GST hike could add $50,000

July 25, 2015

St George & Sutherland Shire Leader, Sydney

BANKS and property developers have said their customers would be among the biggest losers if politicians agreed to lift the GST to 15 per cent or apply it to financial services.

Peter Icklow, chief executive of the 60-year-old housing developer, Monarch Investments, said real estate would be affected heavily by a GST hike.

“It’s going to whack another $50,000 on every new home,” he said.

But oil and gas company BP has given strong support to raising the GST and retailers said the 10 per cent consumption tax should be extended to fresh food.

NSW Premier Mike Baird last week sparked a frenzy of new debate about whether the GST should be lifted to 15 per cent after saying he was willing to talk about the issue.

Mr Baird’s comments come after another state leader, South Australian Labor Premier Jay Weatherill, said in June that he was open to the idea of applying the GST to financial services.

Fresh food, education and health services are also GST exempt.

Under the current rules, new homes are subject to the GST, which adds roughly 10 per cent to the price, whereas the buyers of second-hand homes pay nothing.

The Urban Development Institute of Australia (UDIA) cautioned against raising the rate of the GST, which could push up the cost of new housing substantially at a time when housing affordability is a major concern.

“At the current GST rate of 10 per cent, a new home sold at Australia’s median dwelling price of $571,500 already includes a GST component of $51,955, which existing homes are not subject to,” said UDIA vice-president Michael Corcoran.

Housing industry lobby group HIA said it would oppose any increase to the GST unless new housing was exempt.

Banks have opposed the extension of GST to financial services.

In its submission to the government’s tax discussion paper, Westpac said: “extending the GST to the majority of financial services will mean higher costs for consumers”.

The Australian Bankers Association said other countries had tried but failed to come up with a way to apply consumption taxes to financial services.

Others in the business world support GST changes. BP, for example, backs an increase to 15 per cent and applying the GST to more areas.

“The real opportunity to address revenue needs of the states and improve the efficiency of the tax system overall is to recognise what many other countries have already done by increasing the rate of GST,” BP said in its submission to the review.