Private ruling: GST-free medical aids and appliances
Published: January 2014

Ruling: Q1: Are your supplies of a positioning aid GST-free? | A1: No.

Relevant facts and circumstances: You are registered for GST. You supply a product known as the XXXX pillow. The pillow is specifically designed to treat infants under the age of 12 months who have developed flat spots on their head. This condition is commonly known as Plagiocephaly. The pillow is intended to be used as a positioning aid to minimise pressure and provide support to the soft cranium of infants. The pillow contains a special cavity which provides gentle head support without reducing the baby's mobility. The pillow is also used as a preventative measure to prevent flatspots from developing. The pillow is registered with the Therapeutic Goods Administration (TGA) as a Class 1 medical device (Registration number XXXXXX). The Registration details state that the intended purpose of the item is use 'as a positioning aid and to minimize pressure and provide uniform support for the soft cranium of infants' You contend that your pillows fall within 'pressure management mattresses and overlays' as listed in items 66 of the table under Schedule 3 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5. | Section 9-40. | Subsection 38-45(1). | Subsection 38-47(1). | Paragraph 182-10(2)(a). | Paragraph 182-10(2)(b). | Section 182-15. | Schedule 3 table item 66. | Schedule 3 table item 82. | Schedule 3 table item 87.

Reasons for decision: Summary: Under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you must pay the GST payable on any taxable supplies that you make. Section 9-5 of the GST Act provides you make a taxable supply if: (a) you make the supply for consideration, (b) the supply is made in the course or furtherance of an enterprise you carry on, (c) the supply is connected with Australia, and (d) you are registered or required to be registered for GST. A supply however is not a taxable supply to the extent that it is GST-free or input taxed. Division 40 deals with input-taxed supplies and does not include anything similar to your supply of the pillow. Division 38 deals with GST-free supplies and specifically, Subdivision 38-B is relevant for consideration. | Detailed Reasoning - GST-free medical aids and appliances: Subsection 38-45(1) of the GST Act provides that a supply is GST-free if: · it is covered by Schedule 3 (medical aids and appliances), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), and · the thing supplied is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability. Schedule 3 of the GST Act lists a number of medical aids and appliances. Of relevance are: · Item 66 …. · Item 82 …. · Item 87 …. | Detailed Reasoning - Item 66 - 'pressure management mattresses and overlays': Item 66 in the table in Schedule 3 to the GST Act lists 'pressure management mattresses and overlays'. The terms 'pressure management mattress' and 'pressure management overlay' are not defined in the GST Act. Australian Taxation Office Interpretative Decision ATOID 2002/525 Goods and services tax: GST and contoured pillows (ATOID 2002/525) explains what constitutes 'pressure management mattress' and 'pressure management overlay'. It states: 'A pressure management mattress is a mattress designed to provide comfort and prevent bed sores by evenly distributing the pressure exerted by the mattress on the patient's body. A pressure management overlay is an overlay for an ordinary mattress so that it provides the same benefits as a pressure management mattress.' Relying on the rules of statutory interpretation, the meaning of a particular word can be determined by looking at the words around it. Taking its meaning from the words around it, the word 'overlays' should be taken to mean pressure management overlays that are laid over a mattress. Based on this definition, a pillow is not an overlay or a mattress. A pillow is not considered to be a pressure management mattress as a pillow cannot be used as a mattress. It is only used as a support for the head during rest. It is clear that a mattress and a pillow have different purposes. For these reasons, the pillow is not covered by Item 66 of Schedule 3 to the GST Act. | Detailed Reasoning - Item 82 - 'night-time positioning equipment modifications': Item 82 in the table in Schedule 3 to the GST Act lists 'night-time positioning equipment modifications'. ATOID 2002/525 explains what constitutes 'night-time positioning equipment modifications'. It states: 'This refers to modifications necessarily made to night-time positioning equipment in order to correctly position a person to suit their particular condition or disability during sleep. It is the modifications to such night-time positioning equipment, rather than the night-time positioning equipment itself, that is covered by Item 82.' A pillow is not a modification to night-time positioning equipment. A pillow is a separate item which, when placed on a bed, does not modify the bed or mattress to cater for a disability or illness. It is merely an accessory to be used in conjunction with a mattress. Furthermore, if the pillow itself was considered to be a piece of night-time positioning equipment, the pillow would still not fall within this item as it is only modifications to the pillow that would be covered. For these reasons, the pillow is not covered by Item 82 of Schedule 3 to the GST Act. | Detailed Reasoning - Item 87 - 'cushions specifically designed for people with disabilities': Item 87 in the table in Schedule 3 to the GST Act lists 'cushions specifically designed for people with disabilities'. To come within this item, your pillow must fall within the definition of 'cushion'. ATOID 2002/525 explains what constitutes a cushion'. It states: 'The Macquarie Dictionary (3rd edition) defines a 'cushion' as, among other things,'a soft bag of cloth, leather or rubber filled with feathers, air etcetera, used to sit, kneel or lie on or anything of similar appearance or use'. This definition is similar to that of a pillow; 'a bag or case filled with feathers, down, or other soft material, commonly used as a support for the head during sleep or rest'. While the definitions for pillow and cushion are not the same, there is considerable overlap in meaning between a pillow and a cushion. That is, cushions and pillows can be said to be soft bags of cloth containing a soft substance or material that can be used interchangeably to support a part of the body. However, cushions and pillows can be distinguished on the basis of the area in which they are used. That is, pillows are used predominantly to support the head and neck regions while cushions are used to support all areas of the body. The contoured pillow supports the head and neck while a person lays or sleeps. Therefore, it is unclear whether the contoured pillow is a cushion for the purposes of Item 87.' Sections 182-10(2)(a), 182-10(2)(b) and 182-15 of the GST Act state that we can use a category heading in the table of Schedule 3 of the GST Act to 'confirm the provisions meaning is the ordinary meaning conveyed by its text, taking into account its context in this Act and the purpose or object underlying the provision' or 'in determining the purpose or object underlying the provision'. The category heading, 'Mobility of people with disabilities - physical: seating aids' in the Schedule confirms that including the word 'cushions' was to cover those used by people requiring support while seated, such as those used by people in wheelchairs. Having regard to the purpose or object underlying the provision, we can determine that the term 'cushion' in the Schedule 3 item was meant to convey the ordinary meaning as a support for other parts of the body. This is distinct from the purpose of a pillow which is designed to support the head and neck during sleep. For these reasons, for the purposes of item 87, a cushion will not include a pillow that is primarily used to support the head and neck area for rest or sleep purposes. While pillows may be specifically designed for people with neck and back injuries, they will not be considered to be cushions for the purpose of this item. As the pillow is designed to support the head and neck regions of the body, the pillow is not covered by Item 87 in the table in Schedule 3 to the GST Act. As there are no items in Schedule 3 of the GST Act or GST Regulations that include goods similar to your pillow, the requirements under subsection 38-45(1) of the GST Act will not be met. | Detailed Reasoning - Other GST-free health goods: Subsection 38-47(1) of the GST Act provides that a supply of goods is GST-free where those goods are of a kind that the Health Minister has determined in writing are GST-free. The current Determination in force, GST-free Supply (Health Goods) Determination 2011 (Health Determination) provides that the supply of goods of a kind described in Schedule 1 of the Health Determination are GST-free where those goods are required, or in a class of goods required, to be included in the Australian Register of Therapeutic Goods pursuant to the Therapeutic Goods Act 1989. In this case, whilst the pillow is included in the Australian Register of Therapeutic Goods, Schedule 1 to the Health Determination does not include such a good or class of goods. As such, your supply of the pillow will not be GST-free under section 38-47 of the GST Act. Therefore, the supply of your pillow is not GST-free. | Detailed Reasoning - Other relevant comments: In addition to the requirement that an item must be covered by Schedule 3 to be GST-free, the pillow must also be specifically designed for people with an illness or disability, and also not widely used by people without an illness or disability. It is arguable that Plagiocephaly would not fall within the scope of an illness or disability as initial research indicates that the condition is cosmetic in nature and does not restrict or hinder communication, speech and learning development. It also appears that the condition self corrects naturally as the baby grows. From the literature provided, it indicates that the pillow is designed as a preventive measure for babies that do not suffer from Plagiocephaly and as such is a product designed to avoid the condition from occurring. As such, we consider that the pillow would also be widely used by people (babies) who do not suffer from the condition.