ATO Interpretative Decision
ATO ID 2005/90
Goods and Services Tax
GST and supply of general purpose orthopaedic footwear known as comfort footwearFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a supplier of footwear, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies general purpose orthopaedic footwear known as comfort footwear?
Decision
No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells general purpose orthopaedic footwear known as comfort footwear.
The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of footwear. The entity supplies general purpose orthopaedic footwear known as comfort footwear. Comfort footwear is footwear that is designed to provide extra comfort to the wearer, particularly people with extra long, extra wide, extra high or injured feet.
Comfort footwear is sold to the public. Orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses comfort footwear.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of sections 9-5 of the GST Act.
Reasons for Decision
Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance:
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- is covered by Schedule 3 to the GST Act (Schedule 3) or in the A New Tax System (Goods and Services Tax) Regulations 2019(GST Regulations)
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- is specifically designed for people with an illness or disability, and
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- is not widely used by people without an illness or disability.
The entity supplies general purpose orthopaedic footwear that is designed to provide extra comfort to the wearer. Of relevance to the entity's supply is item 41 in the table in Schedule 3 (Item 41) and item 42 in the table in Schedule 3 (Item 42).
Item 41 lists 'surgical shoes, boots, braces and irons'. The phrase 'surgical shoes, boots, braces and irons' is not defined in the GST Act. The Macquarie Dictionary (1997), 3RD edn, The Macquarie Library Pty Ltd, New South Wales, defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'.
Accordingly, 'surgical shoes, boots, braces and irons' are shoes or boots (and associated braces and irons) designed to support or correct a deformed foot or leg and those designed to be worn to support and protect a foot as a result of surgery. This includes fully customised medical grade shoes and boots.
Footwear that is designed for general use or is designed primarily to provide proper support and comfort in general (as opposed to supporting or correcting a deformed foot) is not covered by Item 41.
The entity's comfort footwear is general purpose orthopaedic footwear that is only designed to provide extra comfort to the wearer, particularly people with extra long, extra wide, extra high or injured feet. They are not designed to support or correct deformed feet or support and protect a foot after surgery. Although orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses the entity's footwear, this does not alter the design or purpose of the footwear. The entity's footwear is not covered by Item 41.
Item 42 lists 'orthotics'. The word 'orthotics' is not defined in the GST Act. The Macquarie Dictionary (1997), 3RD edn, The Macquarie Library Pty Ltd, New South Wales, defines 'orthotic' as the adjectival form of the word orthosis. Orthosis is defined as 'a device applied to the body to modify position or motion, as a supporting collar, plaster cast, etc'. Therefore, an orthotic for the purposes of Item 42 is a device which is applied to the body to change or alter position or motion, or prevent movement.
Shoes could be orthotics but only in very limited situations. The common meaning of the term 'orthotics', in relation to feet, is that it applies to devices which are inserts for shoes, and not to shoes themselves. For shoes to be orthotics, they would have to be custom made and incorporate an orthotic device as an integral part of the shoe. Such shoes would generally only be made for a person with some form of deformity. Therefore shoes which can be classed as 'orthotics' would generally also be classed as 'surgical shoes'.
The entity's footwear provides extra comfort to the wearer. It does not change or alter the position or motion, or prevent movement, in the feet of the wearer. Therefore, the entity's footwear is not covered by Item 42.
Furthermore, the entity's footwear does not fall under any other item in Schedule 3 or the GST Regulations. The supply of the entity's footwear is not GST-free under subsection 38-45(1) of the GST Act.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies general purpose orthopaedic footwear known as comfort footwear.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 9 April 2019 | Throughout | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019. |
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
subsection 38-45(1)
Division 40
Schedule 3
Schedule 3 table item 41
Schedule 3 table item 42
The Regulations Related ATO Interpretative Decisions
ATO ID 2005/87
ATO ID 2005/88
ATO ID 2005/89
ATO ID 2005/91
Other References:
The Macquarie Dictionary (1997), 3RD edition. The Macquarie Library Pty Ltd, New South Wales
Commonwealth of Australia 2004. GST Pharmaceutical Health Forum - Issues Register - Attachment A - Schedule 3 - Medical aid or appliance. Tax Office, viewed 19 March 2004.
Keywords
Goods and services tax
GST free
GST health
Section 38-45 - medical aids & appliances
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782
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