Private ruling: GST and bedding products
Date of advice: 12 May 2017
Published: September 2017

Ruling: Q1: Is the supply of the electronically and manually operated adjustable beds (Beds) GST-free under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. | Q2: Is the supply of the pressure management mattresses and overlays (Mattresses and Overlays) GST-free under subsection 38-45(1) of the GST Act? | A2: Yes. | Q3: Is the supply of the Ergonomic and Orthopaedic Pillows GST-free under subsection 38-45(1) of the GST Act? | A3: Yes.

Relevant facts and circumstances: You are licensed to sell the products in Australia. Products marketed have been specifically designed in conjunction with leading researchers and health physicians. The products include: ● the Beds, which provide enhanced support and create an anatomically neutral orthopaedic sleeping position; ● the Mattresses, which are pressure management mattresses which are designed to evenly distribute body pressure across the mattress; ● the Overlays, which are pressure management overlays for covering the pressure management mattresses which are padded in the load bearing areas of the mattress to provide greater support and comfort, ● the Erogonomic Pillows, which are specifically designed from the same core technology used in the Mattresses to assist people with disabilities, including people suffering back and neck injuries; and ● the Orthopaedic Pillows, which are specifically designed to be breathable, washable and most importantly, height adjustable so that sleepers can increase or decrease the elevation of the pillow. Beds The bed structure has been designed as an ergonomic structure. The Beds are capable of being adjusted in height, either manually or electronically, at both the head and foot area. These adjustments allow the customer to elevate the positioning of the bed at the head and foot of the bed from horizontal to vertically upright. These adjustable features would assist a person with a mobility impairment get in and out of bed unaided. The designer of the Bed together with medical practitioners have considered the needs of people with an illness or disability and the Beds possess those relevant design characteristics, specifically: the design characteristics of the Beds: (i) assist people with an illness or disability to get in and out of bed unaided; (ii) allow people with an illness or disability to sleep or rest with the upper or lower body in an elevated position which has the application to alleviate the effects of a number of medical conditions. The Beds are almost exclusively sold to customers with disabilities and illnesses. Mattress and Overlays The Mattresses have a unique, specially designed body that is particularly stable, offering ergonomic properties for pressure management. The Mattress yields at the precise points where pressure is required and provides support in areas where the spine requires greater support. The make of the Mattress effectively reduces pressure points to evenly distribute the weight of the sleeper. The Mattresses are designed (and operate) in such a way that the body weight is evenly distributed across the whole of the mattress. The adjustability of the Bed, together with the pressure support for the Mattresses, assists sleepers in maintaining an anatomically neutral position during sleep - helping to keep the spine in alignment, to alleviate the issue of many sleepers with back and neck injuries. The Mattresses are therefore designed (and operate) in such a way that the body weight is evenly distributed across the whole of the mattress. The stability of the Mattress is designed to minimise movement of the whole mattress when a sleeper turns. The Overlay contours the Mattress and works to compliment the design of the Mattress, to achieve the same 'pressure distribution' effects. The Overlays are padded in the load bearing areas of the Mattress, such as the head and shoulder region, to provide greater support (and general comfort) for the pressure distribution to those areas. Most purchasers of an Overlay also purchased or have previously purchased a Bed and the Mattresses and Overlays are specifically designed and intended to complement the bed bases. Ergonomic Pillows The Ergonomic Pillows have the same design technology that has been applied to the production of the Mattresses. The Ergonomic Pillows are specifically designed to provide optimal spine support for customers who suffer back or neck problems. The Ergonomic Pillows are specifically designed and intended to complement the Beds, Mattresses and Overlays. Orthopaedic Pillows The Orthopaedic Pillows are height adjustable. The inner of the pillow has been designed to be removable in any quantity - meaning that the user can adjust the pillow height to their exact height requirements. The Orthopaedic Pillows are specifically designed and intended to complement the Beds, Mattresses and Overlays. Further information about your market and marketing A sample has been taken of a number of randomly selected customers showing that most of the customers suffered from an illness or disability. Notwithstanding those 'wider market' activities you undertake, the ultimate consumers of your products (i.e. those who are using the products) are those consumers who are specifically suffering from an illness or disability, and the products are pitched to such consumers. That is, when selling the products, you focus almost exclusively on the significant health benefits of the products (by reason of the special design features etc. as discussed above). The result being for the products, that significant health benefit is the fundamental thing that distinguishes the products from standard products. This distinction is clearly enhanced by the fact the products are materially more expensive than other standard products (or a similar kind in the market). The premium price is clearly evidence of the superior design technology and quality inherent in the products.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1). | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3 table item 59. | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3 table item 60. | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3 table item 66. | A New Tax System (Goods and Services Tax) Act 1999 Schedule 3 table item 82.

Reasons for decision: Summary: The supply of the Beds is a GST-free supply because all of the requirements of subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. | Detailed Reasoning - Detailed reasoning: The supply of medical aids and appliances is GST-free supply where the requirements of section 38-45 of the GST Act are met. Subsection 38-45(1) of the GST Act provides that 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. For a medical aid or appliance to be GST-free, it must satisfy all the requirements of subsection 38-45(1) of the GST Act. Schedule 3 The first requirement in subsection 38-45(1) of the GST Act is that the thing supplied must be covered by Schedule 3 or specified in the regulations. The category "Mobility of people with disabilities - physical bedding for people with disabilities" lists the following medical aids and appliances: ● item 59 in the table in clause 1 of Schedule 3 (item 59) - manually operated adjustable beds ● item 60 in the table in clause 1 of Schedule 3 (item 60) - electronically operated adjustable beds. Section 182-15 of the GST Act provides that the category heading in Schedule 3 is not an operative part of the GST Act but may be used, as per subsection 182-10(2) of the GST Act, amongst other things, to "confirm the meaning if the ordinary meaning conveyed by its text" or "in determining the purpose or object underlying the provision". The category heading in Schedule 3 does provide some guidance as to the purpose or object underlying the provision. The words of the category heading convey an intention that the adjustable bed should possess characteristics such that the bed is suitable for use by people with a disability in order to provide greater mobility. People with a disability often have difficulty getting in and out of bed and some are incapable of doing so, unassisted. By adjusting the upper section of the adjustable bed the occupant can achieve a sitting or semi standing position to assist the occupant to get in and out of the bed unaided. As such the adjustable bed has characteristics that make it suitable for use by people with a disability or illness in order to provide greater mobility. The Beds are capable of being adjusted in height, either manually or electronically, at both the head and foot area. These adjustments allow the customer to elevate the positioning of the bed at the head and foot of the bed from horizontal to vertically upright. These adjustable features would assist a person with a mobility impairment get in and out of bed unaided. Accordingly, the Beds are covered by items 59 or 60. Hence, the Beds satisfy the first requirement in subsection 38-45(1) of the GST Act. Specifically designed for people with disabilities The second requirement in subsection 38-45(1) of the GST Act is that the thing supplied be specifically designed for people with an illness or disability. The GST Pharmaceutical Health Forum - issues register provides the following guidance. 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 it's 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. In accordance with paragraph 5.27 of the explanatory memorandum to the A New Tax System (Goods and Serve Tax) Bill 1998 , certain aids and appliances designed for people with an illness or disability which are not of a kind ordinarily used in the wider community are GST-free. Based on the information you provided, the model and design of the Beds satisfy the requirements of items 59 or 60 as adjustable beds specifically designed for people with an illness or disability. Accordingly, the Beds satisfy the second requirement in subsection 38-45(1) of the GST Act. Not widely used by people without an illness or disability The third requirement in subsection 38-45(1) of the GST Act is that the thing supplied is not widely used by people without an illness or disability. The GST Pharmaceutical Health Forum - issues register provides the following guidance. 1.d. 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) 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 it's manufactured purpose will not prevent the good from being GST-free. As can be seen from issue 1(d), the actual use of adjustable beds do not appear to be the determining factor in whether an adjustable bed can be sold GST-free, rather it is the purpose for which that type of adjustable bed is used by the wider community. The model and design of the Beds show that they are not widely used by people without an illness or disability. Accordingly, the Beds satisfy the third requirement in subsection 38-45(1) of the GST Act. As all the requirements in subsection 38-45(1) of the GST Act are satisfied, the supply of the Beds is GST-free. | Summary: The supply of the Mattresses and Overlays is a GST-free supply because all of the requirements of subsection 38-45(1) of the GST Act are satisfied. | Detailed Reasoning - Detailed reasoning: Item 66 in the table in Schedule 3 to the GST Act (item 66) covers pressure management mattresses and overlays. In accordance with ATO Interpretative Decision ATO ID 2005/5, 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. Similarly, a pressure management overlay is an overlay that is designed to provide comfort and prevent bed sores by evenly distributing the pressure exerted on the patient's body. The Mattresses have a unique, specially designed body that is particularly stable, offering ergonomic properties for pressure management. The Mattress yields at the precise points where pressure is required and provides support in areas where the spine requires greater support. The body effectively reduces pressure points to evenly distribute the weight of the sleeper. The Mattresses are designed (and operate) in such a way that the body weight is evenly distributed across the whole of the mattress. The Overlay contours the Mattress and works to compliment the design of the Mattress, to achieve the same 'pressure distribution' effects. The Overlays are padded in the load bearing areas of the Mattress, such as the head and shoulder region, to provide greater support (and general comfort) for the pressure distribution to those areas. Accordingly, the Mattresses and Overlays are covered by item 66. Hence, the Mattresses and Overlays satisfy the first requirement in subsection 38-45(1) of the GST Act. We accept that the model and design of the Mattresses and Overlays are specifically designed for people with an illness or disability and are not be widely used by people without an illness or disability. Accordingly, the Mattresses and Overlays satisfy the second and third requirement in subsection 38-45(1) of the GST Act. As all the requirements in subsection 38-45(1) of the GST Act are satisfied, the supply of the Mattresses and Overlays is GST-free. | Summary: The supply of the Ergonomic and Orthopaedic Pillows is a GST-free supply because all of the requirements of subsection 38-45(1) of the GST Act are satisfied. | Detailed Reasoning - Detailed reasoning: Item 82 in the table in Schedule 3 (item 82) covers night-time positioning equipment modifications. In accordance with ATO Interpretative Decision ATO ID 2014/21, a contoured pillow is covered by item 82 because it is a product that modifies the function of a mattress, which is 'night time positioning equipment' as held by the Administrative Appeal Tribunal in Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation [2013] AATA 802. The contoured pillow is designed to be placed on and used in conjunction with a mattress to alter the flat, horizontal surface of the mattress and to change the sleeping position of the user by altering the position of the user's head and neck while they sleep. The Ergonomic Pillows have the same design technology that has been applied to the production of the Mattresses. The Ergonomic Pillows are specifically designed to provide optimal spine support for customers who suffer back or neck problems. The Ergonomic Pillows are specifically designed and intended to complement the Beds, Mattresses and Overlays. The Orthopaedic Pillows are height adjustable. The inner of the pillow has been designed to be removable in any quantity - meaning that the user can adjust the pillow height to their exact height requirements. The Orthopaedic Pillows are specifically designed and intended to complement the Beds, Mattresses and Overlays. Accordingly, the Ergonomic and Orthopaedic Pillows are covered by item 66. Hence, the Ergonomic and Orthopaedic Pillows satisfy the first requirement in subsection 38-45(1) of the GST Act. We accept that the model and design of the Ergonomic and Orthopaedic Pillows are specifically designed for people with an illness or disability and are not be widely used by people without an illness or disability. Accordingly, the Ergonomic and Orthopaedic Pillows satisfy the second and third requirement in subsection 38-45(1) Ergonomic Pillows of the GST Act. As all the requirements in subsection 38-45(1) of the GST Act are satisfied, the supply of the Ergonomic and Orthopaedic Pillows is GST-free.