Private ruling: GST and electronic adjustable bed bases with optional mattresses
Date of advice: 2 May 2018
Published: July 2018

Ruling: Q1: Is your supply of the electronic adjustable bed bases and the optional accompanying mattresses that are specifically designed to be used with the bases, GST-free under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when sold as a complete ensemble or as separate items? | A1: Yes, your supply of the electronic adjustable bed bases and the optional accompanying mattresses that are specifically designed to be used with the bases is GST-free under section 38-45 of the GST Act when sold as a complete ensemble or as separate items.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You sell electronic adjustable bed bases and specific mattresses to accompany the bases. Your customers may choose to purchase the electronic adjustable bed bases and the optional accompanying mattress as a complete ensemble or they can choose to purchase the electronic adjustable bed base and the mattress separately. You supply these products wholesale to bedding retailers in Australia for monetary consideration, who then on-sell them to end users. You currently have no agreement in place with any of your wholesale customers to treat the supply of these products as a taxable supply. Your proposed marketing strategy is to promote and highlight the therapeutic nature, medical benefits and value of the products for those people with an illness or a disability. The electronic features have design characteristics that would assist an ill or disabled person to get in and out of bed unaided by raising the head or foot areas of the bed electronically. You advised that these products will generally be used by people with an illness or disability and not by the public at large. However, you acknowledge and recognise that some people will use them to improve their quality of life and they may not be disabled or suffering from a medical condition. You designed these products to specifically assist users with a medical illness or disability. In addition, you provided a list of medical conditions that your products may alleviate. You provided the relevant user manuals and your manufacturer’s product setup report to support your claims. Your mattress is designed and manufactured to work hand in hand with the electronic adjustable bed bases.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 38-45 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(1) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(2) | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-45(3)

Reasons for decision: Summary: Section 38-45 of the GST Act provides that a supply of medical aids and appliances is GST-free if certain requirements are met. In particular, subsection 38-45(1) of the GST Act provides that the supply of the medical aid or appliance is GST-free if the thing supplied: ● is covered by Schedule 3 or specified in the regulations ● is specifically designed for people with an illness or disability, and ● is not widely used by people without an illness or disability. However, subsection 38-45(3) of the GST Act further provides that a supply is not GST-free if the supplier and the recipient have agreed that the supply or supplies of a kind that include that supply, will not be treated as GST-free supplies. Item 60 of Schedule 3 lists electronically operated adjustable beds under medical aids and appliances for mobility of people with disabilities – physical: bedding for people with disabilities. ATO Interpretative Decision (ATO ID) 2005/4 explains that the word 'bed' is not defined in the GST Act and lists the definition of the word ‘bed’ taken from The Macquarie Dictionary , 1997, 3rd edition, The Macquarie Library Pty Ltd NSW, to mean, amongst other things, as: ' 1. a piece of furniture upon which or within which a person sleeps. 2. the mattress and bedclothes together with the bedstead. 3. the bedstead alone. 4 ...' Therefore, we consider that the word 'bed' as used in Item 60 of Schedule 3 also refers to both the bed frame and its mattress or the bed frame only. You explained that the electronic features range were designed to assist an ill or disabled person get in and out of the bed unaided by raising the head or foot areas of the bed and that they were also designed to assist users with a medical illness or disability. Based on the information you provided, we consider your supply of the electronic adjustable bed bases and the optional accompanying mattresses is covered by Item 60 of Schedule 3 when sold as a complete ensemble. Our GST Pharmaceutical Health Forum – issues register (ATO Health Register) at Issue 1.c. provides that in determining whether a medical aid and appliance is specially 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. It provided further indicators of the intention of how a good is to be used as including how it is marketed and the type of retail outlets from which it can be purchased. You provided a list of medical conditions the bases and the mattresses may alleviate. In addition, your proposed marketing strategy will promote and highlight the therapeutic nature, medical benefits and value of the products for those people with an illness or a disability. Based on the information you provided, we accept that the bases and the optional accompanying mattresses are specifically designed for people with an illness or disability. Issue 1.d in the ATO Health Register provides that in determining whether a medical aid and appliance is widely 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. It further provides that the relevant provision does not require the GST treatment of the good to be determined by reference to the actual use for which it is being purchased, rather it focuses on the purpose for which the wider community purchases these products. Accordingly, the irregular and uncommon use of a medical aid and appliance that is contrary to its manufactured purpose will not prevent the good from being GST-free. You explained that the bases and the mattresses were designed and manufactured to specifically assist users with a medical illness or disability. In addition, you provided your manufacturer’s report to support the product intention. Based on the information you provided, we accept that the bases and the optional accompanying mattresses will not be widely used by people without an illness or disability. Consequently, your supply of the bases and the optional accompanying mattresses satisfy all the requirements under subsection 38-45(1) of the GST Act. In addition, you advised that you currently have no agreement in place with any of your wholesale customers to treat your supply of the bases and/or the mattress as a taxable supply. In this regard, subsection 38-45(3) of the GST Act is also satisfied. Therefore, we consider your supply of the bases and the optional accompanying mattresses that are specifically designed to be used with the bases is GST-free under section 38-45 of the GST Act when sold as a complete ensemble. You advised that you also expect to sell the bed bases separately and not as a complete ensemble with the accompanying mattresses. As explained above in the explanation provided about ATO ID 2005/4, the word ‘bed’ can refer to both the bed frame and the mattress or the bed frame only. Consequently, your supply of the bed bases on their own would still satisfy the definition of a bed and as such, will still be covered by Item 60 of Schedule 3. Therefore, we consider your supply of the electronic adjustable bed bases is still GST-free under section 38-45 of the GST Act when sold separately. You advised that you also expect to sell the mattresses separately and not as a complete ensemble with the bed bases. Notwithstanding that, as determined above, your supply of the bases and mattresses as a complete ensemble or bases only are GST-free under section 38-45 of the GST Act, we now need to determine if the mattresses are GST-free when sold separately. Subsection 38-45(2) of the GST Act provides that a supply of a thing is GST-free, if the thing is: ● supplied as a spare part for a medical aid and appliance that is GST-free under subsection 38-45(1), and ● specifically designed as a spare part for a medical aid and appliance that is GST-free under subsection 38-45(1). ATO ID 2005/4 provides that the term ‘spare part’ is not defined in the GST Act and instead used the definition provided in the Macquarie Dictionary being, a part which replaces a faulty, worn or broken part of a machine. It further explained that a part need not actually be replacing something which is faulty, worn or broken to qualify as a spare part, but just be capable of doing so. You provided that the accompanying mattress is designed to work hand in hand and move in unison with your bed bases. Based on the information you provided and our determination above, we consider that your supply of the mattresses on their own is the supply of a spare part for and specifically designed for your GST-free electronic adjustable bed bases. Therefore, as the requirements of subsection 38-45(2) of the GST Act are satisfied, your supply of mattresses is still GST-free under section 38-45 of the GST Act when sold separately. Accordingly, your supply of the electronic adjustable bed bases and the optional accompanying mattresses that are specifically designed to be used with the bases is GST-free under section 38-45 of the GST Act when sold as a complete ensemble or as separate items.