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Goods and Services Tax (GST) in Australia

Updated: Aug 15, 2023

Goods and services tax (GST) is a broad-based consumption tax which is applied to most goods and services sold or consumed in Australia. It was introduced in 2000 at a rate of 10%.

A hand withdrawing some Australian currency from a wallet, next to a calendar square with 'Taxes Due!' written in red text. The text "Goods and Services Tax" is foregrounded.

How does GST work?

When a business sells a taxable good or service it must add GST to the price. The GST is then paid to the Australian Taxation Office (ATO) by the business. When a consumer buys a taxable good or service, they pay the GST to the business. The business then passes the GST on to the ATO.

For example, if a manufacturer sells a product to a retailer for $100, the manufacturer will add GST to the price, making the total price $110. The retailer will then sell the product to the consumer for $110, and the consumer will pay the GST to the retailer. The retailer will then pass the GST on to the ATO.

History of GST in Australia

The idea of introducing a GST in Australia was first raised in the 1970s. However, it was not until the 1990s that the government began to seriously consider it. The GST was finally introduced in 2000 as part of John Howard's government's tax reform package, despite Mr. Howard previously insisting that his government would "never ever" introduce a GST.

Pros and Cons of GST

Despite GST being established in Australia's tax law for more than two decades, there remains considerable debate on the merits of the tax.

Those who support GST argue that it is a fairer tax than income tax, because it taxes consumption rather than income. They also argue that it is an efficient tax, because it is difficult to avoid or evade. Contrastingly, those who oppose GST argue that it is a regressive tax, because it disproportionately burdens low-income earners. They also argue that it is an inefficient tax, because it leads to increased prices for goods and services.

Furthermore, due to its implementation at multiple stages of consumption, not just at the final individual consumer level, GST arguably serves to inflate prices for consumer goods and is thus an inflationary tax. For example, when a farmer sells a product to a processor, like livestock to an abattoir, the farmer is required pay GST on the sale. The processor will then sell the product on to a retailer, and the processor will be required to pay GST on the sale. The retailer will then sell the product to the consumer, and the retailer will pay GST on the sale. The consumer will then pay GST to the retailer. In this way, the added GST is arguably inflating the overall price of a good, as taxation is required at each moment of transaction.

Sources & Further Reading

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