The beginning of 2015 has seen a substantial increase in media speculation regarding GST reform. The reform agenda is expected to include a range of key measures previously noted by the Government, such as broadening the GST base and increasing the GST rate. It is speculated that a number of new areas are also being targeted as possible areas of reform, such as the imposition of GST on bank charges and broader financial services.

Background

Since the introduction of the GST on 1 July 2000, the Commonwealth Government has not embarked on or commissioned any significant review regarding GST reform. While the Government has undertaken a number of reviews of federal taxes in recent years, these have either been confined to specific tax matters or expressly excluded a review of GST (such as the Henry Tax Review commissioned by the former Labor Government).

In preparation for last year’s Federal election, the Coalition undertook to commission a further review of Australia’s taxation system during its first term of Government. The outcome of this review is to be published in a White Paper on the Reform of Australia’s Tax System which is expected to be completed by the end of 2015.

The terms of reference of the White Paper, which were determined towards the end of last year, now cover GST reform.

Possible areas of GST reform

In the lead up to the Christmas period, there was significant pressure on the Government from the media and various industry bodies to broaden the GST base by (amongst other things) lowering the GST exempt threshold for overseas online purchases.

On 5 January 2015, Dan Tehan (the member for Wannon and a Liberal Party backbencher) authored an article in the Australian Financial Review calling for a further broadening of the GST base to bring in an extra $21.6 billion in annual revenue and allowing for “serious reductions in direct taxes”.

The broadening of the GST base has been supported by Andrew Robb (member for Goldstein and Minister for Trade and Investment). While the discussion initially focused on fresh food, education and health, Mr Tehan has declared that “exemptions for financial services should be examined”. According to Mr Tehen, examination is appropriate given that GST concessions for financial services are not provided in New Zealand, nor in the majority of Scandinavian countries.

More generally, there are three areas anticipated to be covered in the White Paper insofar as it applies to GST. These are:

  1. broadening the tax base;
  2. increasing the GST rate; and
  3. amending the distribution formula.

Next steps

In response to media speculation regarding changes to the GST law, the Government has noted that GST reform will be considered as part of an impending discussion on broader tax changes.

The first stage of this reform is expected to be announced via the release by the Government of an options paper regarding the White Paper. The options paper was due to be released in December 2014 but is now expected to be circulated later this month.

Once the options paper is released, the Government is expected to seek information and feedback from interested parties.