ATO ID 2014/21: GST and contoured pillows
Date of decision: 17 June 2014
Business line: Indirect Tax

Issue
Is the entity making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies a contoured pillow designed for people with head and/or neck injuries?

Decision
Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a contoured pillow designed for people with head and/or neck injuries.

Facts
The entity is a supplier of a contoured pillow. The contoured pillow is specifically designed for people with head and neck injuries. The contoured pillow is designed to be placed on a mattress and alter the position of the user's head and/or neck while they sleep. The contoured pillow is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 82 in the table in Schedule 3 (Item 82) lists 'night-time positioning equipment modifications'. The contoured pillow is covered by item 82 because it is a product that modifies the function of a mattress, which is 'night time positioning equipment' as held by the Administrative Appeal Tribunal in Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation [2013] AATA 802. The contoured pillow is designed to be placed on and used in conjunction with a mattress to alter the flat, horizontal surface of the mattress and to change the sleeping position of the user by altering the position of the user's head and neck while they sleep. This pillow is specifically designed for people with an illness or disability as it's designed for people with head and/or neck injuries. Also, the pillow is not widely used by people without an illness or disability. Therefore, the supply of the contoured pillow is GST-free pursuant to section 38-45(1) of the GST Act. Note: Pillows that are not specifically designed for people with an illness or disability do not satisfy subsection 38-45(1) of the GST Act. For example, a product which is designed to promote healthy posture while sleeping and prevent or reduce the risk of postural problems and neck stiffness from occurring in the future is not specifically designed for people with an illness or disability. Further, pillows (including contoured pillows) that are widely used by people without an illness or disability do not satisfy subsection 38-45(1).

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 paragraph 182-10(2)(c) section 182-15 Schedule 3 Schedule 3 table item 66 Schedule 3 table item 82 Schedule 3 table item 87
Case references: Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation [2013] AATA 802
Related public rulings and determinations: ATO ID 2002/525 is overturned by this decision.
Subject references: Goods & services tax GST free GST health section 38-45 - medical aids & appliances supplies & acquisitions taxable supply