ATO ID 2005/91: GST and supply of general purpose orthopaedic footwear known as extra-depth footwear
Date of decision: 30 July 2002
Business line: Indirect Tax

Issue
Is the entity, a supplier of footwear, 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 general purpose orthopaedic footwear known as extra-depth footwear?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells general purpose orthopaedic footwear known as extra-depth footwear. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of footwear. The entity supplies general purpose orthopaedic footwear known as extra-depth footwear. Extra-depth footwear is footwear that is designed to accommodate the wearing of a foot orthosis to provide proper support and comfort. Extra-depth footwear is sold to the public. Orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses extra-depth footwear. 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 certain medical aids and appliances is GST-free where the medical aid or appliance: The entity supplies general purpose orthopaedic footwear that is designed to accommodate the wearing of a foot orthosis to provide proper support and comfort. Of relevance to the entity's supply is item 41 in the table in Schedule 3 (Item 41) and item 42 in the table in Schedule 3 (Item 42). Item 41 lists 'surgical shoes, boots, braces and irons'. The phrase 'surgical shoes, boots, braces and irons' is not defined in the GST Act. Therefore the phrase will be given its ordinary meaning. The Macquarie Dictionary (1997), 3RD edn, The Macquarie Library Pty Ltd, New South Wales, defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'. Accordingly, 'surgical shoes, boots, braces and irons' are shoes or boots (and associated braces and irons) designed to support or correct a deformed foot or leg and those designed to be worn to support and protect a foot as a result of surgery. This includes fully customised medical grade shoes and boots. Footwear that is extra deep to accommodate the wearing of a foot orthosis to provide proper support and comfort in general (as opposed to extra deep to support or correct a deformed foot such as hammer toes or another specific deformity) is not covered by Item 41. The entity's extra-depth footwear is general purpose orthopaedic footwear that is only designed to accommodate the wearing of a foot orthosis. The footwear is not designed to support or correct deformed feet or support and protect a foot after surgery. Although orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses the entity's footwear, this does not alter the design or purpose of the footwear. The entity's footwear is not covered by Item 41. Item 42 lists 'orthotics'. The word 'orthotics' is not defined in the GST Act and is therefore given its ordinary meaning. The Macquarie Dictionary (1997) defines 'orthotic' as the adjectival form of the word orthosis. Orthosis is defined as 'a device applied to the body to modify position or motion, as a supporting collar, plaster cast, etc'. Therefore, an orthotic for the purposes of Item 42 is a device which is applied to the body to change or alter position or motion, or prevent movement. Shoes could be orthotics but only in very limited situations. The common meaning of the term 'orthotics', in relation to feet, is that it applies to devices which are inserts for shoes, and not to shoes themselves. For shoes to be orthotics, they would have to be custom made and incorporate an orthotic device as an integral part of the shoe. Such shoes would generally only be made for a person with some form of deformity. Therefore shoes which can be classed as 'orthotics' would generally also be classed as 'surgical shoes'. Although the entity's footwear is extra deep to accommodate the wearing of a foot orthosis, the footwear itself is not an orthotic. Therefore, the entity's footwear is not covered by Item 42. Furthermore, the entity's footwear does not fall under any other item in Schedule 3 or the GST Regulations. The supply of the entity's footwear is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in 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 supplies general purpose orthopaedic footwear known as extra-depth footwear.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 41 Schedule 3 table item 42
Related ATO interpretative decisions: ATO ID 2005/88 | ATO ID 2005/89 | ATO ID 2005/90
Other references: The Macquarie Dictionary (1997), 3RD edition. The Macquarie Library Pty Ltd, New South Wales Commonwealth of Australia 2004. GST Pharmaceutical Health Forum - Issues Register - Attachment A - Schedule 3 - Medical aid or appliance. Tax Office, viewed 19 March 2004.
Subject references: Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply