GST issues registers

Health Industry Partnership

Issue 4 - Medical aids and appliances

(a) added, (u) updated, (w) withdrawn

4. Section 38-45 Medical aids and appliances

Non-interpretative - straight application of the law.

Explanation

Section 38-45 provides that where the elements of that section are satisfied, a medical aid or appliance listed in Schedule 3 will be GST-free. The elements of section 38-45(1) are that the medical aid or appliance is:

a.

covered by Schedule 3 or subsequent regulation, and

b.

specifically designed for people with an illness or disability, and

c.

not widely used by people without an illness or disability.

Once an item meets all of the above elements then its supply will be GST-free all the way down the supply chain and not only when supplied to a person who has an illness or disability.

Further, section 38-45(2) provides that a spare part that is specifically designed as a spare part for a GST-free medical aid or appliance will be GST-free.

Medical aids or appliances can be added to Schedule 3 by regulation.

Related questions

The following questions explore what is within the concept of 'medical aid and appliance' for the purposes of section 38-45. None of the questions and answers should be read in isolation but rather as part of the whole of the information contained in this document.

4.a.2. Where a medical aid or appliance is repaired, will the repair be GST-free?

Non-interpretative - straight application of the law.

There is no provision for the labour component of repairs to be GST-free. By section 38-45(2) a spare part for, which is specifically designed as a spare part for, a GST-free supply under section 38-45(1) will be GST-free.

4.a.3. Are generic batteries for hearing aids GST-free?

Non-interpretative - straight application of the law.

No. Generic batteries are not GST-free. Item 46 of Schedule 3 provides that batteries specifically designed specifically for use with hearing aids are GST-free. Generic batteries would fail the conjunctive test in section 38-45(1)(b). Such batteries are not 'specifically designed for people with an illness or disability' and would be 'widely used by people without an illness or disability'. For batteries used in hearing aids to be GST-free, they must be specifically designed for that use.

4.a.4. Will all needles and syringes be GST-free?

Non-interpretative - straight application of the law.

Item 37 of Schedule 3 refers to needles and syringes under the category heading, "Diabetes". It is not only needles and syringes for use by diabetics which fall within item 37. However, it is considered that the individual items 'needles' and 'syringes' must be interpreted by reference to the fact that they are listed together. On this basis, it is considered that a needle that is not designed for use with a syringe, or a syringe that is not designed for use with a needle, will not be covered by item 37 in Schedule 3. Thus, an item such as a needle for inserting sutures is not covered by Schedule 3.

The supply of needles and syringes that are covered by item 37 will be GST-free if specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. For example, needles for insulin dependent diabetics will be GST-free.

4.a.5. Are supplies of medical aids and appliances only GST-free when supplied to the person with an illness or disability?

Non-interpretative - straight application of the law.

Medical aids and appliances which satisfy all of the elements of section 38-45 are GST-free at all stages of the supply chain.

4.a.6. Is the hire of goods GST-free where those same goods would be GST-free under section 38-45 if purchased?

Non-interpretative - straight application of the law.

Section 38-45(1) states that the supply is GST-free. The section does not require that the medical aid or appliance be purchased to be GST-free. Where the purchase of a medical aid or appliance is GST-free, it is accepted that the hire of the same medical aid or appliance will be GST-free.

4.a.7. Where a person hires or purchases goods through a hospital which are not listed in Schedule 3, will the goods be GST-free?

Non-interpretative - straight application of the law.

The hire or purchase of goods not listed in Schedule 3 will not be GST-free under section 38-45. Goods which are not listed in Schedule 3 may be GST-free under subsection 38-20(1) where they are used to manage a disease, injury or condition of a hospital patient as part of the supply of hospital treatment to that patient or under subsection 38-20(3) where the goods supplied are directly related to GST-free hospital treatment.

4.a.8. Is a personal alarm unit a 'medical alert device' for the purposes of Item 33 of Schedule 3?

4.a.9. Is the charge for the ongoing monitoring of a 'medical alert device' GST-free?

4.a.10. Are aged persons included in 'people with an illness or disability' for the purposes of section 38-45?

Non-interpretative - straight application of the law.

It is considered that medical aids or appliances listed in Schedule 3 that may be acquired by aged persons for use in the event that an illness or disability befell them (for example 'medical alert device') willsatisfy the requirement that the medical aid or appliance be 'specifically designed for people with an illness or disability'.

4.a.11. What is the meaning of 'artificial teeth' for the purposes of section 38-45 and Schedule 3 - Item 30?

4.a.12. Is the sale of first aid kits GST-free?

Non-interpretative - straight application of the law.

First aid kits are not listed in Schedule 3 as a section 38-45 GST-free item. Accordingly, the sale of a first aid kit is not GST-free under section 38-45.

4.a.13. Is the installation of medical aids and appliances GST-free under section 38-45?

4.a.14. Are non-prescription sunglasses, frames for prescription lenses and accessories GST-free?

Non-interpretative - straight application of the law.

Non-prescription sunglasses, frames for prescription lenses and accessories are not listed in Schedule 3 and are not GST-free. Lenses for prescription spectacles are listed at Item 155 of Schedule 3 and are GST-free.

4.a.15. When does a lens become a 'lens for prescription spectacles' for the purposes of subsection 38-45(1) and Item 155 of Schedule 3 of the GST Act?

4.a.16. Are lens treatments including coatings/tints (hard coat, multicoat, tints, UV filter, mirror coat) subject to GST?

4.a.17. Is cutting and edging of a lens supplied by an optical laboratory to an optometrist subject to GST?

Non-interpretative - straight application of the law.

No. Where an optical laboratory supplies lenses for prescription spectacles and, as part of the supply of the finished lenses, cutting and edging is required, the cutting and edging is part of the supply of the finished lenses and will be GST-free.

4.a.18. Is the fitting of a lens supplied by an optical laboratory to an optometrist subject to GST?

Non-interpretative - other references see:

•

GSTR 2006/9 - Goods and services tax :supplies

•

GSTR 2001/8 - Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts

Generally, no. On our understanding, the fitting of a lens to a frame is normally part of the Quality Assurance process relating to the supply of the lens. As the fitting of a lens to a frame is not normally separately charged for, there is no consideration for the supply, and as such, the fitting service will not be subject to GST.

However, where there is a separate supply of a service of fitting lenses to spectacle frames, it will be subject to GST.

4.a.19. Are walking sticks GST-free?

Non-interpretative - straight application of the law.

A medical aid or appliance is GST-free where it is:

a.

covered by Schedule 3 or subsequent regulation, and

b.

specifically designed for people with an illness or disability, and

c.

not widely used by people without an illness or disability.

Once an item meets all of the above elements then its supply will be GST-free all the way down the supply chain and not only when supplied to a person who has an illness or disability.

Item 97 of Schedule 3 refers to 'walking sticks - specialised'. The word 'specialised' was used to exclude non-functional and purely ornamental walking sticks and to only include those walking sticks that were intended for use by ill or disabled people. This reflects the inherent nature of the items included in Schedule 3.

Accordingly, walking sticks (excluding non-functional and purely ornamental walking sticks), being hand held devices, the principal function of which is to assist a person to walk by taking some of the weight of that person where that person is unable to walk unaided, and which have been specifically designed for people with an illness or disability and are not widely used by people without an illness or disability are GST-free.

This interpretation of item 97 was made on 24 May 2001 and replaces all alternative interpretations made prior to this date.

4.a.20 Will the initial supply of a foot orthosis to a patient and subsequent postage and modifications or repair to the foot orthosis by a podiatrist or contracted lab be GST-free?

The first part of this issue under the heading 'initial supply' is a straight application of the law.

In relation to the second issue on postage, for source of ATO view, refer to GSTD 2002/3- Goods and services tax: how do I account for GST when I supply taxable goods, non-taxable goods and delivery services together?

The question refers to a number of separate supplies and it is necessary to identify each supply, the supplier and the recipient so as to determine the GST status of each supply.

Initial supply

The initial supply of an orthosis for the foot is GST-free under section 38-45, where it is designed and used as an external application to modify position or motion. In addition it must be specifically designed for people with an illness or disability, and not widely used by people without an illness or disability. A foot orthosis is GST-free at all points in the supply chain where these requirements are met, regardless of whether the patient takes possession of the orthosis during a consultation or subsequently by post.

Postage

In most cases, delivery of a foot orthosis is a taxable supply that is separate to the actual supply of the foot orthosis itself.

However, where the cost of delivery of a foot orthosis is part of a single, indivisible supply of the GST-free foot orthosis, the supply of the delivered foot orthosis is GST-free. It would be necessary that the cost of delivery did not alter between clients and that it was not merely an optional extra that was included in a single amount.

Also, where a podiatrist pays a postage fee as agent for the patient, and is reimbursed the exact amount of postage incurred, the podiatrist has not made a taxable supply. Any GST charged by the postal carrier on the supply of postage, is paid by the patient in this situation. The podiatrist would not be entitled to input tax credits in relation to the postage.

Repairs and modifications

Where as part of a GST-free service pursuant to section 38-7 or 38-10 (for example podiatry or chiropody), the recognised professional modifies a foot orthosis due to the changing shape or condition of the patient or the patient's foot, it is accepted that this modification will also be GST-free to the patient.

However, any supply by a contracted lab to a podiatrist will not be GST-free under section 38-7 or 38-10. Also, where a foot orthosis is repaired to restore it, this repair will not be GST-free pursuant to section 38-7 or 38-10.

See also Issue 2.a.15 which explains the issue of the modifications and repairs to medical aids and appliances as part of a GST-free medical or other health service.

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