Common GST categories
Medical aids and appliances
Medical aids and appliances are items listed in the GST law, such as wheelchairs, hearing aids and prescription glasses, that are GST-free when supplied to help people with disabilities or health conditions.
Medical aids and appliances are a specific GST-free category. The GST law contains a detailed list of items that qualify when they are specially designed to help people with a disability or health condition. The list includes things like wheelchairs, crutches, walking frames, hearing aids, artificial limbs, prescription spectacles and contact lenses, pacemakers, certain blood glucose monitoring devices, and some other aids.
The key point is that the item has to be in the schedule of the GST law. If an item is not on the list, it is generally taxable even if it seems medically useful. For example, general health products and fitness equipment are usually taxable, while a hearing aid designed to help a person with a hearing impairment is GST-free. Where the list refers to specific items, details such as the item's design and purpose matter.
Supplying the item is one thing. Repairs, replacement parts and related services are treated separately, and some are GST-free while others are not. Whether a service is GST-free depends on its connection to the listed item and on the type of service. A repair performed on a GST-free aid, for example, may itself be GST-free in some circumstances, but a general maintenance service on non-listed equipment will be taxable.
Suppliers who sell aids and appliances can still claim credits for the GST on their business costs, because their sales are GST-free and not input-taxed. This is an important advantage over input-taxed treatment. If they sell a mix of GST-free and taxable items, they must code each product correctly and report the GST on taxable products on their BAS.
Common misunderstandings include thinking that a doctor's recommendation is enough to make an item GST-free, or that anything sold at a pharmacy is GST-free. The test is whether the item is covered by the specific provisions. Another mistake is assuming that hiring an aid rather than selling it has the same treatment. Hire or lease arrangements need to be checked individually.
If you sell or buy these goods, keep product descriptions and supplier information showing which items you treat as GST-free. A change in the listed items or their definitions can alter the treatment. This content is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A registered mobility store sells a wheelchair for $1,800, which is GST-free, and a $110 massage cushion including GST. GST included in the cushion is $110 / 11 = $10. If the store sells one of each in a day, it reports $10 GST payable, and it can still claim credits for the GST on its shop rent and stock purchases.
Practical tips
- Check each product against the list in the GST law rather than relying on how it is described or recommended.
- Treat repairs and hire separately from sales. Their GST status depends on the circumstances.
- Confirm the model and specification of a device before treating it as GST-free, as similar items can fall on either side of the list.