Higher GST will hit retirees

In what is described to be in the “discovery phase”, the Federal Government is looking at several options to increase Goods and Services Tax (GST) to 15 per cent. According to The Sunday Telegraph, these options are:

1. Increase GST to 15 per cent with no exemptions.

2. Increase GST to 15 per cent on all goods and services except fresh food, which would be exempt. GST would also apply to currently exempt health and education services.

3. Increase GST to 15 per cent but not on fresh food, and certain health and education services, as per current exemptions.

4. Increase GST on all goods and services to 12.5 per cent.

 

The income raised from an increase in GST is estimated to be around $24.5 billion annually and would be used to fund tax cuts for middle-income earners, as well as to cover the shortfall in spending on education and health. There may also be a compensation fund for pensioners affected by the price increases. These increases are estimated by the National Centre for Social and Economic Modelling (NATSEM) to amount to $2915 annually for the average family. 

The GST increases and associated policy changes are likely to form the basis of the Government’s next federal election campaign, with Prime Minister Malcolm Turnbull and Treasurer Scott Morrison arguing that all options are on the table for consideration. Mr Morrison has previously highlighted that to provide cuts in income tax, there needs to be an increase in GST.  “When you have the average wage earner in this country about to move into the second-highest tax bracket at $80,000 next year, you’ve got a problem with the incentives in your tax system,” he said.

State premiers are divided on the increase to GST, with NSW Premier Mike Baird and his South Australian counterpart Jay Weatherall agreeing that is should be open to debate but Victoria’s Daniel Andrews believes that an increase in the Medicare levy would be more favourable.

Read more at Dailytelegraph.com.au

Opinion: Is raising GST the best way?

Apparently people are less likely to change their spending habits based on GST. But try telling that to retirees struggling to make ends meet.

Australia may have one of the lowest rates of consumption tax in the developed world, but for those living on a fixed income, even the smallest rise will be difficult to absorb.

Take health, for instance. According to the Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard, a single retiree living a modest lifestyle is currently paying $84.20 per month on health insurance, chemist goods and out-of-pocket medical expenses, most of which are currently GST-free. If GST was extended to goods and services at 15 per cent and applied to this expected spend, it would then need to be $96.83 per month – that’s an extra $12.63 a retiree living a modest lifestyle will need to find just to cover their health costs.

Of course compensation for those on a pension and low incomes would need to be provided if a GST increase was implemented, but will it ever be enough? Given that those on a full single Age Pension are currently some $1100 per year shy of what ASFA recommends to live even a modest lifestyle, most of those who will require compensation to cover extra costs are already well below a decent income.

And let’s not forget the carbon tax compensation scheme – how many Australians felt adequately compensated for the rises associated with this tax?

If the money from a GST increase is indeed to cover the budget shortfall for health, then surely an increase in the Medicare Levy linked to income makes more sense? Given that high-income earners are already paying an additional two per cent for the Temporary Budget Repair Levy until 30 June 2017, then surely this could be extended, but redirected to health?

Is GST the best way to secure spending on health and education? Would you support a rise in GST? Or would you struggle financially if any of the mooted options were adopted? Can you think of a better way for the Government to raise more revenue?

Written by Debbie McTaggart



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