ATO ID 2001/708: GST and supply of an external tissue expander machine to a plastic surgeon
Date of decision: 17 October 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of medical goods, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells an external tissue expander machine to a plastic surgeon?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells an external tissue expander machine to a plastic surgeon. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of medical goods. The entity sells an external tissue expander machine to a plastic surgeon. The external tissue expander machine works by applying external suction pressure to lift and gradually increase breast tissue over a long period of time. The machine is worn externally and held in place with a sports bra. The external tissue expander machine is not associated with mammary prostheses, but rather is used as an alternative to mammary prostheses. The machine is not used for reconstructive purposes, for example, it is not related to breast reconstruction following a mastectomy. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: Under subsection 38-45(1) of the GST Act, the supply of medical aids and appliances is GST-free where the medical aid or appliance: Item 84 in the table in Schedule 3 (Item 84) lists 'mammary'. 'Mammary' is not defined in the GST Act and therefore it is given its ordinary meaning. The Macquarie Dictionary (1997) defines 'mammary' as 'of or relating to the mamma or breast'. It is considered that it is not possible to supply a 'mammary' and, as such, it is unclear what should be included under this item. Therefore section 182-15 of the GST Act, pursuant to paragraph 182-10(2)(c) of the GST Act, can be relied on because the meaning of the item is ambiguous. Under section 182-15 of the GST Act, the second column in the table in Schedule 3 may be considered when determining the meaning of Item 84. 'Mammary' is listed in Schedule 3 under the second column heading of 'Mobility of people with disabilities - physical: prostheses'. Therefore, it is considered that the meaning of 'mammary' in Item 84 is intended to be restricted to mammary prostheses. The external tissue expander machine is not a mammary prosthesis. It is an alternative to a mammary prosthesis. Therefore, an external tissue expander machine is not covered by Item 84. Item 15 of Schedule 3 to the GST Regulations (Item 15) specifies 'supplements and aids associated with mammary prostheses'. In this case, the external tissue expander machine is an alternative to a mammary prosthesis and is not a supplement or aid associated with mammary prostheses. Therefore, the external tissue expander machine is not covered by Item 15. As the supply of an external tissue machine is not covered by the items discussed above and is not covered by any other items in Schedule 3 of the GST Act nor specified in the GST Regulations, the requirements of subsection 38-45(1) of the GST Act are not satisfied. Consequently, the supply is not GST-free under section 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells an external tissue expander machine to a plastic surgeon.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 section 182-15 Schedule 3 Schedule 3 table item 84
Other references: The Macquarie Dictionary, 1997, 3rd Edition, The Macquarie Library Pty Ltd, New South Wales
Subject references: Goods & services tax GST-free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply