ATO ID 2002/225: GST and ear moulds for hearing aids
Date of decision: 25 June 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an ear mould for use as a spare part for a hearing aid?

Decision
Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies an ear mould for use as a spare part for a hearing aid.

Facts
The entity is a supplier of medical aids and appliances. The entity supplies an ear mould to replace a faulty, worn or broken part for a GST-free hearing aid for the hearing impaired. The ear mould is specifically designed as a spare part for a hearing aid. The supply of a hearing aid is GST-free under subsection 38-45(1) of the GST Act. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Subsection 38-45(2) of the GST Act provides that a supply of a spare part is a GST-free supply if the spare part is: The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...' The part is supplied to replace a faulty, worn or broken component of a medical aid. Accordingly, the part is considered a 'spare part' for the purposes of the GST Act. Furthermore, the part is supplied as a spare part for a medical aid that is GST-free under subsection 38-45(1) of the GST Act. Therefore, the supply satisfies the first requirement in subsection 38-45(2) of the GST Act. The ear mould is specifically designed for a hearing aid that is GST-free under subsection 38-45(1) of the GST Act. Therefore, it meets the second requirement. Therefore, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies an ear mould for use as a spare part for a hearing aid.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 38-45 subsection 38-45(1) subsection 38-45(2) Schedule 3
Related ATO interpretative decisions: ATO ID 2001/210 | ATO ID 2001/211 | ATO ID 2001/212 | ATO ID 2001/216
Other references: The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales
Subject references: Goods and Services Tax GST-free GST health Section 38-45 - medical aids & appliances