<html><body>
<p>From 1 July 2018 the Government will require purchasers of new residential premises to remit the GST directly to the ATO as part of settlement.</p>
<p>KPMG's Indirect Tax Partner Kate Law says this announcement comes as a surprise.</p>
<p>"It is a significant divergence from the way the GST system currently operates , where GST is collected from the supplier (developers).</p>
<p>"The Government has announced this change as a tax integrity measure," she noted.</p>
<p>Around four years ago, ATO compliance programs targeted illegal “phoenix” activity, purportedly from a number of property developers who repeatedly placed companies in liquidation with outstanding GST obligations, despite having claimed input tax credits on construction costs.</p>
<p>However, KPMG indicated it was not aware of industry consultation on this issue more recently.</p>
<p>"We question the practicality and administrative cost of imposing GST on unregistered ‘mum and dad’ purchasers.</p>
<p>"Where developers use the margin scheme to calculate the GST liability, the purchaser is unlikely to be aware of the amount of GST included in the purchase price.</p>
<p>"This measure will therefore require developers to change the way they disclose the price to ensure the GST liability is disclosed as a separate line item," it noted</p>
<p>The Budget papers state that this measure is estimated to increase GST revenue by $660 million and associated payments to the States and Territories, net of administrative costs, by $1.6 billion over the forward estimates period (4 years to 2019-20).</p>
<p>However, the Budget papers state that the difference is due to the timing of when GST is collected and recognised.</p>
<p>"This suggests that it is not a permanent GST difference - which is seemingly at odds with the Government’s statement that some developers are failing to remit the GST to the ATO.”</p>
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j.ballantyne1990-6AQqhLzZaK

New residential GST surprise policy shift in 2017 Budget 

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<div class="_1FVA8dr2"><span>A former Channel Seven Melbourne television newsreader has denied she deliberately withheld more than $1.8 million in GST payments during her property development days.</span></div>
<div class="_1FVA8dr2"><span> </span></div>
</div>
<div class="block-content">
<div class="_1FVA8dr2"><span>Simone Semmens faced a County Court of Victoria jury trial today after pleading not guilty to 10 charges of dishonestly withholding tax over a 10-year period.</span></div>
<div class="_1FVA8dr2"><span> </span></div>
</div>
<div class="block-content">
<div class="_1FVA8dr2"><span>The prosecutor Robert Barry said Semmens had purchased mansions in prestige areas, then subdividing and developing new properties on the land.</span></div>
</div>
<div class="advert" data-ad-type="MEDIUM" data-loc="MOBILE" data-max-width="767"> </div>
<div class="block-content">
<div class="_1FVA8dr2"><span>The case involved a property at Portsea, at Caulfield North and an earlier property in Toorak.</span></div>
<div class="_1FVA8dr2"><span> </span></div>
<div class="_1FVA8dr2"><span>The <span>Portsea mansion was Noorah which was bought for $7.5 million.</span></span></div>
<div class="_1FVA8dr2"> </div>
<div class="_1FVA8dr2">Rosecraddock, the Caulfield North mansion which cost $7.8 million in 2007, saw homes built within the curtilage of the 150-year-old Italianate mansion set on its then 8857-square-metre holding. <span>It was the scene of the 2005 </span><span>murder</span><span> of eccentric millionaire Peter Shellard. </span><span>Rosecraddock</span><span> and its subdivided</span><span> grounds were eventually sold, all up, for $17.4 million.</span>
</div>
<div class="_1FVA8dr2"><span> </span></div>
<div class="_1FVA8dr2">The Crown alleges Semmens knowingly didn't pay GST on them - failing to pay as much as $329,000 in tax per sale.</div>
</div>
<div class="block-content">
<div class="_1FVA8dr2"><span> </span></div>
<div class="_1FVA8dr2"><span><span>She had the Caulfield North estate subdivided into seven properties, had the Toorak home demolished and replaced with two apartments and had an extra two homes built on the Portsea land, and then sold all the developments at a profit.</span></span></div>
<div class="_1FVA8dr2"><span> </span></div>
</div>
<div class="block-content">
<div class="_1FVA8dr2"><span>Barry said the former Seven Network newsreader was aware of her tax obligations via communications she had with her bank and her surveyor.</span></div>
<div class="_1FVA8dr2"><span> </span></div>
</div>
<div class="block-content">
<div class="_1FVA8dr2"><span>Semmens was a beauty queen, including being crowned Miss Victoria Grocery Industry in the 1980s, and was also the <span>one-time corporate spokeswoman for Telstra</span>.</span></div>
<div class="_1FVA8dr2"><span> </span></div>
<div class="_1FVA8dr2"><span><span>Semmens' lawyer Ms Ashlee Cannon said it was "hotly contested" that her client was required to pay the GST.</span></span></div>
<div class="_1FVA8dr2"><span><span> </span></span></div>
<div class="_1FVA8dr2"><span><span>Semmens, a US citizen, had been<span> pulled from a California-bound plane and charged with the multi-million dollar tax offences in October 2015. H<span>er Toorak house had been searched by police and tax investigators in March 2013.</span></span></span></span></div>
</div>
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Simone Semmens faces County Court over GST withholding allegations after prestige Melbourne property sales

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<p>The Australian states' mid-year reviews (MYRs) revealed that revenue pressures from the housing market correction will partly offset gains from the GST funding reform, according to Moody's Investors Service.</p>
<p>Moody's Investors Service noted that at the same time, they expect higher-than-budgeted capital spending to become a major challenge for states as most embark on record capital spending programs, causing debt to rise more rapidly than revenue.</p>
<p>They added that for some states, debt will start rising from a lower level than in earlier budget projections, overall debt burdens will remain elevated over the next four years, increasing vulnerability to risks such as unbudgeted health and education reform costs.</p>
<p><strong>Housing correction will partly erode revenue gains from GST reform:</strong></p>
<p>Additional Commonwealth GST top-up payments will be offset by a weaker housing market according to Moody's</p>
<p>However, a weaker housing market will offset these gains.</p>
<p>John Manning, Vice President, Moody’s Investors Service said, "following strong growth in transfer duty revenue in recent years, particularly driven by very strong house prices along the Australian east coast, the MYRs forecast a larger drop in property-related revenue than previously budgeted."</p>
<p>"Despite already projecting lower property-related revenue in their FY2019 budgets, the larger states of NSW and Victoria now forecast further declines in transfer duty and land tax revenue as a result of weakening residential property market prices and falling sales volumes."</p>
<p>He noted however, "revenue projections for both states increased overall."</p>
<p>"Both NSW and Victoria expect to receive additional Commonwealth grant revenue to offset lower transfer duty revenue."</p>
<p>"Higher payroll tax revenue, mineral royalties and an upward revision to GST also increased NSW’s revenue projections, while Victoria’s projections improved due to higher payroll taxes from stronger full-time employment and wage growth," he concluded.</p>
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New South Wales and Victoria feeling the pressure from housing correction: Moody's

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<p>Property Exchange Australia (PEXA) has expanded the capabilities of its e-conveyancing platform in response to recent legislative changes concerning payment of GST at settlement.</p>
<p>The change, effective 1 July 2018, now requires property purchasers to pay GST on the price of new residential premises or potential residential land directly to the Australian Taxation Office (ATO).</p>
<p>Previously, developers were responsible for this payment.</p>
<p>The introduction of this new legislation is primarily designed to reduce the $1.8 billion owing in GST payments to the Federal Government, and to eliminate the practice of ‘phoenixing’, a process by which a company declares insolvency, but reforms under a new name to avoid paying debts and taxes.</p>
<p>PEXA executive Mike Cameron,said the visibility for all parties is a major benefit of a more streamlined, digital process.</p>
<p>"The PEXA platform provides transparency for all parties and added assurance that the new process has been adhered to," Cameron said. </p>
<p>"The ability to complete GST at settlement through an e-Conveyancing transaction provides certainty for all involved in property exchange."</p>
<p>Australian Institute of Conveyancers (AIC) national president, Shane Jacob, said through PEXA "we have the clarity we don’t get in the paper-based world that the GST for relevant properties had been captured".</p>
<p> </p>
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PEXA streamlines GST payments on new property purchases

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<p>Buyers of new residential property after 1 July 2018 need to be aware they will be responsible for making sure the GST on their purchase is paid to the ATO as part of the purchase settlement process. The laws are aimed at reducing tax evasion in the property development sector, that require buyers to pay the GST at settlement.</p>
<p>The GST will not be an additional cost to buyers as it’s already part of any contracted purchase.</p>
<p>The chief executive of the Property Council of Australia, Ken Morrison, said this was one of the biggest changes to the way GST was collected on property since its introduction almost two decades ago.</p>
<p>“Under this change, buyers of new residential properties or subdivision of potential residential land will be responsible for remitting the GST amount to the ATO on or before settlement,” Mr Morrison said.</p>
<p>“Previously, this was done by the developer. The overwhelming majority did the right thing and passed the GST they collected through to the ATO, but this measure has been introduced to deal with the minority who didn’t through so-called 'phoenixing'.”</p>
<p>The new process will mean additional steps in the settlement process for residential property buyers, including submitting forms to the ATO and separating the GST from the purchase price of the property.</p>
<p>This could affect up to 70,000 property transactions a year.</p>
<p>“People buying property after 1 July should talk to their solicitor or settlement agent to ensure they have the right arrangements in place to meet this new requirement and ensure a smooth settlement process,” Mr Morrison said.</p>
<p>There are transitional arrangements in place for contracts entered into before 1 July 2018 and which settle before 1 July 2020.</p>
<p>Mr Morrison said Property Council members had been investing in systems and staff training to support the introduction of the new process and to mimimise disruption or inconvenience to their customers.</p>
<p>“We’ll closely monitor the implementation of the change and continue to consult with Government on issues that may arise during the transition.”</p>
<p>The change to GST payment is the biggest of a number of federal and state property- related changes that come into effect on 1 July.</p>
</div>
</div>
</div>
<div class="page" title="Page 2">
<div class="section">
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<div class="column">
<p><span>Other measures include:</span></p>
<p><span>Federal</span></p>
<p><span>People aged 65 and over will be able to contribute $300,000 from the sale of their family home into superannuation</span></p>
<p><span>Queensland</span></p>
</div>
</div>
</div>
<div class="section">
<div class="layoutArea">
<div class="column">
<ul>
<li>
<p><span>Additional Foreign Acquirer Duty (residential) to increase from 3% to 7%.</span></p>
</li>
<li>
<p><span>New land tax category for holdings over $10m – 2.25% for individuals and 2.5%</span></p>
<p><span>for trusts, companies or absentee landholders.</span></p>
</li>
<li>
<p><span>Waste disposal levy $70 per tonne.</span></p>
</li>
</ul>
</div>
</div>
</div>
<div class="layoutArea">
<div class="column">
<p><span>New South Wales</span></p>
<ul>
<li>
<p><span>Local Infrastructure Levy caps will be increased in areas not funded by the Local Infrastructure Growth Scheme:</span></p>
<p><span>o </span><span>$40,000 for greenfield areas</span><span>o </span><span>$30,000 for infill areas</span></p>
</li>
<li>
<p><span>From 1 July,</span></p>
<p><span>South Australia</span></p>
<p><span>ACT</span></p>
</li>
</ul>
</div>
</div>
<img src="blob:https://www.urban.com.au/1bb22a79-4780-4658-89ea-656f7047f32f" alt="page2image9448" width="311.520000" height="14.880000"><div class="layoutArea">
<div class="column">
<p><span>eConveyancing will replace many of the paper and manual</span></p>
</div>
</div>
<img src="blob:https://www.urban.com.au/80e4a9b4-e8bc-422a-be59-22a0431fc3d7" alt="page2image10376" width="393.600000" height="13.920000"><div class="layoutArea">
<div class="column">
<p><span>processes traditionally involved in property transactions with secure online</span></p>
</div>
</div>
<img src="blob:https://www.urban.com.au/3edb595d-a49b-4437-9a0d-343251c98e22" alt="page2image11304" width="413.040000" height="13.920000"><div class="layoutArea">
<div class="column">
<p><span>processes. All standalone transfers and caveats must be lodged electronically</span></p>
</div>
</div>
<img src="blob:https://www.urban.com.au/5891ddef-2987-4406-9a39-cf64fde767d7" alt="page2image12272" width="76.080000" height="13.920000"><div class="layoutArea">
<div class="column">
<p><span>from this date.</span></p>
</div>
</div>
<div class="section">
<div class="layoutArea">
<div class="column">
<ul>
<li>
<p><span>Final phase of the full abolition of commercial stamp duty.</span></p>
</li>
<li>
<p><span>Off-the-plan stamp duty concession measure ends on 30 June 2018.</span></p>
</li>
</ul>
</div>
</div>
</div>
<div class="section">
<div class="layoutArea">
<div class="column">
<ul>
<li>
<p><span>Stamp duty abolished for first home buyers who earn less than $160,000 for new or existing homes</span></p>
</li>
<li>
<p><span>Abolition of first home buyers grant</span></p>
</li>
</ul>
</div>
</div>
</div>
</div>
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July 1 sees different GST rules for new residential property buyers

<html><body>
<p>A class action seeks to claim up to $100 million over allegations that GST was charged wrongfully on the sale of apartments in the ACT.  </p>
<p>International litigation funder IMF Bentham, which is working with Corrs Chambers Westgarth, announced the law suit to the ASX on Tuesday.</p>
<p>It has lodged a statement of claim with the Federal Court in NSW alleging Belconnen Lakeview, a company in the Hindmarsh Group, charged and collected GST on the sale of 352 units in Altitude Apartments when no GST was payable, The Australian Financial Review reported.</p>
<p>IMF Bentham has also identified 25 residential developments sold by various developers in the ACT that may fit the same criteria.</p>
<p>"Over 3000 unit owners in the ACT across a range of developments have already sent us their contracts, and in many cases it seems the purchaser was wrongly charged GST," IMF Bentham Sydney investment manager Oliver Gayner was quoted as saying by the AFR.</p>
<p>"We have given Belconnen Lakeview every opportunity to explain the conduct alleged in the statement of claim, and in the absence of any satisfactory explanation we have now determined to put the matter before the Federal Court to decide."</p>
<p>Assuming an average unit price of $450,000 and an average GST claim of around $40,000, as much as $100 million might be outstanding. </p>
<p>The statement of claim says Belconnen Lakeview used its accountant to obtain an ATO private ruling which switched the tax status from 'taxable' to 'input taxed' shortly before sales commenced. But the company did not inform its customers, who continued to be charged GST, according to the claim.</p>
<p>Hindmarsh Group in the ACT did not comment.</p>
<p>The federal government is also worried that some developers have not remitted GST on new apartments. </p>
<p>This year’s federal budget laid out that as of mid-2018, GST on new homes will be collected directly from home-buyers and not from developers. </p>
<p>The new remittance arrangement is expected to add $650 million in GST revenue over four years.</p>
<p> </p>
<p> </p>
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jonathanchancellor-7SQnKwU6yx

Class action seeks up to $100 million for wrong GST charges on apartment sales

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<p>GUEST OBSERVER</p>
<p>If GST is payable on the sale of a strata lot, can a dissenting owner recover GST in respect of the sale of its lot having regard to Part 10 of the Strata Schemes Development Bill 2015? </p>
<p>The short answer is yes, GST will most likely be recoverable as part of the “compensation value” received by a dissenting owner.</p>
<p>Who is a “dissenting owner”?</p>
<p>A dissenting owner is an owner of a lot which does not support a strata renewal plan prepared in accordance with Part 10 of the Strata Schemes Development Bill 2015. </p>
<p>What is the “compensation value”?</p>
<p>The “compensation value” is the value of a lot determined:</p>
<p>• pursuant to s55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Acquisition Act) subject to any modifications prescribed by the regulations; or <br> • by any different valuation method prescribed by the regulations.</p>
<p>The regulations are yet to be published, so it is unclear whether the regulations will specifically regulate (or modify) the manner in which the “compensation value” is calculated, and in particular whether or not  GST will be recoverable by a dissenting owner as part of the market value of the dissenting lot.</p>
<p>However, if the “compensation value” is to be determined solely pursuant to the Acquisition Act, then it is most likely that any GST paid (or payable) on the sale of the dissenting lot would form part of the market value of that lot, meaning that a dissenting lot owner would then recover GST as part of the overall value it receives. </p>
<p>Is a dissenting owner entitled to “compensation value” for its lot?</p>
<p>Yes, at a minimum.</p>
<p>When making an order to effect to a strata renewal plan, a court must be satisfied in relation to the compensation being received by lot owners that:</p>
<p>• in the event of the sale of the entire strata scheme (a “collective sale”), each lot owner must receive not less than the “compensation value”; and<br> • in the event of a “redevelopment”, the amount to be paid to a dissenting owner must be the greater of the “compensation value” of the dissenting owner’s lot and the amount which the dissenting owner would have been entitled to had they supported the strata renewal plan.</p>
<p><em>Leisha de Aboitiz, partner at William James Law and Ole Mitrevski, solicitor at William James Law. They can be contacted <a href="https://www.williamjameslaw.com.au" target="_blank">here</a>.</em></p>
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jchancellor-FAypfDUnLy

Property 101: GST and strata

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<p><span>GUEST OBSERVER</span></p>
<p><span>If you look at the efficiency of the GST – in other words, the amount of economic activity that is destroyed for every dollar you raise – the Government’s latest tax discussion paper says it is just as inefficient a tax as the income tax. It’s much less equitable though. The income tax is paid disproportionately by those further up the distribution and the GST hits those down the bottom. – Andrew Leigh, Shadow Assistant Treasurer, <a href="https://www.andrewleigh.com/the_gst_is_inefficient_and_inequitable_so_why_raise_it_rn_drive" target="_blank"><span>interview</span></a> with Patricia Karvelas on RN Drive, July 20, 2015.</span></p>
<p><span>There are two parts to the Shadow Assistant Treasurer’s statement. In the first part, he simply cites a Treasury report that shows that the GST is as efficient – or inefficient – as the income tax. The second part states that the GST is less equitable as “the income tax is paid disproportionately by those further up the distribution and the GST hits those down the bottom.”</span></p>
<p><span>A spokesperson for Dr Leigh said:</span></p>
<p><span>In terms of data supporting the statement, I’d refer you to p.25, chart 2.9 of the government’s <a href="https://bettertax.gov.au/files/2015/03/TWP_combined-online.pdf" target="_blank"><span>Re:think tax discussion paper</span></a>. This shows that the GST and flat rate labour income tax have an equivalent marginal excess burden, according to Treasury modelling.</span></p>
<p><span>What do economists mean by an efficient tax?</span></p>
<p><span>There are both direct and indirect costs associated with raising taxes. Direct costs include those that are incurred in the collection of the tax. While direct costs are not insignificant (the Australian Taxation Office employs over 20,000 people), economists consider the indirect costs of taxation to be more relevant. These relate to the distortions that a tax creates.</span></p>
<p><span>For example, a tax on apples raises the price of apples to consumers and importantly makes apples relatively more expensive than say oranges. This will lead to consumers buying fewer apples and perhaps more oranges. While the government raises revenue in this process, the tax distorts the behaviour of consumers with possible impacts on the production of oranges and apples.</span></p>
<p><span>The efficiency loss is the reduction in welfare, usually measured in dollars, from a consumer buying fewer apples than what she would like to because of the tax, and also any distortions in production.</span></p>
<p><span>Is the GST as efficient (or inefficient) as the income tax?</span></p>
<p><span>To apply this idea in the current context, an income tax will reduce the remuneration of a worker, relative for example to other non-remunerated activities such as leisure.</span></p>
<p><span>Thus, in theory, an income tax could impact on one’s decision of how much to work (or whether to work at all). The GST, however, raises all prices except for goods and services not subject to it.</span></p>
<p><span>There lies the conceptual reason for the GST to have a similar impact than an income tax; individuals care not about the dollar amount they receive as wages but rather about the goods and services that they can purchase from their wages over their lifetimes, including savings and bequests.</span></p>
<p><span>Let me illustrate this with an example. Here I assume that there is no borrowing or saving, a flat income tax of 10% and a broad-based GST of 11.11%. Consider an individual on a $50,000 income. After paying taxes, she has $45,000 left to spend on goods and services. In this case, $50,000 expenditure on goods and services would include GST of $5,000. That is, both taxes would allow the consumption of $45,000 of goods and services and, as a result, should lead to similar behavioural impact and distortions.</span></p>
<p><span>This theoretical argument is borne out by <a href="https://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/Working%20Paper%202015%2001/Documents/PDF/TWP2015-01.ashx" target="_blank"><span>Treasury modelling</span></a>. Chart 33 from the report is reproduced below. It estimates the “marginal excess burden” (MEB) of different taxes.</span></p>
<p><span>The MEB is measure of efficiency loss that captures the decrease in the future ability to spend across the economy per dollar of revenue raised from a tax. These estimates are derived using a long-run economic (computable general equilibrium or CGE) model where households are captured by a representative economic unit.</span></p>
<p><a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/89446/area14mp/image-20150723-22849-1anubmx.png" target="_blank">Click to enlarge</a></p>
<p><a href="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/89446/area14mp/image-20150723-22849-1anubmx.png"><img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/89446/width668/image-20150723-22849-1anubmx.png" alt=""></a></p>
<p><span>The chart reports the marginal excess burden of a number of taxes including a stylised personal income tax (represented by a flat rate), a stylised tax on labour income only and the GST. An out-of-model calculation for a marginal tax rate of 25% is presented as an illustration of an average taxpayer in 2011-12. As it can be seen in the chart above, the MEB estimates for the GST and the stylised income tax are nearly identical.</span></p>
<p><span>Is the GST less equitable than the income tax?</span></p>
<p><span>To answer this question, I need to define a couple of simple terms.</span></p>
<p><span>A tax system is regressive if the tax paid, as a fraction of income, decreases with income. A common view of the GST, reflected in the Shadow Treasurer’s statement, is that poorer households pay proportionally more than do richer households. Conversely, a tax system is progressive if the tax paid, as a fraction of income, increases with income. By design, the income tax rate faced by individuals in Australia increases with their income.</span></p>
<p><span>The table below uses a survey of households undertaken by the Australian Bureau of Statistics (ABS) to shed light on this question. It shows the average amount of GST, taxes and net income per income quantile for the 2009-2010 financial year. Net income includes pensions, family tax payments, and other benefits, and excludes tax paid on income. As expected, the income tax is clearly progressive. The amount of GST as a fraction of gross income varies considerably less across most of the income distribution, although it is overall decreasing, with the exception of the lowest quintile who pays a much higher fraction of their gross income as GST. Taxes and GST paid as a percentage of average weekly household gross income per income quantile (2009-2010).</span></p>
<p><span>However, looking at the fraction of GST paid and income may be misleading as incomes are volatile and spending can be smoothed via borrowing and savings. To take this into account, I report below the amount of GST paid as a fraction of total expenditures, which is likely a better measure of the level of spending that households can sustain. Once again, the lowest quintile pays substantially more GST as a fraction of expenditures, but there is a small variation for the other groups.</span></p>
<p><span>Verdict</span></p>
<p><span>The Assistant Shadow Treasurer is correct that the efficiency of the GST as a tax is similar to that of income tax. He is also correct that the income tax is more progressive than the GST and that the GST hits disproportionally those in the bottom of the income distribution.</span></p>
<p><span>However, while technically the data above suggests that the GST is a regressive tax, the difference between the fraction of income or expenditures paid in the form of GST is small amongst the various quantiles of the income distribution, with the exception of the poorest.</span></p>
<p><span>Review</span></p>
<p><span>I concur with the comparative distribution effects of the GST and personal income tax.</span></p>
<p><span>In the case of relative efficiency effects, because the income tax in practice falls on capital income as well as labour income and because it has a progressive rate schedule, it has additional distortion costs to those assessed with a flat rate tax on labour income considered in the FactCheck.</span></p>
<p><span>First, income tax applies to <a href="https://www.wisegeek.org/what-is-capital-income.htm"><span>capital income</span></a> (for example, stock dividends) as well as to labour income. Capital income tax distorts aggregate saving versus current expenditure decisions. The hybrid Australian capital income taxation of different saving options distorts the composition of savings between one’s home, other property, bank deposits, superannuation and so forth.</span></p>
<p><span>Second, while the GST has a flat rate of 10%, the income tax rate schedule is a progressive one with marginal rates from zero to 49%. With efficiency costs increasing more than proportionately with the tax rate, a progressive tax rate generates larger distortions on average than a flat rate tax.</span></p>
<p><span>Accepting the comparative efficiency and distribution effects of the GST and income taxes, most sensible suggestions for taxation reform which involve a more comprehensive base and/or higher rate GST to reap efficiency gains from a tax mix change also propose that some of the GST revenue gain be recycled as higher social security rates and a lower but more progressive income tax rate schedule to maintain the effective purchasing power of the poor.</span></p>
<p><em><span style="line-height: 1.3em;">John Freebairn is professor, Department of Economics at University of Melbourne and an author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/john-freebairn-90" target="_blank">here</a>.</span></em></p>
<p> </p>
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po-LsXgBTHBmX

Is the GST as efficient but less equitable than income tax? Factcheck

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<p><span>The property developer, Peter Icklow, chief executive of Monarch Investments, said real estate would be adversely affected by any GST hike.</span></p>
<p><span>"It's going to whack another $50,000 on every new home," he told <em>The Australian Financial Review</em>.</span></p>
<p><span>It follows debate over lifting the GST to 15%.</span></p>
<p><span>NSW Premier <span>Mike Baird</span> says he was willing to talk about the issue. </span></p>
<p><span>Under the current rules, new homes are subject to the GST, which adds roughly 10% to the price, but buyers of established homes pay nothing.</span></p>
<p><span>The Urban Development Institute of Australia says at the current GST rate of 10%, a new home sold at Australia's median dwelling price of $571,500 included a GST component of $51,955.</span></p>
<p><span>A white paper on tax reform will be released by the end of the year.</span></p>
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