Private ruling: GST - medical aids and appliances - electronically operated adjustable beds
Published: April 2013

Ruling: Q1: Is the supply by an Australian company (AusCo) of a specific range of electronically operated adjustable beds a GST-free supply when supplied either as a complete ensemble (mattress and adjustable base) or as an adjustable base only? | A1: Yes, the supply of the specific range of electronically operated adjustable beds is a GST-free supply when supplied either as a complete ensemble (mattress and adjustable base) or as an adjustable base only.

Relevant facts and circumstances: An Australian company (AusCo) is registered for goods and services tax (GST). AusCo imports and sells a range of bed products in Australia. AusCo is introducing a new range of electronically operated motorised adjustable beds, referred to as the 'XXXX' range which includes several variations. The design features of these beds include motorised adjustable head and leg elevation, a massage system, and a remote electronic controller. AusCo supplied photographs showing these design features. Currently, AusCo does not have a product brochure for the XXXX range of beds. AusCo sells the beds either as a complete ensemble (mattress and adjustable base) or as an adjustable base only. AusCo submitted that the electronically operated motorised adjustable head and leg elevation design features of the adjustable base assist a person with an illness or disability to get in and out of bed unaided and allow such a person to sleep or rest with the upper or lower body in an elevated position, thereby alleviating the effects of a number of medical conditions such as back problems, arthritis, rheumatism, hiatus hernia, acid reflux, and breathing problems. AusCo also submitted that the mattress (sold together with the adjustable base as an ensemble) has design features which relieve pressure and compliment the adjustable base by being better suited for use with the adjustable base than a standard spring mattresses. AusCo advised that, whilst the beds are designed for people with an illness or disability, the beds may also be used by people without an illness or disability. AusCo also advised that AusCo sells the beds to retailers, not directly to the public and that AusCo therefore does not hold records as to who purchases the beds or the purposes for which the wider community purchases the beds. AusCo advised, however, that the retail prices of the beds range from $XXXX whereas the retail prices of standard beds range from a lower price. AusCo submitted that the design features of the beds and the comparatively higher cost of the beds as compared to standard beds which do not have those design features suggested that the beds would not be widely used by people without an illness or disability. AusCo advised that AusCo does not have any agreements in place whereby AusCo and the recipient of a supply of a XXXX bed by AusCo, have agreed that that supply not be treated as GST-free.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 38-45 | A New Tax System (Goods and Services Tax) Act 1999 Section 182-15

Reasons for decision: Summary: GST is payable on a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) you are *registered, or required to be registered. However, the supply is not a taxable supply to the extent that it is *GST-free or *input taxed. (* denotes a defined term in section 195-1 of the GST Act) The facts indicate that AusCo satisfies the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as AusCo makes the supply of the beds for consideration; the supply is made in the course of AusCo's business of importing and selling bed products; the supply is connected with Australia (as the beds are made available in Australia); and AusCo is registered for GST. However, the supply of the beds is not a taxable supply to the extent that it is either GST-free or input taxed. There are no provisions in the GST Act which require AusCo to treat the supply of the beds as input taxed. What remains to be determined is whether the supply of the beds by AusCo is GST-free. | Detailed Reasoning - GST-free supply: Division 38 of the GST Act sets out the supplies that are GST-free. Medical aids and appliances are covered by section 38-45 of the GST Act, which states: (1) A supply is GST-free if: (a) it is covered by Schedule 3 (medical aids and appliances), or specified in the regulations; and (b) 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. (2) A supply is GST-free if the thing supplied is supplied as a spare part for, and is specifically designed as a spare part for, another thing the supply of which would be GST-free under subsection (1). (3) However, a supply is not GST-free under subsection (1) or (2) if the supplier and the *recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as GST-free supplies. (* denotes a defined term in section 195-1 of the GST Act) Schedule 3 to the GST Act and the GST Regulations contain a list of medical aids and appliances which are generally used by people with various illnesses or disabilities. However, Schedule 3 to the GST Act and the GST Regulations do not operate in isolation to make the listed items GST-free. The supply of any item listed in Schedule 3 to the GST Act or the GST Regulations as medical aids or appliances must also satisfy all of the requirements in subsection 38-45(1) of the GST Act in order for that supply to be GST-free, i.e. the medical aid or appliance must be specifically designed for people with an illness or disability and must not be widely used by people without an illness or disability. Additionally, subsection 38-45(3) of the GST Act states that a supply of a medical aid or appliance is not GST-free if the supplier and the recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as a GST-free supply. Schedule 3 to the GST Act, or the GST Regulations Schedule 3 to the GST Act lists a number of medical aids or appliances under various categories. One such category is: Mobility of people with disabilities - physical: bedding for people with disabilities and two of the nine items listed under that category are: 59. manually operated adjustable beds 60. electronically operated adjustable beds Section 182-15 of the GST Act provides that a category heading in Schedule 3 is not an operative part of the GST Act but may be used, per subsection 182-10(2) of the GST Act either to confirm a provision's meaning is the ordinary meaning conveyed by its text (taking into account its context and the purpose or object underlying the provision) or determine a provision's meaning if the provision is ambiguous or obscure. The relevant category heading in Schedule 3 (i.e. 'mobility of people with disabilities - physical: bedding for people with disabilities') provides some guidance in interpreting item 60 - 'electronically operated adjustable beds'. The opening words used in the category heading (i.e. 'mobility of people with disabilities - physical') indicate that the nine medical aids or appliances listed under that category should have design features which assist with the mobility of people who have a physical disability. The category heading then refers to 'bedding for people with disabilities'. We note that there are seven other category headings in Schedule 3 which begin with 'mobility of people with disabilities - physical' and then refer to various classes of medical aids or appliances which assist with the mobility of people with physical disabilities such as 'physical seating aids', 'physical walking aids', 'wheelchairs and accessories' etc. The nine medical aids and appliances listed under the category heading include three types of bed (manually operated adjustable, electronically operated adjustable and hospital-type) plus six items which form part of or are used in conjunction with a bed. This suggests that 'bedding' is intended to include a bed and an item which forms part of or is used in conjunction with a bed. In our view the category heading indicates that the ordinary meaning of 'electronically operated adjustable beds', taking into account its context and the purpose or object underlying that provision, refers to beds which are both adjustable and operated electronically in a manner designed to assist with the mobility of people with a physical disability. People with a physical disability often experience difficulty getting in and out of bed and may be incapable of doing so unassisted. By using the remote control to electronically operate an adjustable bed a person with a physical disability may reach a sitting or semi-standing position which assists that person to get in and out of the bed unaided, thereby assisting with the mobility of that person. The XXXX range of beds, when supplied as a complete ensemble (mattress and adjustable base), clearly falls within the words 'electronically operated adjustable beds' in Schedule 3. The position is less clear when the XXXX range is supplied as an adjustable base only, but the use of 'bedding' in the relevant category heading and the listing of both types of beds and items which form part of or a used in conjunction with a bed under that category heading indicate that 'electronically operated adjustable beds' should be interpreted to include the supply of a XXXX adjustable base only. | Detailed Reasoning - Specifically designed for people with an illness or disability: The matters taken into account in determining whether a medical aid or appliance is specifically designed for people with an illness or disability are discussed in the GST Pharmaceutical Health Forum Issues Register (issue 1.c.): What factors should be taken into account in determining whether a medical aid or appliance is specifically designed for people with an illness or disability? In determining whether a medical aid and appliance is specifically designed for people with an illness or disability reference should be made to the designer's/manufacturer's intention of how the good is to be used and its features. Indicators of the designer's/manufacturer's intention of how a good is to be used include how the good is marketed and the type of retail outlets at which the goods can be purchased. The design features of the XXXX range of beds (whether sold as a complete ensemble (mattress and adjustable base) or adjustable base only) include a motorised adjustable base that allows head and leg elevation, a massage system, and remote electronic controller. AusCo submitted that those design features made the beds capable of providing assistance to people with an illness or disability by allowing those people to get in and out of bed unaided and/or allowing them to sleep or rest with the upper or lower body in an elevated position so as to alleviate the effects of a number of medical conditions, including back problems, arthritis, rheumatism, hiatus hernia, acid reflux and breathing problems. AusCo also submitted that the mattress (sold together with the adjustable base) has design features which relieve pressure and compliment the adjustable base and are better suited for use with an adjustable base than traditional spring mattresses. In our view the design features of both the complete ensemble and the adjustable base indicate that they are specifically designed for people with an illness or disability. Although AusCo was unable to provide evidence as to how the beds are marketed or the type of retail outlets at which they are sold, we consider that the design features of both the complete ensemble and the adjustable base mean that both satisfy the requirement of being specifically designed for people with an illness or disability. | Detailed Reasoning - Not widely used by people without an illness or disability: Factors taken into account in determining whether a medical aid or appliance is not widely used by people without an illness or disability are discussed in the GST Pharmaceutical Health Forum Issues Register. Issue number 1.d. in the GST Pharmaceutical Health Forum Issues Register states: What factors should be taken into account in determining whether a medical aid or appliance is widely used by people without an illness or disability? In determining whether a medical aid and appliance is used by people without an illness or disability reference should be made to how the wider community uses these goods. That is, the common purpose for which the goods are purchased. Subsection 38-45(1) of the GST Act does not require the GST treatment of a medical aid and appliance to be determined by reference to the actual use for which an item is being purchased but rather focuses on the purpose for which the wider community purchases these products. Accordingly, it is considered that irregular and uncommon use of a medical aid and appliance in a way contrary to its manufactured purpose will not prevent the good from being GST-free. As AusCo sells the beds to retailers rather than directly to the public, AusCo does not hold records of the common purpose for which the beds are purchased. AusCo advised, however, that the retail prices of the beds range from $XXXX, whereas the retail prices of standard beds range from a lower price. Taking into account the design features of the beds and the higher cost of the beds as compared to standard beds which do not have those design features, we accept AusCo's submission that the beds are not widely used by people without an illness or disability. Subsection 38-45(3) AusCo advised that AusCo does not have any agreements in place whereby AusCo and the recipient of a supply of a XXXX bed by AusCo, have agreed that that supply not be treated as GST-free. | Detailed Reasoning - Conclusion: Accordingly, the supply by AusCo of a XXXX range of electronically operated adjustable bed (either as a complete ensemble or as an adjustable base only) is GST-free as a supply of a medical aid or appliance under section 38-45 of the GST Act.