GST and contoured pillows

Is the entity, a supplier of medical 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 a contoured pillow?

No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a contoured pillow. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a supplier of medical appliances. The entity supplies a contoured pillow. The contoured pillow is specifically designed for people with head and neck injuries. The contoured pillow supports the head and neck while a person lays or sleeps. The contoured pillow is not widely used by people without an illness or disability.

The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.

Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is 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 (GST Regulations); • is specifically designed for people with an illness or disability; and • is not widely used by people without an illness or disability.

Items in the table in Schedule 3 of relevance are: • Item 66 - pressure management mattresses and overlays; • Item 82 - night-time positioning equipment modifications; and • Item 87 - cushions specifically designed for people with disabilities.

Item 66 in the table in Schedule 3 (Item 66) lists 'pressure management mattresses and overlays'. 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. A pressure management overlay is an overlay for an ordinary mattress so that it provides the same benefits as a pressure management mattress. The contoured pillow is not a pressure management mattress or overlay. Accordingly, the contoured pillow is not covered by Item 66.

Item 82 in the table in Schedule 3 (Item 82) lists 'night-time positioning equipment modifications'. This refers to modifications necessarily made to night-time positioning equipment in order to enable correct positioning of a person to suit their particular condition or disability during sleep. It is the modifications to such night-time positioning equipment, rather than the night-time positioning equipment itself, that is covered by Item 82.

The contoured pillow is not a modification to night-time positioning equipment, it is a bedding accessory. It is a separate item in itself which, when placed on a bed, does not modify the bed. Accordingly, the contoured pillow is not covered by Item 82.

Item 87 in the table in Schedule 3 (Item 87) lists 'cushions specifically designed for people with disabilities'. This refers to a cushion with a specifically designed character or function, that has been made or adapted for the purpose of assisting with the support or positioning of an individual with a disability or to prevent or alleviate conditions associated with that disability.

For a product to be covered by Item 87, it must firstly be a 'cushion'. The word 'cushion' is not defined in the GST Act, and therefore, takes on its ordinary meaning. The Macquarie Dictionary (1997) defines a 'cushion' as, among other things, 'a soft bag of cloth, leather or rubber filled with feathers, air etc used to sit, kneel or lie on or anything of similar appearance or use'. This definition is similar to that of a pillow, which is defined in The Macquarie Dictionary (1997) as 'a bag or case filled with feathers, down, or other soft material, commonly used as a support for the head during sleep or rest'.

While the definitions for pillow and cushion are not the same, there is considerable overlap in meaning between a pillow and a cushion. That is, cushions and pillows can be said to be soft bags of cloth containing a soft substance or material that can be used interchangeably to support a part of the body.

However, cushions and pillows can be distinguished on the basis of the area in which they are used. That is, pillows are used predominantly to support the head and neck regions while cushions are used to support all areas of the body. The contoured pillow supports the head and neck while a person lays or sleeps. Therefore, it is unclear whether the contoured pillow is a 'cushion' for the purposes of Item 87.

Item 87 is listed under the category heading 'Mobility of people with disabilities - physical: seating aids'. Even though this heading is not an operative part of Schedule 3 it may be used in determining a provision's meaning where the provision is ambiguous or obscure (paragraph 182-10(2)(c) of the GST Act and section 182-15 of the GST Act).

The category heading specifically states 'seating aids'. As such, it is considered that Item 87 covers cushions used by people requiring support while seated, for example, cushions used by people in wheelchairs. This means that, for the purposes of Item 87, a cushion does not include a pillow that is primarily used to support the head and neck area for rest or sleep purposes.

Therefore, although the contoured pillow is specifically designed for people with neck and back injuries it is not a cushion for the purpose of Item 87.

As there is no item in Schedule 3 that covers contoured pillows, the supply of such a pillow is not GST-free under subsection 38-45(1) of the GST Act.

The entity is registered for GST and the supply meets the 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 a contoured pillow.