ATO ID 2002/3: GST and a cushion with an overlay
Date of decision: 8 June 2001
Business line: Indirect Tax

Issue
Is the entity, a supplier of seating accessories, 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 cushion with an overlay that is designed for use on the seats of heavy earthmoving equipment?

Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a cushion with an overlay that is designed to be used on the seats of heavy earthmoving equipment. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts
The entity is a supplier of seating accessories. The entity supplies a cushion with an overlay that is designed and marketed for use on seats of heavy earthmoving equipment. The cushion with an overlay is designed to act as a shock absorber to help prevent back injury for people using heavy earthmoving equipment. The cushion with an overlay is customised to fit the seat dimensions of the heavy earthmoving equipment. The entity is registered for goods and services tax (GST). The supply meets 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: Item 87 in the table of Schedule 3 (Item 87) lists 'cushions specifically designed for people with disabilities'. It is considered that for an item to fall within this category, the item must be a cushion with a specifically designed character or function, that has been made or adapted for the purpose of assisting with the support or positioning of an individual with a disability or to prevent or alleviate conditions associated with that disability. In this case, the cushion with an overlay is designed to help prevent back injury for people using heavy earthmoving equipment. It is being used as a preventative measure and to provide comfort during work activities rather than to assist with the support or positioning of a person with a disability. As such, the cushion with an overlay is not a cushion specifically designed for people with disabilities for the purpose of Item 87. In addition, this cushion with an overlay is not specifically designed for people with an illness or disability and is widely used by people without an illness or disability. Therefore, the supply of a cushion with an overlay 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 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 a cushion with an overlay that is designed for use on the seats of heavy earthmoving equipment.

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 87
Subject references: Goods and services tax GST free GST health Section 38-45 - medical aids & appliances