Issue
Is the entity, a supplier of medical aids and appliances, 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 and installs 'hearing loops' that are built up on the premises from their integral components?
Decision
Yes, The entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies and installs 'hearing loops' that are built up on the premises from their integral components.
Facts
The entity is a supplier of medical aids and appliances. In this case, the entity is supplying and installing 'hearing loops'. These 'hearing loops' are built up on the premises from their integral components.
The term 'hearing loop' encompasses infra-red, FM and induction loop hearing systems. These systems are used in conjunction with an individual's own hearing aid to increase the volume of a dedicated sound source and decrease the impact of background noise.
Based upon common industry usage of these terms, infra-red and FM hearing systems consist of a small transmitter attached to a specific sound source (such as a dedicated microphone or television). The transmitter sends signals directly to a receiver worn by the listener. These signals are then converted back into sound.
An induction loop system consists of an amplifier (connected to a specific sound source such as a dedicated microphone or television) and a loop of wire (placed around the perimeter of a room). These items work together to create a magnetic field within the room. When a person wearing a hearing aid or loop receiver equipped with a 'T' or telecoil circuit comes within this magnetic field, a second electric current is created. This second current is amplified by the hearing aid or loop receiver and is then converted back into sound.
These 'hearing loops' are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability.
The entity is registered for goods and services tax (GST). There is no agreement between the entity and the recipient to treat the supply as not a GST-free supply.
Reasons For Decision
Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances will be GST-free where the medical aid or appliance: • is covered by Schedule 3 to the GST Act (Schedule 3), or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations); and • is specifically designed for people with an illness or disability; and • is not widely used by people without an illness or disability.
Item 11 of Schedule 3 to the Regulations (item 11) specifies 'hearing loops'. The term 'hearing loop' is not defined in the GST Act. However, the term is commonly used to denote Infra-red, FM and Induction Loop systems.
From the accepted industry definitions of these hearing systems, it is considered that the term 'hearing loop' refers to the integral components of a system that transforms a voice into a current and either transmits it directly to a receiver worn by the listener, or induces a corresponding current within a loop receiver or hearing aid equipped with a 'T' or telecoil circuit.
The integral components of an infra-red or FM hearing system are the specially designed transmitter and receiver.
The integral components of an induction loop hearing system will usually be an amplifier, a loop wire, the associated cables and clips, the loop receiver (such as a specially equipped headset) and a microphone and stand where the loop cannot be used as part of a public address system.
Where the integral components of a hearing loop system are sold together as a complete device, which may or may not be attached to a building or fixture, this supply is GST-free under subsection 38-45(1) of the GST Act. However, the installation charge is a taxable supply provided that the requirements of section 9-5 of the GST Act are satisfied.
In contrast, where the hearing loop system is built up on the premises (either from various generic components or from a kit), the supply of the integral components and their installation will be the supply of a 'hearing loop' as specified in item 11, provided that the components are integrated into an identifiable medical aid or appliance. In this situation, the individual components lose their distinct identity and become a part of the entire created unit.
In this case, the entity is supplying and installing those types of hearing loops that are built up on the premises from integral components. Therefore, the supply and installation of these hearing loops is covered by item 11. As these hearing loops are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability, their supply and installation is a GST-free supply under subsection 38-45(1) of the GST Act. [Note: A hearing aid loop amplifier is considered to be a spare part that is specifically designed for use in the hearing loop. As such, the separate supply of a hearing aid loop amplifier is GST-free under subsection 38-45(2) of the GST Act.
Some parts used to make hearing loops are generic in nature. When supplied separately, as individual items, they are not GST-free under subsection 38-45(2) of the GST Act as they are not a spare part specifically designed for use in the hearing loop.
If a purchaser (who is registered for GST), acquires parts in the course of or in furtherance of their enterprise, for the purpose of using those parts to make a GST-free supply of a hearing loop, an input tax credit may be claimed for any GST paid in relation to those parts provided that the requirements of Division 11 of the GST Act are satisfied.]