Determination is effective from 29 October 1998. It replaces any previous public or private rulings, to the extent that they are inconsistent with it. However, if a person will pay less tax because of this Determination, it can be acted upon immediately. Nothing in this Determination may be taken as automatically authorising a refund before the date of effect of the Determination. Credit claims will be considered on their individual merits.

Taxation Ruling ST 2255 is withdrawn from the date of effect of this Determination.

Reasons

Subitem 1(1)(f) in Schedule 2 to the ST(E&C) Act taxes (currently at 12%) goods of a kind ordinarily used in, or in connection with, room heating, including fire grates and fireplaces, if they are of a kind ordinarily used for household purposes.

Subitem 39(1)(h) in Schedule 1 to the ST(E&C) Act exempts from sales tax, metal building materials, including girders, rods, bars, wire, sheets, mesh and lathing, fabricated units made up of these goods, and attachments for the fabricated units, if the goods are of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land.

Section 24 of the Sales Tax Assessment Act 1992 (STAA) states that an assessable dealing is not taxable if the goods are covered by an exemption Item that is in force at the time of the dealing and all the requirements of that Item have been met at or before the time of the dealing.

The Federal Court in the Jetmaster case found that a built-in firebox insert was exempted by the equivalent to subitem 39(1)(h).^[F1] The Court found that a smoke gather was also covered by the equivalent to subitem 39(1)(h).

Although the firebox insert may also be covered by subitem 1(1)(f) in Schedule 2, section 24 of the STAA operates to apply the exemption.

Firebox inserts retain their identity as metal building materials, even if they incorporate a door that consists partly or wholly of heat resistant glass. Other minor inclusions such as hardware items, a wooden handle or rubber seals also do not affect the exemption.

However, tax is payable on a fan that is attached to the firebox insert as it is not metal building materials. Attachments for metal building materials must also be able to be characterised as metal building materials. Furthermore, a fan is excluded from subitem 39(1) by paragraph (3)(i) which excludes electrical fittings, accessories or equipment. Fans, of a kind ordinarily used for household purposes, are covered by subitem 1(1)(h) in Schedule 2.

Moveable grates and ash pans are not attached to the firebox, and are not attachments for metal building materials. These goods sold with firebox inserts are covered by subitem 1(1)(f) in Schedule 2.

The Administrative Appeals Tribunal in Case 27/93; AAT Case 8811 held that freestanding wood heaters were not covered by the equivalent to subitem 39(1)(h) because they are not goods of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land. Freestanding heaters are covered by subitem 1(1)(f) in Schedule 2 if they are of a kind ordinarily used for household purposes. They are taxable at the Schedule 2 rate.

Gas, electric and oil heaters, whether of the insert, console or freestanding type, and gas-fired log and coal fires, are not covered by subitem 39(1)(h) in Schedule 1 as they are not able to be characterised as metal building materials. These goods, if of a kind ordinarily used for household purposes, are covered by subitem 1(1)(f) in Schedule 2 and are taxable at the Schedule 2 rate.

Subitem 39(1)(j) in Schedule 1 exempts piping, tubing, and fittings (and parts for fittings) for piping and tubing, if they are goods of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land.

Based on the Jetmaster decision, flue-pipes for any type of heater are piping or tubing of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land, and are exempt under subitem 39(1)(j) in Schedule 1. However, paragraph (3)(a) of Item 39 excludes from exemption duct work or channelling of a kind ordinarily used in forced-draught ventilating or air-conditioning systems.

Fittings, and parts for fittings, for flues that are exempt under subitem 39(1)(j), are also exempt under that subitem.

We have based our decision on the following legislative provisions:

Section 24 of the Sales Tax Assessment Act 1992;

Subitems 39(1)(a); 39(1)(e), 39(1)(h), 39(1)(j) and 41(2) in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992;

Subitems 1(1)(f) and 1(1)(h) in Schedule 2 to the Sales Tax (Exemptions and Classifications) Act 1992.

And case law:

Jetmaster Fireplaces Pty Ltd v. FC of T 89 ATC 4464; (1989) 20 ATR 689;

Case 27/93; AAT Case 8811 93 ATC 324; (1993) 26 ATR 1075.

Communication of the Decision

This Determination has been made available for publication by the sales tax publishing houses and will be provided to organisations whose members deal in goods covered by this Determination including the Australian Solid Fuel and Woodheating Association Inc, The Australian Gas Association and the Gas Appliance Manufacturers Association of Australia.

Commissioner of Taxation
29 July 1998

References

ATO references:
NO NAT 98/6455-5

Related Rulings/Determinations:

ST 2255

Legislative References:
Sch1-39(1)
Sch1-39(1)(a)
Sch1-39(1)(e)
Sch1-39(1)(h)
Sch1-39(1)(j)
Sch1-30(3)(i)
Sch1-41(2)
Sch2-1(1)(f)
Sch2-1(1)(h)

Case References:
Jetmaster Fireplaces Pty Ltd v. FC of T
89 ATC 4464
(1989) 20 ATR 689

Case 27/93AATCase8811
93 ATC 324
(1993) 26 ATR 1075